Prudential PLC Ar 2020

We do
life
HK stock code: 2378
Prudential plc Annual Report 2020

Prudential
helps people
get the most
out of life.
Contents
01 Group overview
02 Chair’s statement
05 Group Chief Executive’s report
10 Strategic report
12 Group at a glance
14 Our business model
16 Our performance
18 Group strategy and operations
28 Group Chief Financial Officer and Chief Operating
Officer’s report on the 2020 financial performance
45 Group Chief Risk and Compliance Officer’s report on the
risks facing our business and how these are managed
70 ESG report
118 Governance
120 Chair’s introduction
122 Board of Directors
127 Group Executive Committee
128 How we operate
139 Risk management and internal control
141 Committee reports
168 Statutory and regulatory disclosures
169 Index to principal Directors’ report disclosures
170 Directors’ remuneration report

172 Annual statement from the Chair of the
Remuneration Committee Visit www.prudentialplc.com
176 Our Executive Directors’ remuneration at a glance to find out more about Prudential plc
177 Summary of the current Directors’ remuneration policy
179 Annual report on remuneration
203 Additional remuneration disclosures
206 Financial statements
320 European Embedded Value (EEV) basis results
352 Additional information

354 Index to the additional unaudited financial information
379 Risk factors
391 Glossary
396 Shareholder information
399 How to contact us
The UK Corporate Governance Code requires that we

demonstrate how we have applied the Principles of the The Directors’ Report of Prudential plc for
Code. Throughout the Annual Report we have inserted the year ended 31 December 2020 is set
red-circled letters, as shown above, to indicate which out on pages 02 to 09, 120 to 169 and 354
section, page or paragraph demonstrates our compliance. to 399, and includes the sections of the
Please see page 127 for more details. Annual Report referred to in these pages.
We make healthcare affordable and
Group overview
accessible, we protect people’s wealth
and grow their assets and we empower
our customers to save for their goals.
Strategic report
Governance
Total full-year ordinary dividend
16.10 cents
Our year in numbers
Directors’ remuneration report

Notes
Change on actual Change on constant
1 Attributed to the shareholders of the
Summary financials 2020 $m 2019 $m exchange rate basis7 exchange rate basis7
Group before deducting the amount
Life new business profit 4,405 attributable to the non-controlling
from continuing operations2 interests. This presentation is applied
consistently throughout the document.
2,802 2 New business profit, on a post-tax basis,
$2,802m (36)% (37)%

on business sold in the year, calculated
in accordance with EEV principles.
3 Operating free surplus generated
Operating free surplus from insurance and asset management
2,886 2,861 operations. For insurance operations,
generated from operating free surplus generated
continuing operations3 represents amounts maturing from
Financial statements
$2,886m
the in-force business during the year
1% 1% less investment in new business and
excludes non-operating items. For asset
management businesses, it equates to
Adjusted operating profit 5,507 5,310 post-tax operating profit for the year.
from continuing operations1,4 Further information is set out in
‘movement in Group free surplus’
$5,507m
of the EEV basis results.
4% 4% 4 ‘Adjusted operating profit’ refers to

adjusted IFRS operating profit based
on longer-term investment returns from
IFRS profit after tax from 2,185 continuing operations. This alternative
European Embedded Value (EEV) basis results

continuing operations1,5 1,953 performance measure is reconciled to
IFRS profit for the year in note B1.1 of
the IFRS financial statements.
$2,185m 12% 12%

5 IFRS profit after tax from continuing
operations reflects the combined effects
of operating results determined on the
basis of longer-term investment returns,
together with short-term investment
variances which for 2020 were driven by
31 December 2020 31 December 2019 the negative effects in the US and Asia,
Total Per share Total Per share and gains arising on the reinsurance of
EEV shareholders’ funds fixed and fixed index annuity business in
the US and other corporate transactions.
$54.0bn 2,070¢ $54.7bn 2,103¢ 6 Shareholder surplus over Group

minimum capital requirement and
estimated before allowing for second
IFRS shareholders’ funds interim ordinary dividend. Shareholder
$20.9bn
business excludes the available capital
800¢ $19.5bn 749¢ and minimum capital requirement of
participating business in Hong Kong,
Additional information
Singapore and Malaysia. Further

LCSM shareholder surplus information on the basis of calculation
over Group minimum of the LCSM measure is contained in
capital requirement6 note I(i) of the Additional unaudited
$11.0bn
financial information.
n/a $9.5bn n/a 7 Further information on actual and
constant exchange rate bases is set out
in note A1 of the IFRS financial statements.

Prudential plc
Annual Report 2020 01
F
Chair’s statement
The long-term
drivers of demand
for the products
and services we
provide are clear
and strong.
Shriti Vadera Chair of the Board
I took over as Chair of Prudential

in January 2021, having joined the
Board in May 2020 in the midst of
a year dominated by Covid-19 and
its effects on financial markets,
economies, and people’s health
and wellbeing.
02 Prudential plc
Annual Report 2020 prudentialplc.com
While the pandemic continues to have an impact, many of our markets Prudential has built top-three positions in nine Asian life insurance
Group overview
are starting to ease social distancing restrictions, demand for our markets, with significant upside potential in the region’s two largest
services remains strong, and the long-term opportunities for growth markets, China and India, where we operate in conjunction with local
remain as compelling as ever. partners. Our distribution network is deep and broad, with around
600,000 agents3, access to around 20,000 bank branches, and
Our people have responded to the challenges of Covid-19 with innovative new digital partnerships. We create products to serve the
purpose, dedication and innovation. Often under great pressure, needs of everyone from those seeking low-cost policies for specific
they have found creative new ways of meeting the needs of customers purposes to the emerging middle class and affluent families requiring
Strategic report
and wider stakeholders. I would like to thank the Group’s management more holistic financial planning advice. We are also East Asia’s leading
led by Mike Wells, and our employees, agents, partners and suppliers Islamic life insurer and have a growing business serving small and
for their efforts and achievements. medium-sized enterprises, the backbone of Asia’s economic success.
These capabilities have helped our Asia embedded value to more than
As Mike sets out in his report, these efforts translated into a resilient double in the past five years to $44 billion.
financial performance and, guided by Prudential’s new dividend policy
announced in August 2020, the Board has approved a 2020 second Prudential has invested and innovated to adapt to evolving consumer
interim ordinary dividend of 10.73 cents per share. needs. Eastspring, our Asia asset manager, which has top-10 positions
Governance
in seven markets, serves the needs both of Asian savers and of global
Accelerating structural transformation investors seeking access to Asian opportunities. Pulse, our new digital
Our business is at a pivotal moment. Prudential has already gone platform, is an end-to-end tool for agent management and client
through significant structural change with the 2019 demerger of our fulfilment, being rolled out4 in 15 markets in Asia and Africa in 11
UK and European operations, M&G plc. In January 2021, the Board languages. Our investment in Africa gives us exposure to a growing,
announced its intention to separate Jackson, our US business, under-served continent whose population is expected to double to
through a demerger in the second quarter of 2021 and we continue more than two billion people by 2050.
to make good progress towards the completion of this transaction.

As a standalone business, we expect Jackson to pursue a focused E
strategy which prioritises optimisation and stability of capital
resources while protecting franchise value. Our people
Our people, and their ability to work with agility and innovation,
Jackson’s separation will complete Prudential’s transformation from a are another important source of competitive advantage. Over 2020,
diversified, global group into a focused business exclusively targeting we launched 175 new products5. This pace of progress requires the
the fast-growing health, protection and savings opportunities of Asia collaboration of people with varied experiences and skills, and the
and Africa. promotion of a culture of inclusion has become an increasing area
of attention for the management and Board.
In order to enhance financial flexibility and de-lever the balance sheet,
Prudential is considering raising new equity of around $2.5-3 billion We recognise that the efforts made by our people, while adapting to
following the completion of the Jackson demerger. Our preferred route virtual working and the broader pressures of the pandemic, can place
is a fully marketed global offering to institutional investors concurrent a strain on their wellbeing. This was a focus of the Board and its
with a public offering in Hong Kong to retail investors. As an Asia- employee engagement directors, Kai Nargolwala for Asia and Africa
focused company, the Group believes there are clear benefits from and Tom Watjen for the US and UK, whose activities in this area are
increasing both its Asian shareholder base and the liquidity of its shares summarised on page 79. To understand better both the anxieties
in Hong Kong. The allocation of any offering will take into account a and the ambitions of our people, a series of listening exercises were
number of criteria including the interests of existing shareholders. conducted, including our largest-ever employee survey and an
online ‘Collaboration Jam’ that saw more than 5,000 people make
A contributions. Informed by this feedback, practical initiatives were
put in place to support people’s mental health and work-life balance.

Strategy In 2021, with Covid-19 continuing to impact lives and working patterns
Prudential benefits from a rare combination of rising unmet consumer in many markets, these themes will continue to be a key area for
need for its services, hard-to-replicate capabilities, and a strong sense Board consideration.
of purpose and business strategy that flow organically from each other.
In Asia, people are growing more prosperous and populations are

ageing. By 2040, the region is expected to account for over half of
global GDP1, with the number of people over 65 years old reaching
750 million2. These structural trends are increasing the need for
financial protection and long-term savings. However, people remain
under-insured, with four out of every 10 US dollars spent on health still
settled out of pocket. While people need to save more in order to be
able to live well throughout their longer lives, the investment industry
in much of Asia is in its early stages of development. Mutual fund
penetration – the ratio of total funds invested versus GDP – is more
than 100 per cent in the United States, but below a third of that level in
South-east Asia, and significantly lower in some markets in the region.

Prudential plc
Chair’s statement / continued
A
B
Purpose and ESG Outlook
Prudential’s ability to generate shareholder returns is inextricably While the macroeconomic environment remains uncertain as the
linked to our creation of social value. Our stated purpose is to help world continues to manage through the pandemic, the underlying,
people get the most out of life, by enabling them to become healthier long-term drivers of the demand for the products and services we
and wealthier. We provide important social benefits by improving can provide remain clear and strong. Technologies such as machine
access to healthcare and financial protection. By providing services learning, combined with growing digital connectivity, are enabling
that customers value, we build long-term loyalty and recurring substantial leaps in the development of financial services, while
income, which translates into high-quality earnings for shareholders. consumer preferences are evolving rapidly, in some areas spurred
Furthermore, as an owner and manager of assets, focused on on by the pandemic. The pace at which Prudential adapted to the
delivering strong returns over the long term, we understand the operational challenges created by the Covid-19 pandemic gives me
importance of playing an active role in the transition to a lower- confidence in our ability to harness these changes, and to continue
carbon future. to grow in Asia and Africa, addressing unmet health, protection and
savings needs.
Over the past year, to reinforce this linkage between our business
model and our purpose, we have refreshed our environmental, social I very much look forward to playing my part in this transformation
and governance (ESG) strategy. This will now focus on three priorities: and working with all of you to realise our ambitions.
making health and financial security accessible; stewarding the
human impacts of climate change; and building social capital through
developing a culture of inclusion, and digital responsibility. The Board
is committed to working with management to ensure that these
priorities are placed at the heart of how we do business.
In January 2021, the Board established for the period up to the 2022 Shriti Vadera
Annual Meeting a Responsibility & Sustainability Working Group, Chair of the Board
to be chaired by Alice Schroeder. This will oversee the embedding
of the new ESG framework and progress on diversity and inclusion
initiatives and will take on employee engagement activities. You can
find more information in the ESG section of this report starting on
page 70 and on our website: prudentialplc.com.
The Board
My predecessor, Paul Manduca, stepped down on 31 December 2020
after eight years as Chairman. I would like to thank him for the way he
skilfully helped navigate the Group through this period of substantial
change and for the generous way in which he supported me personally
during the period of transition. Also during 2020 we saw the departure
of Sir Howard Davies from the Board after almost ten years as a
Non-executive Director and Chair of the Risk Committee, with Jeremy
Anderson succeeding him as Chair of that committee. At the 2021
annual general meeting, Kai Nargolwala will step down as a
Non‑executive Director after nine years on the Board. Sir Howard
and Kai made significant contributions to the work of the Board
and they leave with our gratitude.
The Board needs to evolve to keep pace with the Group’s future as
an exclusively Asian and African business and its increasing focus on
digital capabilities. To this end, in February 2021 we announced the
appointments of Chua Sock Koong and Ming Lu, who will both join
the Board as Non-executive Directors on 1 May 2021. They bring
extensive experience of successfully investing in, growing and leading
businesses across Asia.
Notes
1 Source: McKinsey – Asia’s future is now, July 2019.
2 Source: Euromonitor International – Three Out of
The World’s Top Five Oldest Populations Will Be in Asia
by 2040, November 2020. Data for 2040 are forecasts.
3 Including India.
4 As of 22 February 2021.
5 Including 37 bite-sized digital products.
04 Prudential plc
Group Chief Executive’s report
We are well placed
Group overview
to continue to
deliver value for
Strategic report
our shareholders
Governance
and all our
stakeholders.

Mike Wells Group Chief Executive
Like all businesses, we faced

new and unexpected challenges
throughout 2020, but I am pleased
to say that, thanks to the dedication
of our people, we made considerable
progress on all fronts.

Prudential plc
Group Chief Executive’s report / continued
We are well placed to weather the continuing effects of Covid-19 and Delivering on long-term strategic goals
to deliver for our customers and shareholders over the longer term. We have had two key strategic objectives in 2020. The first has
Our wide range of innovative products, diverse and flexible approach been to deliver the proposed separation of our US business, Jackson.
to distribution, and relentless focus on operating efficiency enabled The second has been to enable our shareholders to benefit to the
us to continue to operate profitably, and at the same time continue maximum extent from the health, financial protection and savings
to invest heavily in organic and inorganic growth initiatives. opportunities in our chosen markets in Asia and Africa, while ensuring
that we deliver more digitally enabled, scalable operations in those
In 2020 we focused on three areas of activity. First, we have regions to position us well for future success.
been meeting the urgent needs of our customers, colleagues and
communities in light of the pandemic. Second, we advanced the In the US we are now able to provide clarity on the path and timing of
pace and the extent of our plans in delivering more digitally enabled, Jackson’s proposed separation. In January 2021 the Group announced
scalable operations, and equipping us with the tools necessary for an update on Jackson’s capital position and that it had decided to
continued success in the future. This had the effect of enabling us pursue the separation of Jackson from the Group through a demerger,
to execute effectively during lockdown restrictions. Third, we whereby shares in Jackson would be distributed to Prudential
accelerated the structural repositioning of the Group, in particular shareholders. Subject to shareholder and regulatory approvals,
enlarging our footprint in the Asian markets with the most attractive the planned demerger is expected to complete in the second quarter
structural opportunities, and working at pace towards the proposed of 2021, and would lead to a significantly earlier separation of Jackson
separation of our US business, Jackson. from the Group than would have been possible through a minority
IPO and future sell-downs, which from market precedent may have
D
E lasted until 2023. This accelerated process will complete Prudential’s
Supporting stakeholders through the pandemic structural shift from a diversified global group to a growth business
We have been working hard to support all our stakeholders focusing exclusively on the unmet health, financial protection and
throughout the year. For our customers, for our colleagues and savings needs of people in Asia and Africa.
distributors, and for the communities in which we work, we have In order to accelerate de-levering during 2021 through the redemption
introduced a range of innovative measures to both deal with the of existing high coupon debt, Prudential is considering raising new
impact of the virus and provide the means for them to emerge in equity of around $2.5-3 billion. Such a transaction, if executed, would
a stronger position once the effect of the virus has subsided. maintain and enhance the Group’s financial flexibility in light of the
For our customers, we have put in place measures to increase coverage breadth of the opportunities to invest in growth and aim to increase the
during this difficult time and to mitigate financial stress resulting from Group’s investor base in Asia. Prudential believes that there are clear
the virus. In most of our markets we introduced free limited-time benefits to the Group, as an Asian focused company, of increasing its
Covid-19 cover, and we made improvements to our offerings institutional ownership in Asia and enhancing the liquidity of its
throughout the year, including providing cash relief upon diagnosis ordinary shares in Hong Kong. As a result, its preference is to raise new
and hospitalisation, and paying out on death. equity through a fully marketed global offering to institutional investors
concurrent with a public offering in Hong Kong to retail investors, to be
We have enabled our colleagues around the world to work remotely undertaken after the Jackson demerger, subject to market conditions.
and have undertaken a number of new initiatives to find out about and The Group has held discussions with shareholders and the allocation
respond to their concerns, in particular managing the risk of mental of any offering will take into account a number of criteria including
and physical health challenges of staff and their families. During the the interests of existing shareholders and the strategic benefits of
course of the year, we have ensured that our people working from enhancing its shareholder base and liquidity in Hong Kong. The Group
home have had the necessary equipment and support to do their believes that there is potential for substantial value creation for all
work safely and comfortably. With disruption to working patterns shareholders through the transformation of Prudential into a business
continuing into 2021, we are taking further measures to help purely focused on profitable growth in Asia and Africa.
colleagues manage the longer-term psychological strains of remote
working by providing as much flexibility as possible, and offering Prudential is planning to retain a 19.9 per cent non-controlling interest
sessions and support for psychological and physical wellbeing. in Jackson1 at the point of demerger, which will be reported within our
IFRS balance sheet as a financial investment at fair value. Subject to
We also took a number of key steps throughout the year to support our market conditions, we intend to monetise a portion of this investment
distributors through the challenges presented by Covid-19. To support to support investment in Asia within 12 months of the planned
our agents, we worked with regulators in 2020 to virtualise the sales demerger, such that the Group would own less than 10 per cent
process, and 28 per cent of agency new cases since April 2020, at the end of such period.
where we focused our efforts initially, together with 27 per cent of
bancassurance new cases since July 2020, have been made virtually. At the point of proposed separation and subject to market conditions,
This compares with very low amounts in prior years. Our Mainland Jackson expects to have an RBC ratio2 in excess of 450 per cent and
China joint venture, CITIC-Prudential, went a step further by creating a Total Financial Leverage3 in the range of 25 to 30 per cent. Jackson
virtual reality ‘meeting room’ where clients can purchase our products. expects to achieve this level of RBC at the point of separation by
contributing proceeds of debt and any hybrid capital raising to its
In the communities in which we work, we launched a number of regulated insurance subsidiaries. As a result, we do not expect that
initiatives to provide support through the challenges of Covid-19 and Prudential will receive a pre-separation dividend from Jackson.
beyond. In May we launched the Prudential Covid-19 Relief Fund to
provide financial support for communities and for the volunteering Following the planned demerger, Jackson intends to pursue a focused
efforts of our people in Asia, the US and Africa. The fund is being strategy that prioritises optimisation and stability of capital resources
distributed among our markets around the world to support while protecting franchise value. Jackson’s financial goals as a
charitable and community projects tackling the immediate impact standalone company will be designed to maintain a resilient balance
of the pandemic and its social and economic consequences. sheet in order to provide shareholders with stable capital returns and
profitable growth over the long term.
06 Prudential plc
In Asia, our focus is on strengthening our footprint in our key strategic We have East Asia’s number-one Islamic life insurance business,
Group overview
markets, building our distribution and product range, and accelerating which saw a 49 per cent growth in new policies in 2020, contributing
the digitalisation of our platform. Our businesses in Asia are aligned to a 14 per cent growth in APE sales for these products in Malaysia
with supportive structural trends in the region, in particular rising and Indonesia combined. Malaysia Takaful is the leader in its market,
prosperity and ageing populations, which are leading to significant with a 32 per cent share of the market in 2020, as is our sharia business
and growing protection and savings gaps. in Indonesia, which has the largest Muslim population of any country9,
with a 35 per cent share of the sharia-compliant market. Our Business
We have built top-three positions in nine Asian life insurance markets, at Pulse (formerly PruWorks) proposition, which serves small and
Strategic report
and we have significant upside potential in the region’s two largest medium-sized enterprises, continues to develop, driving APE sales
markets, China and India. In Mainland China, our branch network from group business up 17 per cent in 2020.
with our local partner CITIC now covers 77 per cent of the country’s
1.4 billion people4, and we see a broad range of opportunities to Our Asia asset manager, Eastspring, manages $247.8 billion in assets
participate more deeply in that market. In India the businesses across 11 markets in Asia, and is a top-10 asset manager in seven of
continue to develop, with our life business recording a 17 per cent rise those markets. Eastspring has a broad product set and an unrivalled
in health and protection APE sales and our asset management business ability to serve the needs both of Asian savers and global investors
increasing funds under management5 by 6 per cent to $26.9 billion20. seeking access to Asian opportunities, and we continue to diversify
Governance
At 31 December 2020, our investment in ICICI Prudential Life the product set.
Insurance was valued at $2.2 billion, in excess of the amount at which
it is recorded in our IFRS and EEV financial statements. Our investment in Africa gives us exposure to a growing, under-served
continent whose population is expected to double to more than
Across our Asian markets, our comprehensive distribution network two billion people by 2050.
allows consumers to access our services how, where and when they
choose. Our network of around 600,000 agents6 is growing ever more The pace of our innovation continues to accelerate, and that is
skilled and productive. Agent recruits7 in Asia (excluding India) rose translating into improved operational performance. In 2020, we

4 per cent in the year, and the number of agents qualifying for elite launched or revamped 175 products10 across our markets, contributing
MDRT status doubled to more than 13,200. Our agent management 20 per cent of APE sales. Of these, more than 115 were traditional
has moved online across all markets, enhancing the effectiveness of and health and protection products, including Anxin, our digital
agent communication and operation, and expanding sales capacity, health and protection solution for the China market, with 165,000
with the number of cases per active agent7 increasing by 8 per cent policies sold in 2020, around 50 per cent of them to new customers.
in 2020 from the prior year. In Indonesia several new launches of simplified standalone protection
products saw their contribution rise to 37 per cent of APE, up from
We have access to around 20,000 bank branches and are working 8 per cent in 2019, which drove an overall increase in total new cases
closely with our partner banks to develop their online offerings. sold in 2020 of 12 per cent.
In 2020, we entered into a major strategic partnership with TMB Bank
in Thailand and also began new relationships with banks in Vietnam, We have significant investment appetite in Asia and Africa that is
Laos, Cambodia and Ghana. We are also developing new distribution based on the absolute size and demographic characteristics of each
channels through our digital partnerships, including OVO, Indonesia’s economy and our ability to build competitive advantage, leveraging
leading mobile payments platform, and The1, Thailand’s largest our scale and expertise. While we will continue to build on our leading
loyalty platform. positions in Hong Kong and ASEAN, we see the greatest opportunities
in the largest economies of China, India, Indonesia and Thailand. We
The services we offer are equally broad. We meet the needs of expect this strategy to deliver profitable and sustainable compounding
everyone from affluent families looking for sophisticated financial growth and high risk-adjusted returns for shareholders. Accordingly,
advice to people considering saving and financial protection for the our dividend policy announced in August reflects a rebalancing of
first time. Across Asia we have seen a heightened need for the health capital allocation from cash dividends to reinvestment of capital into

and protection products that we provide, due to the Covid-19 the Asia business.
pandemic. In a survey, 58 per cent of consumers in our Asian markets
stated that they were interested in products with value-added Following the proposed separation of Jackson, our focus on Asia and
services, with 46 per cent of customers searching for new insurance Africa will support long-term delivery of future shareholder returns
products8. This has been converted into an increase in the proportions through value appreciation, with a focus on achieving sustained
of APE sales represented by health and protection products in seven double-digit growth in embedded value per share. This will in turn
of our Asian markets. be supported by the growth rates of new business profit, which are
expected to substantially exceed GDP growth rates in the markets
in which the post-demerger Prudential Group operates.

Prudential plc
Group Chief Executive’s report / continued
Pulse: building our digital capabilities Our Asia asset management business, Eastspring, saw total assets
Our culture of innovation is exemplified by Pulse, our new digital under management reach $247.8 billion, up 3 per cent from the end of
platform, which is enhancing our digital capability across Asia 2019 and 13 per cent higher than 30 June 2020, on an actual exchange
and Africa. rate basis, with external net outflows moderating in the second half
of year alongside improving equity markets. Eastspring’s funds under
The first iteration of the Pulse mobile app was launched in Malaysia in management also benefited from net inflows from internal Asia life
August 2019, with features focused on helping our customers – and funds of $8.5 billion during 2020, representing a continuing source of
the wider population – prevent and postpone ill-health. These initial reliable funds flows to the Eastspring business and a structural strength
services included an artificial intelligence-driven medical symptom of our business model. Overall, this helped the adjusted operating
checker, telemedicine and dengue fever alerts. Since then, Pulse profit increase by 2 per cent compared with the prior year. Continued
has been launched in 11 languages across 11 Asian and four African cost discipline helped maintain the cost/income ratio14 at 52 per cent.
markets. 58 per cent of Asian consumers desire access to healthcare
value-added services8, such as virtual GP, and new features have Despite the continuing impact of the Covid-19 pandemic across our
continued to be added to Pulse on a weekly basis to meet this demand. markets, we delivered a relatively resilient performance in respect of
Covid-19 has stimulated interest in the health features of Pulse, as both new business profit and APE sales. Outside Hong Kong, new business
consumers and policymakers embrace the flexibility and accessibility profit17 was (4) per cent lower, in line with a (6) per cent reduction
offered by digital health solutions in a period when travel and in APE sales18. In Hong Kong, new business profit was down
face-to-face contact has been restricted. By February 2021, Pulse had (62) per cent, with APE sales (63) per cent lower, largely as a result
been downloaded around 20 million times11. Sales referrals from Pulse of the impact of Covid-19-related restrictions on cross-border sales.
to our agents in 2020, together with a small amount of revenue from Overall, this led to a (28) per cent fall in Asia APE sales as compared
bite-sized products sold directly on Pulse, translated into $211 million with 2019. China, our third-largest market by APE sales, was a
of APE sales12. particular highlight, with bancassurance APE sales up by 34 per cent
compared with 2019. Agency APE sales rebounded by 15 per cent
In 2021, as we continue to help customers become healthier, in the second quarter as restrictions were lifted, and overall APE sales
we intend to broaden our services to give greater support to people’s in the second half increased by 4 per cent compared with the same
wealth needs. period in the prior year. New business profit in China increased
3 per cent to $269 million and new business profit margins
A
C strengthened. This was led by the agency force focus on protection
Financial performance products, which accounted for 53 per cent of sales from this channel
Our financial performance during 2020 provides tangible evidence and as a result agency channel margins16 climbed to 85 per cent
of how we are successfully executing our strategy. (2019: 74 per cent).
At a Group level, overall adjusted IFRS operating profit based on The nature and timing of Covid-19-related disruption varied
longer-term investment returns13 (adjusted operating profit) for 2020 considerably across our markets. The ability of our franchise to grow
from our continuing operations was $5,507 million, 4 per cent higher than as restrictions were lifted is evident from the sequential increase in
the prior year on a constant exchange rate basis, reflecting the continued APE sales in nine markets including Hong Kong, with the third-quarter
growth of our Asia businesses, offset by lower US profits. Central total Asia APE sales above the second by 33 per cent, and the fourth
expenses declined by 8 per cent, reflecting lower interest and head office quarter above the third by 18 per cent.
costs. IFRS profit after tax from continuing operations13 was $2,185 million
in 2020 (2019: $1,953 million on an actual exchange rate basis). We continue to build our operations in Africa, with APE sales reaching
$112 million, representing growth of 51 per cent. Our African
In Asia, in a challenging environment, our diversified, high-quality, businesses are progressing well with the adoption of our new digital
recurring-premium business model enabled us to continue to grow sales management system, which has driven positive operating trends.
value and scale, with our total Asia embedded value reaching
$44.2 billion, an increase of 13 per cent compared with 2019, and more Jackson maintained its leading position in the US variable annuity
than doubling over the last five years. Adjusted operating profit was market19, with new variable annuity APE sales up 13 per cent to
13 per cent higher than 2019 on a constant exchange rate basis, driven $1,662 million, reflecting customer demand for Jackson’s products
by the resilience of our in-force life business and the rebound of the in this market and the breadth and expertise of its distribution force.
level of funds managed by our asset manager Eastspring in the second Jackson’s adjusted operating profit was $2,796 million (2019:
half of 2020. $3,070 million), reflecting DAC adjustment effects and the expected
The quality of our historic book of insurance business contributed reduction in spread-related earnings following the reinsurance
to resilient in-force growth, with a 6 per cent increase in renewal contract with Athene in June 2020 and lower asset yields, partially
premiums14 to $20.1 billion. The high level of renewal premiums offset by higher fee income from increased average account balances.
is the result of the high level of regular-premium business we sell Overall Jackson incurred a $(247) million post-tax loss (2019: loss
(representing 90 per cent of APE sales in 2020), the high mix of health of $(380) million), where the economic nature of our hedging
and protection business, which formed 65 per cent of new business programme, and the related accounting mismatches, alongside
profit in the year, and a 90 per cent customer retention rate15. This the exceptional equity volatility seen over the year, resulted in the
contributed to life insurance adjusted operating profit in Asia growing recognition of losses on equity derivatives taken out as part of
by 14 per cent (on a constant exchange rate basis). The performance Jackson’s hedging programme.
was broad-based, led by Hong Kong, up 20 per cent, with a further
eight markets delivering double-digit growth.
08 Prudential plc
Outlook That confidence in the future is underpinned by the clarity of our
Group overview
Throughout the Covid-19 crisis that dominated 2020, we strategy for delivering long-term profitable growth. The Group aims
demonstrated our ability to act at pace, our adaptability and the to deliver outperformance by building leadership positions in the
resilience of our underlying business. We will continue to apply these markets with the greatest scale, investing in people and innovating,
strengths as we move forward. With each cycle of lockdown and and nurturing relationships with our key stakeholders.
reopening, we have adopted varied responses depending on the local
conditions, we have improved our agility as we have responded, and If we execute successfully, the outcome of our strategy will be growth
the strength of our business has remained apparent. We expect that in new business profit that is expected to outpace the economic
Strategic report
vaccination programmes will be launched in a number of our markets growth of the markets where we operate. We are confident that our
in 2021, triggering a gradual return to more normal economic patterns. clear and focused strategy, coupled with our proven execution ability,
However, the pace of these programmes and their effect is likely to leaves us well placed to continue to deliver value for our shareholders
vary substantially and gives a degree of uncertainty over performance and all our stakeholders over the long term, with a focus on achieving
of the business in the short term. sustained double-digit growth in embedded value per share.
Our most significant market by new business profit and embedded

value is Hong Kong. Sales to Mainland Chinese individuals in
Governance
Hong Kong have been severely curtailed by the closure of the border .
with mainland China. There is at present unlikely to be a lifting of
the border restrictions until the third quarter of 2021 at the earliest,
Mike Wells
but this depends on a number of factors. However, we believe there
Group Chief Executive
will continue to be demand from Mainland Chinese customers for
the Hong Kong product suite once the border reopening occurs
and we have been building on our existing product and digitalisation

capabilities to continue to serve both these and domestic customers
in the future. Since the second quarter of 2020 we have seen
sequential quarterly increases in sales in Asia, but our continued
success across all our markets will be dependent in part on
government reaction to changes in the number and type of Covid-19
cases and the vaccine roll-out.
Nevertheless, we are confident that the demand for our products

will continue to grow in line with the structural growth in our chosen
markets, and that our expanding and increasingly digitalised
distribution platforms will meet that demand.
Notes
1 Prudential is planning to retain a 19.9 per cent voting 7 Excluding India. 17 New business profit, on a post-tax basis, on business
interest and a 19.7 per cent economic interest. 8 Source: Swiss Re COVID-19 Consumer Survey, sold in the year, calculated in accordance with
2 Representing the RBC ratio of Jackson National Life April 2020. EEV principles.
that reflects the capital and capital requirements of 9 Source: Indonesia Ministry of Religion Data Centre. 18 APE sales is a measure of new business activity
Jackson National Life and its subsidiaries, including 10 Including 37 bite-sized digital products. that comprises the aggregate of annualised regular
Jackson National Life NY. 11 As of 22 February 2021. premiums and one-tenth of single premiums on new
3 Calculated on a US GAAP basis as the ratio of 12 APE sales substantially from full-premium products business written during the year for all insurance
total debt (including senior debt, hybrid debt and sold through referrals to agents and a small amount products, including premiums for contracts designated
preferred securities) to total debt and shareholders’ of revenue from 37 new digital products. as investment contracts under IFRS 4. It is not
equity (excluding Accumulated Other 13 Attributed to the shareholders of the Group before representative of premium income recorded in the
Comprehensive Income). deducting the amount attributable to the non- IFRS financial statements. See note II of the Additional
4 2019 data for population. Sources from National controlling interests. This presentation is applied unaudited financial information for further explanation.
Bureau of Statistics and CBIRC. consistently throughout the document. 19 LIMRA: through the third quarter of 2020, Jackson
5 Full year 2020 total funds under management, 14 See note II of the Additional unaudited financial accounted for 16.5% of new sales in the U.S. retail
including external funds under management, money information for definition and reconciliation to variable annuity market and ranked number 1 in
market funds, funds managed on behalf of M&G plc IFRS balances. variable annuity sales.
and internal funds under management, reported based 15 Excluding India, Laos and Myanmar. 20 Representing Prudential’s 49 per cent interest.
on the country where the funds are managed. 16 The value of new business on and EEV basis expressed
6 Including India. as a percentage of APE sales. See note 1 of the EEV
basis results.

Prudential plc
Strategic
A

report
Contents
12 Group at a glance
14 Our business model
16 Our performance
18 Group strategy and operations
28 Group Chief Financial Officer and Chief
Operating Officer’s report on the 2020
financial performance
45 Group Chief Risk and Compliance Officer’s
report on the risks facing our business
and how these are managed
70 ESG report
10 Prudential plc
Group overview Strategic report Governance Directors’ remuneration report Financial statements European Embedded Value (EEV) basis results Additional information
11
Annual Report 2020
Prudential plc

Group at a glance
Prudential plc is an Asia-led group

providing health, protection and
savings solutions to more than
20 million customers
Our differentiated product portfolio in Asia
and Africa is well positioned to meet the
health, protection and savings needs of the
region, where insurance penetration is low
and demand for savings solutions is rapidly
developing. Our trusted brands, digitally
enabled multi-channel distribution and
efficient and agile infrastructure enable us
to meet the growing needs of our customers
for long-term savings and financial security.
Africa opportunity
Rapidly growing multi-product,
multi-distribution business in Africa
51
with operations across the continent
%
We are operating in
growth in APE sales

8
African markets with a
combined population of over
400m
12 Prudential plc
B
Top 3 position in Distribution Our purpose
Group overview
28 %
9 out of 13 life markets Prudential helps people get the most out
of life. We make healthcare affordable
in which we operate and accessible, we protect people’s wealth
and grow their assets, and we empower
our customers to save for their goals.
Downloads of our health and wealth of agency sales made virtually
Strategic report
super-app, Pulse by Prudential between April-December
Our values
c.20m Customers
Ambitious
16m
Our business is competitive. We push
ourselves and each other to greatness,
as of February 20212 but not at all costs. Being a team player
and doing the right thing come first.
Governance
$211m
Curious
The world is changing rapidly. No one
person has all the answers. We are humble
total number of life customers
and seek to listen, learn, and see things
APE sales from Pulse by Prudential
1
differently so we can innovate.
Eastspring is the

Empathetic
There is an age-old wisdom in walking
largest pan‑Asian a mile in another’s shoes. We do that
every day, whether it’s with customers
retail asset manager or colleagues.
excluding Japan Courageous

Prudential’s success and culture belongs
$248bn
to all of us – it’s our shared legacy.
We build it together, bring our full selves
to work, and speak truth to power.
Nimble
assets under management We approach our work iteratively,
with carefully-designed experiments
that help us fail fast and fail forward.
US separation Our strategy

In January 2021 the Board announced that We create shareholder value by focusing

it had decided to pursue the separation of on the opportunities available to the
Jackson from the Group through a demerger, Group’s high-growth businesses in Asia
whereby shares in Jackson would be and Africa.
distributed to Prudential shareholders.
Read more about our Group strategy and operations
The success of Jackson’s variable annuity on page 18
offerings reflects:
—— The attractiveness of Jackson’s product

and the investment freedom and optional
guaranteed benefits they offer; and
—— The breadth of Jackson’s distribution across
multiple channels, and the productivity
of Jackson’s wholesaler field force.
10,000 3m
Americans to reach customers
13%
retirement age
every day for the Notes
1 APE sales substantially from full-premium products
next 40 years sold through referrals to agents and a small amount
growth in variable of revenue from 37 new digital products.
annuity APE sales 2 As of 22 February 2021.

Prudential plc
Our business model
Propositions
to meet
customer
Where we Operating
needs
operate model Markets

We select markets with low insurance
We choose to operate in markets that offer the penetration with a growing need for health,
largest structural growth potential; and tailor protection and savings products, and
products and solutions to meet the needs of demonstrate opportunities for growth.
these populations. We focus on areas with low
insurance penetration in Asia and Africa, and We invest in these markets to address
Reinvestment
where demand for savings is rapidly increasing. the social requirements for insurance
to meet
and asset management solutions, as the
social needs
needs of the population develop alongside
and address
economic growth.
opportunities
We work with governments and
Asia regulators to understand their objectives,
priorities and concerns, and how they
In Asia, there is a growing demand for savings affect or shape our business.
and protection across the region, as markets
are challenged by low life insurance penetration
and a large pension funding gap.
Read more on page 19 Value creation
We generate value through insurance profits from
the protection given to policyholders, and managing
Africa Value for
customers’ savings.
In Africa, we are building businesses in one investors The Group uses the value it creates to reinvest in
of the world’s most under-penetrated markets, and other the Asia business, which will lead to further returns
with the population expected to double to stakeholders for shareholders.
more than two billion people by 2050.
Read more on page 19
Integrated asset management
Our asset management business is fully embedded within
our insurance operations. We leverage Eastspring’s expertise
in equity, bonds and multi-asset management to underpin
US our insurance products, as well as offering products direct
to third-party institutions and retail clients.
In the US, we intend to effect a full separation of
Jackson to enable the Group to focus exclusively
on its high-growth Asia and Africa businesses.
Read more on page 26 Customer service and loyalty
Our excellent customer service is a key factor in building
our strong reputation and leading pan-Asia franchise.
—— High customer loyalty, with a retention ratio
consistently in excess of 90 per cent.
—— The satisfaction and trust our customers
have in our business translates into a
high proportion of repeat sales.
Operating with discipline Building sustainable business

Risk management and disciplined allocation of capital underpin We build sustainable businesses and invest responsibly, seeking
our activities, while our governance, processes and controls enable to integrate environmental, social and governance considerations
us to deal effectively with uncertainty. into our investment processes and stewardship activities.
Read more in the Group Chief Risk and Compliance Officer’s report on page 45 Read more in the ESG report on page 70
14 Prudential plc
The value we create
Group overview
Products for our stakeholders
and brands
We provide health,
Customers Investors
Strategic report
protection and long-term
savings products that meet We aim to provide accessible Our Asia-focused strategy will
the needs of our customers. healthcare solutions as well as support long-term delivery of future
empowering our customers to shareholder returns through value
We focus on long-term recurring save for their goals. appreciation and dividends.
revenue that compounds over time.
We invest in and develop our Innovation During the year we paid out over EEV Group excluding Jackson1
$27.5bn $41.9bn
brands, to build trust, drive awareness and broad
Governance
and attract and retain customers. capabilities
to our customers in respect of

the long-term insurance products
they hold with us2
Government and
Distribution and wider society

customer engagement Our people We regard governments and
legislatures in the markets in which
Our extensive distribution channels We provide an inclusive working
we operate as important stakeholders.
enable us to better understand and environment where we develop
In addition, we support communities
service customers’ financial needs. talent, reward performance, protect
where we operate, through
our people and value our differences.
18,687
Our health, savings and protection products investment in business and
are distributed through our extensive agent infrastructure, paying tax revenues
and community support activity.
network, banks and digital partnerships.
In 2020, the Prudential Covid-19
Our asset management products employees Relief Fund provided financial
are distributed to third-party institutions support for communities and for the
and retail clients. volunteering efforts of our people.
Pulse by Prudential is our health and

wealth super-app. Pulse is a free digital
mobile application that offers holistic
Regulators
We work with regulators to
$33.2m
community support investment
management, artificial intelligence understand their objectives, priorities
(AI)‑powered self-help tools, and concerns, and how they affect
and real time information to serve the shape of our business.
$11.0bn
users 24/7 and promotes health
Suppliers
and wellbeing through a range
of value-added services.
We treat our suppliers fairly so
LCSM shareholder surplus we both mutually benefit from
our relationship.
Notes
Delivering 1 Excludes Jackson EEV basis shareholders’ equity of $12.1 billion. See note II
for of the Additional unaudited financial information for reconciliation to IFRS
customers shareholder’s equity.
2 Comprising $20.3 billion in claims paid in the US and $7.2 billion claims paid in
Asia, both gross of reinsurance. Included within total charge for benefits and
claims in the IFRS income statement, see note C3.1(iii)(c) to the IFRS financial
statements for more details.
Engaging our stakeholders Living by our principles

We engage with our stakeholder groups closely and take account We put customers first. We invest in all our communities.
of their concerns in our decision making. We act with integrity. We take the long view.
We embrace a growth mindset.
Read more in our Section 172 statement on page 78
These principles are underpinned by our values which are set out on page 13

Prudential plc
C
Our performance
Measuring our financial performance

To create sustainable economic value for our shareholders we
focus on delivering sustainable compounding growth while
generating cash and capital to reinvest in the Asia and Africa
businesses and meet our financing needs. We focus on the
following metrics when looking at our financial performance1.
Adjusted IFRS operating profit based Group adjusted operating profit in 2020 is ^
on longer-term investment returns 4 per cent higher on a constant and actual 23%
(adjusted operating profit)2 $m exchange rate basis compared with 2019.
5,310 5,507
The Group’s business involves entering into Adjusted operating profit for the Group excluding
long-term contracts with customers, and hence the 3,063 2,750
Jackson Financial Inc. and its subsidiaries (Jackson)
Group manages its associated assets and liabilities was $2,757 million up 24 per cent on a constant
over a longer-term time horizon. This enables the exchange rate basis (23 per cent on an actual
Group to manage a degree of short-term market exchange rate basis), reflecting higher adjusted
volatility. Therefore, adjusted operating profit operating profit from Asia life and asset 2,757
based on longer-term investment returns is management operations, up 13 per cent on a 2,247
management’s preferred measure when evaluating constant exchange rate basis to $3,667 million
the performance of the business. Other distorting (12 per cent on an actual exchange rate basis) and
items are excluded from adjusted operating profit to lower central and restructuring costs (excluding 2019 $m 2020 $m
allow more relevant period-on-period comparisons Jackson), down 12 per cent to $(910) million (2019:
of the trading operations of the Group, eg the $(1,029) million) on an actual exchange rate basis. Jackson Jackson
effects of corporate transactions are excluded. Jackson adjusted operating profit before Group excl. Jackson Group excl. Jackson
restructuring costs was $2,796 million, down
(9) per cent largely reflecting the impact of DAC Note
adjustments in the current year and the expected Amounts stated after restructuring and IFRS 17
reduction in spread-related earnings following the implementation costs attributable to each block.
Athene reinsurance agreement. Jackson adjusted
operating profit after restructuring costs was
$2,750 million.
EEV new business profit3 $m EEV new business profit in 2020 decreased by 4,405
Life insurance products are, by their nature, long (37) per cent on a constant exchange rate basis and 883 38%
^
term and generate profit over a number of years. (36) per cent actual exchange rate basis compared
Embedded value reporting provides investors with with 2019. 3,522 2,802
a measure of the future profit streams of the Group. EEV new business profit for Asia declined by 601
EEV new business profit reflects the value of future (38) per cent on a constant and actual exchange 2,201
profit streams which are not fully captured in the rate basis to $2,201 million, driven by declines in
year of sale under IFRS reporting. new business sales as a result of Covid-19 related
disruption.
Jackson EEV new business profit declined by 2019 $m 2020 $m
(32) per cent, largely reflecting a decline in sales
and the reduction in interest rates during 2020, Jackson Jackson
partly mitigated by the higher proportion of Asia Asia
variable annuity sales in the year.
EEV operating profit6 $m Group EEV operating profit in 2020 decreased

by (24) per cent on an actual exchange rate basis 6,905 34%
EEV operating profit is provided as an additional ^
measure of profitability. This measure includes EEV compared with 2019. 1,777
new business profit, the change in the value of the 5,220
EEV operating profit for the Group excluding 1,844
Group’s long-term in-force business, and profit 5,128
Jackson fell by (34) per cent on an actual exchange
from our asset management and other businesses rate basis, largely reflecting the decline in new
on an IFRS basis. As with IFRS, EEV operating profit business profit, described above and the effect of 3,376
reflects the underlying results based on longer- lower interest rates on the in-force operating profits.
term investment returns.
Jackson EEV operating profit increased 4 per cent
to $1,844 million.
2019 $m 2020 $m
Jackson Jackson
Group excl. Jackson Group excl. Jackson
Note
Amounts stated after restructuring and IFRS 17
implementation costs attributable to each block.
16 Prudential plc
rowth rate on Group excluding Jackson on an
G
actual exchange rate basis. Group excluding Jackson
comprises Asia, Africa and central operations.
Growth rate on Asia operations on an actual
exchange rate basis.
Group overview
Free surplus generation from insurance Group operating free surplus generation from ^
and asset management businesses4 $m continuing insurance and asset management 7%
Free surplus generation from insurance and asset operations before restructuring costs was
$3,004 million in the year (2019: $2,897 million 3,004
management businesses is used to measure the
internal cash generation of our business units. on an actual exchange rate basis). Group operating 1,109
For insurance operations, it represents amounts free surplus generation from continuing insurance 2,897
maturing from the in-force business during the and asset management operations after 1,125
period, less investment in new business and restructuring costs was $2,886 million in the 1,895
Strategic report
excludes other non-operating items. For asset year (2019: $2,861 million on an actual exchange
management, it equates to post-tax operating rate basis). 1,772
profit for the year. Operating free surplus generation before
restructuring costs for Asia operations increased
8 per cent on a constant exchange rate basis 2019 $m 2020 $m
(7 per cent on an actual exchange rate basis) to
$1,895 million, following the growth of the in-force Jackson Jackson
portfolio and lower levels of new business, partially Asia Asia
Governance
offset by the effect of lower interest rates compared
with the prior year.
Jackson operating free surplus generated before
restructuring costs fell (1) per cent compared
with 2019, which included a $355 million benefit
following the integration of the John Hancock
business acquired in 2018.

EEV basis shareholders’ equity6 $bn Group total EEV basis shareholders’ equity ^
EEV represents the present value of the decreased (1) per cent during 2020 to $54.0 billion. 9%
shareholders’ interest in the post-tax future profits EEV shareholders’ equity for the Group excluding
(on a local statutory basis) expected to arise 54.7 54.0
Jackson increased 9 per cent to $41.9 billion,
from the current book of long-term business, 16.3 12.1
largely reflecting Asia new business sales and
after sufficient allowance has been made for the operating returns on its growing in-force book.
aggregate risks in the business. Asset management 41.9
38.4
and other non-insurance subsidiaries, joint
ventures and associates are included in EEV at
the Group’s proportionate share of IFRS basis
shareholders’ equity, with central Group debt
shown on a market value basis.
2019 $bn 2020 $bn
Jackson Jackson
Group excl. Jackson Group excl. Jackson
Group local capital summation method The Group’s available capital, as recorded on
shareholder basis surplus5 $bn a LCSM shareholder basis, covers the Group’s 11.0
The Hong Kong Insurance Authority (IA) is the minimum capital requirement over three times.
9.5
Group-wide supervisor for the Prudential Group. In 2020, capital generation from the in-force

In agreement with the Hong Kong IA, the Group business has been used to invest in new business,
currently applies the local capital summation pay the external dividend and invest in new
method (LCSM) to determine Group regulatory partnerships. After these investment and 328%
capital requirements (both minimum and distributions, and the impact of market movements, 309%
prescribed levels) until the Group-wide LCSM shareholder surplus increased from
Supervision (GWS) Framework is effective, $9.5 billion, with an LCSM shareholder ratio
which for Prudential is expected in the second of 309 per cent, at 31 December 2019 to
quarter of 2021 upon designation by the Hong $11.0 billion, with an LCSM ratio of 328 per cent, 2019 $bn 2020 $bn
Kong IA. See the Group capital position section at 31 December 2020.
of the Group Chief Financial Officer and Chief
Operating Officer’s report for further information.
Notes
1 The comparative results shown above have been 3 New business profit, on a post-tax basis, on business 5 Surplus over Group minimum capital requirement
prepared using an actual exchange rate (AER) basis sold in the year, calculated in accordance with and estimated before allowing for second interim
except where otherwise stated. Comparative results EEV principles. ordinary dividend. Shareholder business excludes
on a constant exchange rate (CER) basis are also shown 4 Operating free surplus generated from insurance the available capital and minimum capital requirement
in financial tables in the Group Chief Financial Officer and asset management operations. For insurance of participating business in Hong Kong, Singapore
and Chief Operating Officer’s report on our 2020 operations, operating free surplus generated and Malaysia. Further information on the basis of
financial performance. Growth rates for 2019 to 2020 represents amounts maturing from the in-force calculation of the LCSM measure is contained in note
are on an AER basis. business during the year less investment in new I(i) of the Additional unaudited financial information.
2 Adjusted operating profit is management’s primary business and excludes non-operating items. 6 The EEV basis results have been prepared in
measure of profitability and provides an underlying For asset management businesses, it equates to accordance with EEV principles discussed in ‘basis
operating result based on longer-term investment post-tax operating profit for the year. Restructuring of preparation’ of the EEV basis results. See note II
returns and excludes non-operating items. costs are presented separately from the business unit of Additional unaudited financial information for
This alternative performance measure is reconciled amount. Further information is set out in ‘movement definition and reconciliation to IFRS balances.
to IFRS profit for the year in note B1.1 of the IFRS in Group free surplus’ of the EEV basis results.
financial statements.

Prudential plc
Group strategy and operations
Prudential’s differentiated product and geographic portfolio is

well positioned to meet the protection and savings needs of the
growing populations in Asia and Africa, where insurance penetration
is currently low and demand for savings solutions is rapidly
developing. In the United States, Jackson remains a leading provider
of variable annuities to retail investors. Following the proposed
demerger of Jackson, Prudential intends to take full advantage of
the long-term structural opportunities in Asia and Africa. It seeks
to operate with discipline in allocating capital for long-term returns,
and to deliver profitable and increasingly diversified growth.
18 Prudential plc
B
Group overview Asia and Africa
Group overview
Our purpose is to help people get the most out of life. We make We have a pan-Asian footprint, with our largest life and protection
healthcare affordable and accessible and promote financial inclusion operations in Hong Kong, Singapore, Indonesia and Malaysia as well
across our markets. We protect people’s wealth and help them grow as our joint venture in China. We also operate in Thailand, Vietnam,
their assets, and we empower our customers to save for their goals. Taiwan, the Philippines, Cambodia, Laos and Myanmar and have
This purpose is served through implementing our business strategy, a successful partnership in India. Within this footprint, Prudential
set out in this section and our environmental, social and governance has top three positions1 in 9 out of 13 life markets and extensive
Strategic report
(ESG) strategy set out in our ESG report on page 70. distribution networks, across digital, agency and bancassurance
channels. We focus on delivering profitable regular premium health
With this purpose in mind, our intention is to take full advantage of and protection insurance products and fee-based earnings.
the long-term structural opportunities in Asia and Africa and to pursue
a path for a fully independent Jackson. In January 2021, the Board In asset management, Eastspring manages $247.8 billion across
announced that it had decided to pursue the separation of Jackson 11 markets in Asia and provides focused investment solutions to
from the Group in the first half of 2021 through a demerger, whereby third-party retail and institutional clients as well as to our internally
Governance
shares in Jackson would be distributed to Prudential shareholders. sourced life funds. Eastspring is a top 10 asset manager in 7 of the
The result of this separation will be two separately listed companies 11 markets in which it operates, and is the largest pan-Asian retail
with distinct investment propositions, which the Group’s Board asset manager excluding Japan2.
believes will lead to improved strategic outcomes for both businesses.
Since 2014 we have also built a rapidly growing multi-product,
The Prudential Group will focus exclusively on its high-growth Asia multi-distribution business in Africa, with operations now in eight
and Africa businesses. We will also accelerate our development of countries across the continent, and have over one million customers.
digitally enabled products and services to help prevent, postpone Starting in 2021 the regional office for Africa will be based in Nairobi,

and protect our customers from threats to their health and wellbeing, making East Africa our hub for the continued success of operating
as well as supporting them to achieve their savings goals. on the continent.
Jackson will continue to help Americans grow and protect their Our offering in Asia and Africa is evolving to respond to growing
retirement savings and income to enable them to pursue financial customer awareness and demand for products that address health and
freedom for life through its differentiated products, well-known wellness, as well as providing life insurance cover. Pulse by Prudential,
brand and industry-leading distribution network. our health and wellness platform provides a compelling offering to
address these needs, building on our existing distribution channels
Further information on the Prudential Group’s and Jackson’s and trusted brand. Further information on Pulse by Prudential, and our
respective businesses are set out below. The result of the proposed markets, customers, products and distribution within the region is set
separation of Jackson will be two separately listed companies with out below.
distinct investment propositions, which the Group’s Board believes
will lead to improved strategic outcomes for both businesses. Asia has grown significantly over the last 10 years, for example over
the decade from 2010 to 2020, embedded value in Asia grew on
average by 14 per cent3 per annum and at 31 December 2020 was
$44.2 billion. Since 2013, Prudential has committed almost $10 billion
of capital to support growth in Asia, including around $5 billion of
inorganic investments to grow our distribution reach and to build
digital capability. Around one-third of the total investment has been
made since January 2019. Investments in 2020 included establishing
a 15-year strategic bancassurance partnership with TMB, which

significantly strengthens our distribution capability in Thailand’s
fast-growing life insurance sector and strongly complements our
top-five position2 in the country’s mutual fund market. In other
markets we have also established a new bancassurance partnership
with SeABank, a fast-growing bank in Vietnam with approximately
1.2 million customers and almost 170 branches, as well as signing
new agreements with Banque Franco-Lao (BFL) BRED Group in Laos,
and in early 2021 with Phnom Penh Commercial Bank Plc (PPCBank)
in Cambodia.
We have significant investment appetite in Asia in the future that is

based on the absolute size and demographic characteristics of each
economy and our ability to build competitive advantage leveraging
our scale and expertise. While we will continue to build on our
leading positions in Hong Kong and members of the Association of
Southeast Asia Nations (ASEAN), we see the greatest opportunities
in the largest economies of China, India, Indonesia and Thailand.

This investment is expected to deliver profitable and sustainable
compounding growth and will support long-term delivery of future
shareholder returns through value appreciation, with a focus on
achieving sustained double-digit growth in embedded value per share.

Prudential plc
Group strategy and operations / continued
Cambodia Japan Taiwan

Life insurance Eastspring Life insurance
Market ranking11st Funds under management7$4.1bn Market ranking110th
Population417m Population424m
Penetration50.5% Korea Penetration516.5%
Eastspring Average health protection
China Funds under management7$14.7bn gap per household6 $4,823
Life insurance Eastspring
Market ranking1,84th Laos Funds under management7 $9.1bn
Population41.4bn Life insurance
Penetration52.3% Market ranking1 Top 3 Thailand
Average health protection Population47m Life insurance
gap per household6 $1,724 Penetration50.0% Market ranking18th
Eastspring Population470m
Funds under management7$9.6bn Malaysia Penetration53.3%
Life insurance Average health protection
Hong Kong Market ranking1,112nd gap per household6 $287
Life insurance Population432m Eastspring
Market ranking12nd Penetration53.3% Funds under management7 $14.3bn
Population47m Average health protection
Penetration518.3% gap per household6 $6,864 Vietnam
Average health protection Eastspring Life insurance
gap per household6 $9,156 Funds under management7$14.0bn Market ranking13rd
Eastspring Population497m
Funds under management7$5.6bn Philippines Penetration51.4%
Life insurance Average health protection
India Market ranking11st gap per household6 $1,251
Life insurance Population4110m Eastspring
Market ranking1,93rd Penetration51.2% Funds under management7$5.7bn
Population41.4bn Average health protection
Penetration52.8% gap per household6 $1,406 Myanmar
Average health protection
gap per household6 $1,382 Singapore Life insurance
Population454m
Eastspring Life insurance Penetration50.0%
Funds under management7$26.9bn Market ranking1,122nd
Population46m
Indonesia Penetration56.0%
Life insurance gap per household6 $13,776
Market ranking1,101st
Population4274m Eastspring
Penetration51.4% Funds under management7$137.6bn
gap per household6 $1,230
Eastspring
Funds under management7$5.3bn
20 Prudential plc
Markets With regards to strategy, we see the most significant opportunities
Group overview
The life insurance industry in Asia and Africa remains in the early for growth potential in life insurance and asset management in the
stages of development, as characterised by the low penetration rates four largest economies in our footprint, namely China, India, Indonesia
across the region for insurance. In particular, most of our Asia markets and Thailand. Our joint venture operations in China and India together
are approaching the level of per capita annual income when demand with our businesses in Indonesia and Thailand, provide us with scaled
increases sharply. Around 50 per cent of the global population lacks access, where we can build leadership positions with competitive
access to essential health services13, and across the Asia region advantage and economies of scale. We also intend to continue
specifically, there are significant health funding and wellness gaps; building on our leading positions within Hong Kong and ASEAN.
Strategic report
80 per cent of Asians do not have insurance cover14 and spend some
$400 billion on healthcare as an out-of-pocket expense15. Similarly, In China, our China life business is a 50/50 joint venture with CITIC,
in Africa, while mobile phone access has increased tremendously a leading Chinese state-owned conglomerate. Our China JV business
over the last 20 years, less than 50 per cent of Africans have access performed well in 2020 after the Covid-19 disruption in the first
to modern health facilities16, and 80 per cent have to rely on public quarter, increasing new business profit by 3 per cent. Building
health facilities, which are often understocked, understaffed, on our existing nationwide coverage of 20 branches and 99 cities
and difficult to reach due to the physical and financial burdens (an increase of five since 2019), we expect our China JV business will
of transportation17. continue to grow at pace by expanding and deepening our presence
Governance
from our current geographical footprint, and by leveraging our
Our largest market in respect of APE sales is Hong Kong, which multi-distribution platform. We operate our asset management
accounted for 21 per cent of our overall Asia APE sales in 2020, business in China through CITIC-Prudential Fund Management
followed by Singapore, contributing 17 per cent and China which Company Limited, a JV with CITIC with assets under management
accounted for 16 per cent. The rest of our new business is diversified of $9.6 billion19, as well as our wholly-owned private fund manager
across 10 markets. Our adjusted operating profit is well balanced, with operationalised in 2019 within Eastspring, which now has sourced and
the largest contributions from Hong Kong, Singapore and Indonesia. sub-advised assets under management of $743 million. Our Chinese

life insurance joint venture has also established its own asset
management company in 2020, Prudential-CITIC Asset Management
Co, which further strengthens our capabilities in savings and
Adjusted operating profit by market retirement products.
% vs 2019 CER
$3,667m
In India, our business consists of our 22.1 per cent holding of the
Indian Stock Exchange listed life insurance business, ICICI Prudential
Life Insurance (with our investment valued at $2.2 billion as at
+13% (+12% AER) 31 December 2020) and 49 per cent of the asset manager, ICICI
Prudential Asset Management, which has total funds under
management7 of $26.9 billion19. Our India life business continues to
pivot to health and protection, with a 17 per cent increase in health
and protection APE sales, which now represent 24 per cent of total
APE sales (up 9 percentage points on 2019). We will continue to
capture the significant potential in the Indian life market, with an
aspiration to double 2019 new business profit in three to four years,
by continuing to grow the business, improving retention and
enhancing productivity.
In Indonesia, we continue to strengthen our market leadership, including

in the sharia market where we increased APE sales by 6 per cent and

new business profit by 27 per cent in 2020, and propel growth by
broadening our product offerings, as well as digitalising our business
model. We added 60 products during 2020, doubled MDRT qualifiers
to over 2,100, and launched digital products through both Pulse and
Adjusted Share our OVO partnership. We have seen positive momentum in the last
operating of total Growth quarter of 2020, being the highest sales quarter of 2020, and believe
profit Asia (CER)
our business transformation will continue to drive growth in the future.
Hong Kong $891m 24% 20%
Singapore $574m 16% 18% In Thailand our new distribution partnership with TMB will help us
achieve top-three leadership in the bancassurance channel, and we
Indonesia $519m 14% (1)% will further accelerate growth by developing a holistic omni-channel
Malaysia $309m 8% 14% business model. Coupled with the completion of the acquisition of
TMBAM and TFund which gives us a top-five ranking in the mutual
Eastspring Investments $283m 8% 2% fund market, this will give us a high-quality platform to deliver
Vietnam $270m 7% 14% best-in-class health and wealth solutions to serve the growing
retirement and investment needs of both the rising middle class
China JV $251m 7% 15% and the growing high net worth segments.
Thailand $210m 6% 24%

Philippines $95m 3% 25%
Taiwan $85m 2% 10%
Other $180m 5% 3%

Prudential plc
In our other large businesses, we also see ample opportunities Products and brands
to continue to grow at pace. In Hong Kong, we believe based on our We offer a wide range of insurance products that are tailored to local
own and third party surveys there is latent demand from Mainland market requirements and fast-changing individual needs. We focus
Chinese customers for our Hong Kong product suite and that the on health and protection and savings products with 65 per cent of new
eventual normalisation of visitor arrivals as the border reopening business profit contributed by health and protection solutions and the
occurs will allow for the return of this important source of new rest by savings products that include participating, linked and other
business. For example, 61 per cent of Mainland Chinese visitor traditional products.
preference20 is to receive critical illness medical treatment in
Hong Kong. In the meantime, we continue to build our already strong The diversity and resilience of our business is supported by the
and substantial Hong Kong domestic business through multi-channel continued innovations and enhancements we make to our product
expansion and increased digitalisation of our service offering. We also range, which include broadening coverage for new risks and adding
continue to broaden our product offerings, such as our mid-tier innovative features. In 2020, we introduced or revamped 175 new
medical reimbursement product, the PRUHealth VHIS VIP Plan, products22 contributing 20 per cent of APE sales, including simplified
to fulfil the protection needs of our customers. We will also broaden lower case-sized protection offerings.
access to Mainland China consumers through Greater Bay Area
initiatives and remain a destination of choice through our market-
leading products and service propositions. New business profit by product, 2020 $m
Linked 13%
In Singapore, we see significant opportunities in expanding the Non-par 8%
servicing of the high net worth and small and medium enterprise Par 14%
(SME) markets, alongside supporting a fast ageing population to
Health and protection 65%
address under-covered retirement and health needs. In Malaysia,
we have leading market positions in both the conventional and
Takaful markets. In particular, in the underprovided Takaful segment
where we see substantial opportunity for growth, we increased our
APE sales by 26 per cent and our new business profit by 29 per cent
in 2020.
In our other high-potential growth markets of Vietnam, the Philippines,

Cambodia, Laos and Myanmar, we see the opportunity for rapid
growth through the roll-out of our efficient and scalable business
model, multi-channel distribution networks and the provision of
market-leading digital products and services through Pulse. These
markets currently have very low levels of life insurance penetration,
for example with life insurance penetration5 of just 1.4 per cent in The Covid-19 pandemic has reinforced customer interest in health and
Vietnam and 1.2 per cent in the Philippines. However, with rising protection products, with 58 per cent of consumers across our Asian
GDP per capita at or reaching a threshold of $10,000 to $20,000, markets desiring access to healthcare value-added services, such as
and supported by our proven and market-leading positions, we are access to a virtual GP23. This has been converted into an increase
confident of delivering new life insurance sales growth well in excess in the proportions of APE represented by health and protection
of GDP growth in these markets. products in seven of our Asian markets, led by India (up 9 percentage
points to 24 per cent of APE sales), Singapore (up 5 percentage
We see substantial opportunities to accelerate our asset management points to 25 per cent of APE sales), Thailand (up 9 percentage points
business, Eastspring, building on its leading market position as to 25 per cent of APE sales) and Vietnam (up 3 percentage points to
Asia’s largest retail asset manager (excluding Japan)2 and structural 17 per cent of APE sales), in turn resulting in increased margins for
advantages of reliable and predictable inflows from our life businesses. our Asia markets excluding Hong Kong. Of the 175 new or revamped
The completion of the TMBAM and TFund acquisitions in Thailand products noted above, more than 115 were traditional and health
and successful development of its China business, mentioned above, and protection products.
have strengthened its strategic portfolio.
Our Hong Kong business offers domestic Hong Kong residents and
Since 2014 we have also built a rapidly growing multi-product business mainland visitors sophisticated critical illness, medical benefits and
in Africa, with operations now in eight countries across the continent. life insurance protection business. 91 per cent of all Hong Kong
Despite the Covid-19 pandemic, APE sales at Prudential Africa have consumers23 indicated they would retain life insurance even if their
grown by 51 per cent21 to $112 million during 2020, with the number financial position is disadvantaged by Covid-19 re-enforcing the
of active agents significantly ahead of the same period last year. resilience of this market. The investment proposition provides access
In Ghana, we have renewed our exclusive agreement with Fidelity to international equities and bonds. In particular, our main with-profits
Bank for an additional 10 years, building on a successful partnership product offering uses a with-profits structure, which pools the
over the past five years. We also announced a new partnership with investments of policyholders and allocates returns based on long-term
Vodafone Ghana to provide an innovative microinsurance product investment performance (similar to that historically used in the UK),
to their nine million plus subscribers. Meanwhile, our team in Nigeria and leads to attractive margins. The business has a high level of
has launched a new partnership with the largest mobile operator renewals that is substantially higher than the premiums from new
in the country, MTN, in an effort to reach its subscriber base of business. Singapore offers a similar type of product mix and also uses
over 70 million people and provide protection to the millions a UK-style with‑profits structure.
of uninsured Nigerians.
22 Prudential plc
In China, Anxin, our digital health and protection solution generated Despite the gradual relaxation of Covid-19 containment measures
Group overview
165,000 policies in 2020, with around 50 per cent to new customers. in several markets, virtual selling tools have now become mainstream
In Hong Kong, we launched in the second half of 2020 PRUHealth with distributors, and virtual sales in the fourth quarter represented
VHIS VIP Plan, a tax-efficient medical insurance targeting the mid-tier 23 per cent of both agency and bancassurance sales.
segment, which has contributed 10 per cent of new business profit
for the domestic segment in the fourth quarter of 2020. We place great emphasis on agent professionalism and promote
career progression by providing tailored training programmes
In Indonesia, we retain leadership in the sharia-compliant market, that share experience and best practice across different markets.
Strategic report
with 35 per cent share, accounting for 37 per cent of agency sales in In addition, to further assist our agents during the sales process
Indonesia. Our PRUCinta product, the first traditional sharia product and enhance productivity we continually upgrade the tools at their
with specific cash value, accounts for 14 per cent of Indonesia agency disposal. During 2020, the number of agents qualifying for the
sales. More widely, we have launched 60 products in Indonesia in Million Dollar Round Table (MDRT) doubled in the year to more
2020, including lower ticket standalone protection products which than 13,200.
collectively accounted for 37 per cent of the APE mix (2019: 8 per cent)
and 52 per cent of new case count mix (2019: 11 per cent). In Africa the number of active agents in 2020 significantly increased
from the prior year. The increase in active agents is a direct result of
Governance
Alongside offering products that meet customer needs, we invest implementing our Rookie Development Programme in each market,
in our brands to build trust, drive awareness and attract and which helps with agent professionalism and customer focus, as well as
retain customers. transitioning new agents from the classroom to the field, and making
those agents active within the first month of their recruitment. In most
Distribution and customer engagement markets, as a response to Covid-19-related restrictions, we rapidly
We believe in a multi-channel and integrated distribution strategy for innovated to create an end-to-end virtual sales submission process,
our business which can adapt and respond flexibly depending on local with a virtual recruitment and onboarding process for distributors as
market conditions. Our distribution network is one of the strongest well as delivering training digitally. Moreover, 2020 marked the first

and most diversified in the Asia region, across agency, bancassurance time each market has had at least one agent qualify for the MDRT
and non-traditional partnerships, including digital. In recent years, increasing the number of qualifiers to 38 from 15 in the prior year.
we have also established non-traditional partnerships to broaden our
customer reach, particularly the digitally-savvy millennial segment. Bancassurance
In total, we have more than 300 life insurance and asset management We also have a leading bancassurance franchise that provides access
distribution partnerships in Asia. Alongside these distribution to around 20,000 bank outlets through our strategic partnerships with
channels we also have Pulse by Prudential (discussed further below). multi-national banks and prominent domestic banks.
Our bancassurance partnerships made an important contribution

New business profit by channel, 2020 $m to our business last year. Our new partnership with TMB in Thailand,
which commenced on 1 January 2021, will give us access to an
Agency 74%
Bancassurance 22%
expanded network of 685 branches. In preparation we have trained
more than 5,500 bank sellers and nearly doubled the number of sales
Others 4%
support staff to 240. We have launched a refreshed set of propositions
encompassing the high net worth, retail, commercial and SME
segments and rolled out a new e-POS system.
Outside of Hong Kong, our bancassurance channel APE sales

remained stable despite Covid-19 related disruption. We were
particularly pleased to see the positive momentum in our
bancassurance channel in Indonesia, which saw APE sales up

15 per cent21. We continue to look for opportunities to expand our
presence in this market. There were also particularly strong
performances in our China JV (APE sales up 34 per cent21), Thailand
(APE sales up 21 per cent21) and Vietnam (APE sales up 35 per cent21),
demonstrating our channel strength in these markets.
Agency We have also developed strategies to reach the digitally-savvy
We have around 600,000 licensed tied agents24 across our life insurance millennial segment through UOB Mighty, UOB’s digital bank, and new
markets, and the productivity of active agents increased 8 per cent25,26 partners such as Central in Thailand. Prudential Laos has also recently
in the year, based on number of cases, which are becoming smaller in partnered with Star Fintech to launch payment services via its U-money
size as we, and our customers, focus increasingly on standalone platform. We anticipate that these partnerships will significantly
protection products. Our agency channel is a core component of our enhance our reach to millennial consumers in the country through
success, comprising 74 per cent of our new business profit given the the joint development of digital propositions that encompass health,
high proportion of high margin protection products sold. wellness and wealth products. The experience will also help us in
designing and managing distribution strategies in our existing markets
Our continued support for the agency channel positions us well for as well as in targeting new points of entry.
sustainable growth. Our agent management has moved online across

all markets, enhancing effectiveness of agent communication and
operation, and expanding sales capacity with agent recruits26 of
143,000 in the year. We deployed virtual sales tools across all markets
for almost all products, and 28 per cent of agency new cases since
April 2020, together with 27 per cent of bancassurance new
cases since July 2020 have been made virtually.

Prudential plc
Personal health insights with Pulse
Meet your Accessible Up your

health anywhere, game with
assistant anytime challenges
Pulse by Prudential 37 digital bite-sized products were made available in Pulse in 2020.
In 2020, we have been able to accelerate our digital development Some examples of bite-sized products launched by Prudential within
and associated customer-centric digital ecosystem. Pulse include products related to common critical illnesses in Asia
(cancer, stroke, heart attack), tropical disease protection (dengue,
The Covid-19 pandemic has accelerated growing awareness and malaria, measles), and daily care (food poisoning, minor burns, broken
demand for health and wellness solutions. For example, 46 per cent bones, and accident income support).
of Asian consumers searched for new insurance policies23. Our digital
capabilities allow us to make healthcare more accessible and affordable With greater customer touchpoints, we are also able to generate
in the countries where we operate. Pulse‑led data-driven leads for agents. We saw over 2.2 million leads
generated for agents in 2020 which together with a small amount of
Prudential meets this growing demand for health and wellness revenue from policies sold directly through Pulse, generated APE sales
through its super-app Pulse by Prudential. Pulse is a free digital mobile of $211 million28 in 2020.
application that offers holistic management, artificial intelligence
(AI)-powered self-help tools, and information to serve users 24/7 Recently, we introduced a subscription plan to help Pulse users eat
and promotes health and wellbeing through a range of value-added healthier and promote a more active lifestyle, and even save for the
services. These include telemedicine, health and wellness content future. These paid subscription plans, priced at a low cost of between
and communities, health challenges and rewards, chronic disease $1-$3 per month, are currently available to users in Hong Kong,
management, as well as a self-diagnosis and self-help tools. Pulse has Indonesia, Malaysia, Thailand, Vietnam and the Philippines, with plans
been launched27 in 11 different languages across 11 markets in Asia to expand on the offerings and launch in additional markets in 2021.
(Malaysia, Indonesia, Singapore, Hong Kong, the Philippines, The paid subscription plans have received 164,000 active subscribers
Thailand, Vietnam, Cambodia, Laos, Taiwan, and Myanmar) and during 2020.
most recently four markets in Africa (Kenya, Nigeria, Cameroon
and Zambia), with varying levels of development. We have undertaken steps to meet our objective for Pulse to provide a
platform for end-to-end service, with the same app used by customers
Pulse has been downloaded around 20 million times27 since its initial and distributors. Agents have the ability to sell Prudential products
launch in 2019 in Malaysia. Through this single super-app, Pulse is virtually within the Pulse platform in the Philippines, Malaysia and
being developed to offer an integrated health, wealth, and SME Indonesia. Meanwhile, e-claims are available in Indonesia, Malaysia,
ecosystem. It has integrated 32 local and regional partners27, including Cambodia, Myanmar and the Philippines. We believe the integration
most recently, a signed partnership with Central Group, a leading with the life value chain across sales, claims and payments will allow
retailer in Thailand, that will enable Pulse to access Central Group’s Pulse to enhance value to new and existing users and drive efficiencies
existing digital engagement with customers to offer insurance and in the business.
health solutions to them. We have also signed a partnership with HR
Easily, an HR services digital platform which we make available to our Customer service and loyalty
SME customers through ‘Business at Pulse’. We are seeing continued We believe that excellent customer service has been key to our strong
increase in the usage of AI assessment and triage, lifestyle reputation and leading pan-Asia franchise. Customer loyalty has
management and wellness, and telemedicine consultation services, remained high during the Covid-19 pandemic, with a retention ratio
with over 1.5 million users27 accessing at least one of the services consistently in excess of 90 per cent. The satisfaction and trust our
in Asia, since launch. customers have in our business also translates into a high proportion
of repeat sales, which comprised 47 per cent of APE sales in 2020.
Pulse also enables us to reach a younger customer demographic, The result of these dynamics is a portfolio of over 25 million in-force
with the majority of Pulse users in the 18 to 35 age group compared policies, with each policyholder holding 1.6 policies on average.
with the average age of an existing Prudential customer profile
of around 40, and is broadening our potential customer base,
with 70 per cent of Pulse consumers new to Prudential.
24 Prudential plc
We are focused on unlocking new customer segments through a To support these objectives, Eastspring has organised its operations
Group overview
broader proposition set. During 2020, we added a further 1.3 million into three pillars that will drive the expansion of its capabilities and
new life customers from traditional channels. Our overall life customer growth in the future:
numbers increased to 16 million, of which about 30 per cent are our
health insurance customers. —— Alpha engine – representing centralised investment capability
with an emphasis on driving asset class return on investment
We continue to identify and target new customer groups and segments after adjusting for market-related volatility. This pillar will focus
outside our traditional focus in the Mass and Affluent space in order on diversifying Eastspring’s investment capabilities and styles.
Strategic report
to accelerate our future growth. Within the Emerging segment,
Pulse leads the customer acquisition as described above. Within the —— Advisory solutions – standalone advisory service for institutional
high net worth segment, we first expanded into this segment in 2018 clients; focusing on solutions and products for that market,
with Opus in Singapore, providing a differentiated experience for our including the growing need to support clients’ Environmental,
customers, including a dedicated service team, wealth planners and Social and Governance (ESG) requirements. This pillar will also
external experts covering trust and legal matters. Within the Group focus on reinforcing the quality of service provided to the Group’s
segment, we also developed tailored offerings for small and medium- life operations and supporting the Group’s ESG strategy.
sized enterprise (SME), a segment that remains under-served and
Governance
offers significant growth potential. This strategy is advanced through —— Complementary partner solutions – this pillar will focus on
our all-inclusive platform, Business at Pulse platform, which provides complementary investment capabilities sourced from partners,
digitally-enabled insurance and HR solutions for business owners and in order to enhance strategies available to investors.
their employees, supporting a 17 per cent increase in APE sales from
group business in 2020. We have extended our Business at Pulse In developing its capabilities, Eastspring will further integrate its
platform from Singapore and Indonesia to Hong Kong, the Philippines offerings with those of Prudential’s life business, to enable the Group
and Thailand, and will launch next in Malaysia. to seamlessly offer services across the full spectrum of Life, Health
and Wealth products. Eastspring will leverage Prudential’s established

Integrated asset management distribution channels.
Eastspring is a leading Asia-based asset manager, with operations
across 11 markets in Asia, plus offices in Europe and North America. We believe these developments will further enhance Eastspring’s
With $247.8 billion of assets under management and over 300 position as a leading asset manager in Asia.
investment professionals, it is the largest pan-Asian retail asset Summary
manager excluding Japan2 and is a top-10 asset manager in 7 There is a growing awareness and demand for wellness and insurance
of the 11 markets in which it operates. products across Asia, re-enforced by the global pandemic. We
continue to invest in our chosen markets, building on our leading
Eastspring has a broad product set, as well as significant distribution
position in Hong Kong and ASEAN, and meeting the growing needs
capabilities and industry-leading operational efficiency. Eastspring
of customers in the largest economies of China, India, Indonesia and
provides focused investment solutions, across equity, bonds and
Thailand. This customer need is addressed by our wide range of
multi-asset products, to our internally sourced life insurance funds and
insurance products, tailored to local markets, and extensive and
third-party retail and institutional clients. Distribution channels include
diversified distribution network. We continue to amplify these existing
wholesale, intermediary and direct online formats, which are tailored
capabilities through extending our China footprint, broadening our
as required, depending on the geography involved. This means that
product offerings and enhancing our digital presence. Our innovative
Eastspring can continue to grow and develop through both market
and customer-centric digital ecosystem increasingly complements our
cycles and changes to individual investment styles. Operational
existing distribution channels and provides access to address the needs
efficiency has led to industry-leading margins, with investment in
of new and fast-growing customer segments. Our overall customer
technology, for example the implementation of BlackRock’s Aladdin
offering is supported by our integrated asset manager Eastspring,
system, to deliver common platforms, and world-class risk
which has a clear strategy to expand its capabilities to deliver growth.

management and governance capabilities.
We believe these enhanced capabilities, alongside the resilience of
In terms of strategy, we see substantial growth opportunities to
our high quality and well diversified platform, mean our Asia business
accelerate Eastspring, building on its leading market position as
is well positioned to capture the structural opportunities open to us
Asia’s largest retail asset manager2 (excluding Japan) and structural
and therefore deliver profitable and sustainable compounding growth
advantages of reliable and predictable inflows from our life business.
and high risk-adjusted returns for shareholders.
In particular, we see China, India and Thailand as our most material
market opportunities. Eastspring is well positioned to broaden its
investment capabilities to serve the global needs of Asia-based clients,
while offering global investors access to its expertise in investing in
Asian markets. For example, in October 2020, Eastspring announced a
strategic partnership with Atlantic Zagros Financial Partners to expand
its offshore distribution capabilities to the Americas. To support this
ambition Eastspring’s strategic objectives include developing its
distribution, product range and investment advisory capability,
while continuing to enhance support for the asset management
needs of Prudential’s life insurance business.

Prudential plc
US operations —— Annuities are underutilised in the world’s largest retirement

savings market. The United States is the world’s largest retirement
savings market estimated to consist of approximately $51 trillion
Jackson helps Americans grow and protect their retirement savings in professionally managed retail and institutional assets as of
and income to enable them to pursue financial freedom for life. 31 December 201931. However, only approximately $2.4 trillion
Following the planned demerger, Jackson intends to pursue a focused of professionally managed assets were invested in annuities as
strategy which prioritises optimisation and stability of capital resources of 31 December 2019. A key driver of this underutilisation is the
while protecting franchise value. historical lack of integration of annuities into wealth management
platforms and financial planning tools available to retail investors.
Maintaining a resilient balance sheet is critical to Jackson meeting
Jackson has been working actively with its distribution partners
its objectives of fulfilling its obligations to policyholders, providing
and financial technology firms to integrate annuities into the wealth
stable capital returns to shareholders, supporting the development
management planning tools advisers use to select investments
of the business and enabling profitable growth over the long term.
and build portfolios for their clients.
In line with Jackson’s disciplined approach to pricing and risk
Products
management, pricing actions taken in the first half of 2020 in response
Jackson offers a diverse suite of annuities to retail investors in the
to changing market conditions and to preserve statutory capital,
United States. The success of its variable annuity offerings reflects
resulted in an expected and material reduction in new fixed annuity
the differentiated features Jackson offers as compared with its
and fixed index annuities sales.
competitors, in particular the wider range of investment options
Jackson has identified three main areas for business development. and greater freedom to invest across multiple investment options.
Through the third quarter of 2020, Jackson accounted for
First, Jackson intends to maintain and enhance its comprehensive 16.5 per cent of new sales in the US retail variable annuity market32
suite of retirement products that it believes are sought after by retail and ranked number 1 in variable annuity sales. Jackson also offers fixed
investors and Jackson’s distribution partners. index annuities and fixed annuities and expects to offer a registered
index-linked annuity in 2021. This diverse offering allows Jackson
Second, it plans to optimise the sales mix across its broad product to meet the different needs of retail investors based on their risk
portfolio by leveraging the strength of its industry-leading distribution tolerance and desired growth objectives, and to deliver customised,
network and entering into new distribution agreements. differentiated solutions to its distribution partners. Jackson’s annuities
offer investors the opportunity to grow their savings consistent with
Third, Jackson seeks to develop the overall market demand for retail their objectives, ranging from full market participation with Jackson’s
annuities by partnering with wealth management solution providers variable annuities, to a guaranteed fixed return with Jackson’s fixed
that historically have not considered annuities as a solution to provide annuities. Some of Jackson’s annuities offer optional guarantee
retirement savings and income protection. benefits for a fee, such as full or partial protection of principal,
minimum payments for life and minimum payments to beneficiaries
These strategies are discussed further below. upon death. All annuities also provide investors with tax deferral
benefits consistent with their purpose of providing financial security
Markets at, and through, retirement.
Jackson believes that the US retirement savings and income solutions
market presents a compelling growth opportunity and will support Distribution network
its development in the future. The primary drivers of the industry’s Jackson sells its products through an industry-leading distribution
trends are believed to be the following: network that includes independent broker-dealers, wirehouses,
regional broker-dealers, banks, and independent registered
—— The target demographic is expected to continue to grow. investment advisers, third-party platforms and insurance agents.
Over the next decade, the proportion of the US population aged Jackson’s strong presence in multiple distribution channels has been
55 or older is expected to grow at a rate double that of the total essential to positioning it as a leading provider of retirement savings
US population, resulting in approximately 112 million individuals and income solutions. Each of these channels is supported by
who will be aged 55 or older by the year 203029. Jackson’s sizeable wholesaler field force, which is among the most
productive in the annuity industry. According to the Market Metrics
—— The need for new sources of retirement income is expected
Q3 2020 Sales, Staffing, and Productivity Report, Jackson’s variable
to grow. Over the last few decades, there has been a pronounced
annuity sales per wholesaler are more than 10 per cent higher than
shift from retirement income funded primarily by pension plans
its nearest competitor.
to retirement income funded primarily by individual savings.
Of all private sector workers in the United States, only 15 per cent
had access to a defined benefit pension plan in 2020 (down from
20 per cent in 2010), and 52 per cent only had access to a defined
contribution retirement plan in 202030. This trend has increased the
burden on individuals to save for their retirement and to use those
savings to generate income during retirement.
26 Prudential plc
Operating platform
Group overview
Jackson’s operating platform is scalable and efficient. Jackson
administers approximately 75 per cent of its in-force policies on its
in-house policy administration platform. Jackson’s in-house policy
administration platform gives it flexibility to administer multiple
product types through a single platform. To date, Jackson has
converted over 3.5 million life and annuity policies to its in-house
policy administration platform, eliminating the burdens, costs and
Strategic report
inefficiencies that would be involved in maintaining multiple legacy
administration systems. The remainder of Jackson’s business is
administered through scalable third-party arrangements. Jackson
believes that its operating platform provides it with a competitive
advantage by allowing it to grow efficiently and provide superior
customer service. In 2020, Jackson received the 2019 Contact Center
of the Year award from Service Quality Management and the number 1
overall operational ranking for 2019 from its broker-dealer partners,
Governance
according to the Operations Managers’ Roundtable.
Risk management
Product design and pricing are key aspects of Jackson’s risk
management approach. Jackson operates a sophisticated hedging
programme which seeks to balance three objectives: managing the
economic impact of adverse market conditions, protecting statutory

capital and providing stable distributable earnings throughout
market cycles.
Jackson also uses third-party reinsurance to mitigate a portion of the

risks that it faces, principally in certain of its in-force annuity and life
insurance products with regard to longevity and mortality risks and its
annuities with regard to the vast majority of its guaranteed minimum
income optional benefit (GMIB) features.
Notes
1 Based on full year 2020 (calendar year 2020 for India), 7 Full year 2020 total funds under management, 21 Increase stated on a constant exchange rate basis.
or the latest information available. Sources include including external funds under management, money 22 Including 37 bite-sized products.
formal (eg competitors’ results release, local market funds, funds managed on behalf of M&G plc 23 Source: Swiss Re COVID-19 Consumer Survey,
regulators and insurance association) and informal and internal funds under management, reported April 2020.

(industry exchange) market share data. Ranking based on the country where the funds are managed. 24 Including India.
based on new business (APE sales, weighted full 8 Total joint venture/foreign players only. 25 Cases per active agent.
year premium or full year premium depending 9 Private players only. 26 Excluding India.
on availability of data) or total weighted revenue 10 Excludes Jiwasraya. 27 As of 22 February 2021.
premiums. Full year data is not yet available for 11 Includes Takaful, excludes Group business. 28 Substantially from full-premium products sold
Cambodia, or Laos, full year 2019 data has been 12 Includes onshore only. through referrals to agents and a small amount
used instead. For Hong Kong and the Philippines, 13 Source: World Bank and WHO: Half the world lacks of revenue from 37 new digital products.
ranking based on new business for the first nine access to essential health services, 100 million still 29 Source: Census Bureau’s Current Population Survey,
months of 2020. pushed into extreme poverty because of health March 2017.
2 Source: Asia asset management – Fund manager expenses, December 2017. 30 Source: Bureau of Labor Statistics.
surveys. Based on assets sourced in Asia, excluding 14 Prudential estimate based on number of in-force 31 Source: Estimated by Cerulli & Associates.
Japan, Australia and New Zealand. Ranked according policies over total population. 32 Source: LIMRA.
to participating firms only. 15 Source: World Health Organisation: Global Health
3 Increase stated on an actual exchange rate basis. Observatory data repository (2013). Out of pocket
4 United Nations, Department of Economic and Social as % of total health expenditure. Asia calculated
Affairs, Population Division, World Population as average out-of-pocket.
Prospects 2019 Revision (2020 estimates). 16 Source: The World Bank 2017.
5 Source: Swiss Re Institute; Sigma Explorer: 17 Source: The Borgen Project: Digital health apps
World insurance, 2019 – life insurance penetration in Africa aim to revolutionize medical care,
(premiums as a percentage of GDP). September 2020.
6 Source: Swiss Re Institute: The health protection 18 Attributed to the shareholders of the Group
gap in Asia, October 2018. Average gap per before deducting the amount attributable to the
household is calculated as ‘total health protection non-controlling interests. This presentation is
gap divided by estimated number of households applied consistently throughout the document.
hospitalised under the mentioned gap range’. In this 19 Representing Prudential’s 49 per cent interest.
report, the definition/scope of ‘Asia’ is the 12 markets 20 Based on 4Q20 MCH Sentiment Tracker conducted
surveyed: China, Hong Kong, India, Indonesia, Japan, through online survey by Nielsen online panel on
Malaysia, the Philippines, Singapore, South Korea, behalf of Prudential Hong Kong. Survey results are
Taiwan, Thailand and Vietnam. based on sample size of 451.

Prudential plc
C
Group Chief Financial Officer and Chief Operating Officer’s

report on the 2020 financial performance
Mark FitzPatrick While Covid-19 restrictions led to new APE sales in Asia being
Group Chief Financial Officer (28) per cent1 lower than the prior year, we have seen positive
and Chief Operating Officer momentum in the second half of the year, with H2 2020 sales up
20 per cent1 compared with the first half. Excluding Hong Kong, where
restrictions between Mainland China and Hong Kong have been in
place for much of 2020, new APE sales were down (6) per cent1, with
new business profit falling by only (4) per cent1 as new business profit
margins saw a small improvement over the prior year. Our businesses
in Asia delivered a 13 per cent1 increase in adjusted IFRS operating
profit based on longer-term investment returns (adjusted operating
profit2), reflecting the benefits of our well positioned and broad-based
portfolio, which has long focused on high quality, recurring premium
business. Operating free surplus generation was 8 per cent1 higher,
following the on-going growth of the in-force business and lower levels
of new business which were offset by the impact of lower interest rates.
Lower asset returns and the effect of lower interest rates on the
economic assumptions underpinning DAC amortisation contributed
to US long-term business adjusted operating profit2 being (8) per cent
lower than the prior year. The RBC ratio of Jackson National Life24,
The Group has delivered positive Jackson’s principal operating subsidiary, was 347 per cent, with
operating capital generation in line with expectations following the
operating results while supporting Athene reinsurance transaction. As announced on 28 January, the RBC
ratio is after an 80 percentage point reduction following revisions to
our colleagues, distributors, Jackson’s hedge modelling for US regulatory purposes.
customers and communities during 2020 saw high levels of macro volatility. In the US, the S&P 500 index
fell (4) per cent over the first half before recovering by 20 per cent in
the disruption caused by Covid-19. the second, resulting in a 16 per cent increase over the year. In Asia,
equity indices were similarly volatile, with the MSCI Asia ex Japan
Alongside, we have accelerated Index (6) per cent down in the first half and up 30 per cent in the
second. Government bond yields were lower over the year, notably
preparations for the proposed with the US 10-year government bond yield ending the year at
separation of Jackson and continue 0.9 per cent (31 December 2019: 1.9 per cent). 2020 also saw
significant volatility in credit spreads, for example spreads on US dollar
to develop our capabilities and denominated A-rated corporate bonds rose by 39 basis points in the
first half and fell by (41) basis points in the second half.
presence in our chosen Asia and Africa Covid-19
markets, which will position the The Group Chief Executive’s report has set out how the Group has
risen to the operational challenges presented by Covid-19. In terms
Group well for success in the future. of financial performance, the containment measures taken by
governments across the globe have impacted sales levels and
consequentially new business profitability in 2020, albeit many
business units saw sales improve in the second half of the year as
restrictions were removed. These impacts are discussed in more detail
later in this report. Future sales level will depend on how governments
respond to changing Covid-19 case levels and the success of
vaccination and containment programmes in the markets in which
we operate. Travel between Hong Kong and Mainland China remains
severely restricted, with consequential effects on Mainland China
visitor numbers and the level of APE sales in Hong Kong from this
segment. The impact that Covid-19 has had on the macro-economic
environment, with lower interest rates and volatile equity markets,
has negatively impacted profitability in the year as discussed below.
The sensitivity of our IFRS, EEV and capital metrics to further market
movements are set out in the financial statements later in
this document.
In Asia, where we focus on health and protection business, we

continue to see low levels of Covid-19 claims, which were less than
1 per cent of total Asia claims paid in the year of $7.2 billion. We also
provided our customers in 2020 with premium grace periods in line
with local regulations. Our annual review of non-economic
assumptions underpinning insurance liabilities did not identify the
need for any significant strengthening as a result of the effects of
Covid-19 and overall Asia operating experience remains positive.
28 Prudential plc
There have been no impairments to goodwill or intangible assets Within the US, falling interest rates, with yields on US treasuries falling
Group overview
at 31 December 2020 and we will continue to review for triggers by almost one percentage point over the year, and steeply rising equity
for impairment in line with our normal accounting procedures. markets following substantial falls in the first quarter of the year have
Our investments are largely at fair value in the balance sheet and no led to $(4,262) million of negative short-term investment fluctuations
significant changes to our valuation procedures have been applied. in the US business. Further information is set out in the US section of
Losses on sales of impaired bonds by Jackson increased to this report.
$(148) million in the year (2019: loss of $(28) million) and bond
write-downs increased to $(32) million (2019: $(15) million) reflecting After allowing for non-operating items, the total IFRS profit after tax
Strategic report
volatility in credit spreads. from continuing operations was $2,185 million (2019: $1,944 million1).
Finally, our liquidity position remains healthy with $1.5 billion of IFRS effective tax rates
holding company cash and $0.5 billion of commercial paper in issue In 2020, the effective tax rate on adjusted operating profit based
at 31 December 2020 alongside $2.6 billion of undrawn committed on longer-term investment returns from continuing operations was
facilities. We have not breached any of the requirements of our core 15 per cent. This was unchanged from 2019.
structural borrowings nor modified any of their terms.
The effective tax rate on total IFRS profit in 2020 was negative
Governance
Adjusted operating profit before tax from continuing operations (2) per cent. This was unchanged from 2019 and reflects the tax
For full year 2020, Prudential’s adjusted operating profit2,7 from credit on US derivative losses exceeding the tax charge on profits
continuing operations was $5,507 million (4 per cent higher than from Asia operations.
2019 on a constant and an actual exchange rate basis). Throughout
this document the reference to continuing operations refers to Total tax contribution from continuing operations
results of the full Group in 2020 and the results of the Group in 2019 The Group continues to make significant tax contributions in the
excluding the contribution from the discontinued UK life and asset jurisdictions in which it operates, with $2,114 million remitted to tax
management operations. authorities in 2020. This was similar to the equivalent amount of

$2,168 million3 remitted in 2019.
The increase in adjusted operating profit reflects the combination of
a 13 per cent1 increase in adjusted operating profit2 from our Asia life Tax strategy
and asset management operations, offset by a (9) per cent decrease The Group publishes its tax strategy annually which, in addition to
in adjusted operating profit2 from our US business (including asset complying with the mandatory UK (Finance Act 2016) requirements,
management), and lower central expenses. also includes a number of additional disclosures, including a country-
by-country disclosure of revenues, profits, average employee numbers
Central expenses15 were 8 per cent3 lower than the prior year and taxes for all jurisdictions where more than $5 million tax was paid.
reflecting a reduction in interest expense on core borrowings following This disclosure is included as a way of demonstrating that our tax
the transfer of debt to M&G plc in 2019, partly offset by increased footprint (ie where we pay taxes) is consistent with our business
restructuring costs of $(208) million (2019: $(110) million3). footprint. An updated version of the tax strategy, including 2020 data,
Restructuring costs reflect the Group’s substantial and ongoing IFRS will be available on the Group’s website before 31 May 2021.
17 project and costs associated with actions to reduce central costs
post the demerger of M&G plc. During 2020 our head office activities Corporate transactions
incurred costs of $(417) million (2019: $(460) million3). The Group Jackson reinsurance of fixed and fixed index annuity business
continues to take action to right-size its head office costs alongside in June 2020
the evolving footprint of the business. The Group has delivered Jackson reinsured substantially all of its in-force portfolio of US fixed
$180 million of cost savings effective from 1 January 20215 as and fixed index annuities with Athene (circa $27.6 billion of liabilities).
previously targeted as a result of the M&G demerger6. In addition, as The transaction excluded liabilities relating to Jackson’s legacy life and
a result of the separation of Jackson from the Group, head office costs institutional business, the REALIC portfolio and group pay-out annuity
business reinsured from John Hancock as well as investments in the

are targeted to reduce further by around $70 million from the start
of 2023. We will continue to review the timing of the full realisation of general account by the variable annuity policyholders. The transaction
these further savings following the completion of the US demerger. improved the year-end capital position of Jackson by increasing the
Jackson RBC ratio by 67 percentage points and the Group’s LCSM cover
Non-operating items from continuing operations25 ratio by 24 percentage points. The reinsurance agreement was effective
Non-operating items in 2020 consist of short-term fluctuations in on 1 June 2020 and resulted in an IFRS pre-tax gain recorded through
investment returns on shareholder-backed business of negative the profit and loss account of $804 million, after transaction costs and
$(4,841) million (2019: $(3,203) million3), the net benefit from various post-closing adjustments. After allowing for tax and the reduction in
corporate transactions of $1,521 million (2019: loss of $(142) million3), unrealised gains recorded directly in other comprehensive income,
which are discussed further below, and the amortisation of acquisition the impact of the reinsurance transaction on IFRS shareholders’ equity
accounting adjustments of negative $(39) million (2019: $(43) million3) is a reduction of $(1.2) billion. This transaction reduced the Group’s
arising mainly from the REALIC business acquired by Jackson in 2012. EEV by $(457) million, which largely reflects the loss of future profits
recorded in the value of in-force business as a result of the reinsurance
Negative short-term fluctuations include negative $(607) million for and the loss of unrealised gains on assets passed to Athene, partly
Asia (2019: positive $657 million3) and negative $(4,262) million in the offset by the reinsurance commission received after deducting tax.
US (2019: $(3,757) million).
Equity investment into Jackson by Athene
Falling interest rates in certain parts of Asia led to lower discount In July 2020, Athene Life Re Ltd invested $500 million in Prudential’s
rates on certain policyholder liabilities under the local reserving US business in return for an 11.1 per cent economic interest for which
basis applied, which were not fully offset by unrealised bond and the voting interest is 9.9 per cent. This has no impact on the income
equity gains in the year leading to negative fluctuations overall. statement but resulted in a decline in IFRS shareholders’ equity of
$(514) million at the date of the transaction.

Prudential plc
report on the 2020 financial performance / continued
Other transactions arrangement commenced on 1 January 2021 and the fee paid for
Other transactions in 2020 contributed $717 million to profit and expanding and extending the existing arrangement was $0.8 billion.
principally include the reinsurance commission from a quota share
reinsurance transaction undertaken by Hong Kong as part of the In January 2021, the Group announced its intention to complete the
Group’s on-going asset/liability management. Future surpluses demerger of Jackson in the first half of 2021. The total costs associated
(or losses) arising from the business being reinsured will be shared with with this activity are estimated to be around $110 million to $120 million,
the reinsurer in accordance with the terms of the treaty. Under EEV we of which around half is expected to be borne by Prudential plc and
recorded a loss of $91 million representing the frictional costs of the the remainder by Jackson. These largely relate to advisory and other
arrangement. This treaty helps mitigate the effect of the accounting professional fees and a small amount relates to the separation of
mismatch under the existing regulatory framework in Hong Kong and Jackson’s systems and processes from those of the remaining
is part of our management of the transition to the new RBC regime. Prudential Group.
In the first half of the year, the Thailand business entered into a Of these total costs, $38 million has been incurred in 2020 ($20 million
strategic bancassurance partnership with TMB Bank Public Company by Prudential plc and $18 million by Jackson) and has been included in
Limited with an initial period of 15 years which both expanded and non-operating profit as part of corporate transactions. The remainder
extended the existing partnership with Thanachart Bank. The new of the costs are expected to be incurred in the first half of 2021.
IFRS profit
Actual exchange rate Constant exchange rate
2020 $m 2019 $m Change % 2019 $m Change %
Adjusted operating profit based on longer-term investment returns

before tax from continuing operations
Asia
Long-term business 3,384 2,993 13 2,978 14
Asset management 283 283 – 278 2
Total Asia 3,667 3,276 12 3,256 13
US
Long-term business 2,787 3,038 (8) 3,038 (8)
Asset management 9 32 (72) 32 (72)
Total US 2,796 3,070 (9) 3,070 (9)
Total segment profit from continuing operations 6,463 6,346 2 6,326 2
Other income and expenditure (748) (926) 19 (931) 20

Total adjusted operating profit before tax and restructuring costs 5,715 5,420 5 5,395 6
Restructuring and IFRS 17 implementation costs (208) (110) (89) (110) (89)
Total adjusted operating profit before tax 5,507 5,310 4 5,285 4
Non-operating items:
Short-term fluctuations in investment returns on shareholder-
backed business (4,841) (3,203) (51) (3,191) (52)
Amortisation of acquisition accounting adjustments (39) (43) 9 (43) 9
Gain on disposal of businesses and corporate transactions 1,521 (142) n/a (143) n/a
Profit from continuing operations before tax attributable
to shareholders 2,148 1,922 12 1,908 13
Tax credit attributable to shareholders’ returns 37 31 n/a 36 n/a
Profit from continuing operations for the year 2,185 1,953 12 1,944 12
Loss from discontinued operations for the year, net of related tax – (1,161) 100 (1,165) 100
Profit for the year 2,185 792 176 779 180
IFRS earnings per share

2020 cents 2019 cents Change % 2019 cents Change %
Basic earnings per share based on adjusted operating profit after tax
from continuing operations 175.5 175.0 – 174.6 1
Basic earnings per share based on:
Total profit after tax from continuing operations 81.6 75.1 9 75.1 9
Total loss after tax from discontinued operations – (44.8) n/a (45.1) n/a
30 Prudential plc
IFRS shareholders’ equity
Group overview
2020 $m 2019 $m
Adjusted operating profit after tax attributable to shareholders 4,559 4,528
Profit after tax for the year attributable to shareholders 2,118 783
Exchange movements, net of related tax 239 2,943
Unrealised gains and losses on US fixed income securities classified as available-for-sale
Strategic report
(before the impact of Jackson’s reinsurance with Athene) 2,095 2,679
Impact of Jackson’s reinsurance of fixed and fixed index annuities to Athene (1,795) –
Sale of 11.1 per cent stake in Jackson to Athene (514) –
Demerger dividend in specie of M&G plc – (7,379)
Other external dividends (814) (1,634)
Other 72 117
Net increase (decrease) in shareholders’ equity 1,401 (2,491)
Governance
Shareholders’ equity at beginning of the year 19,477 21,968
Shareholders’ equity at end of the year 20,878 19,477
Shareholders’ value per share 8
800¢ 749¢
Group IFRS shareholders’ equity in the 12 months to 31 December The estimated shareholder LCSM cover ratio10 at 31 December 2020

2020 increased by 7 per cent3 to $20.9 billion (31 December 2019: was 328 per cent (31 December 2019: 309 per cent). Excluding US
$19.5 billion3), largely reflecting profit after tax for the year and foreign operations, the cover ratio falls marginally to 323 per cent, before
exchange movements, partly offset by dividends paid in the year of including the proposed retained 19.9 per cent non-controlling interest
$(0.8) billion and the impact of the sale of 11.1 per cent of the Group’s in Jackson.
economic interest in Jackson to Athene.
Overall, LCSM shareholder surplus over group minimum capital
Group capital position requirements increased by $1.5 billion since 31 December 2019 to
Prudential plc is applying the local capital summation method (LCSM) $11.0 billion at the end of December 2020. LCSM in-force operating
that has been agreed with the Hong Kong Insurance Authority (IA) capital generation in the year was $2.2 billion, which supported
to determine Group regulatory capital requirements until the $(0.2) billion of investment in new business.
Group-wide Supervision (GWS) Framework is effective for Prudential
upon designation. The primary legislation was enacted in July 2020 Overall non-operating items (excluding corporate transactions)
and will come into operation on 29 March 2021. The relevant reduced surplus by $(0.2) billion, with the negative effect of market
subsidiary legislation, including the Insurance (Group Capital) Rules, movements in the year being offset by a $2.2 billion benefit from
was tabled before the Legislative Council on 6 January 2021 and will the introduction of the new Singapore risk-based capital framework
also come into operation on 29 March 2021. This legislation will be (RBC2) effective 31 March 2020. Also included within non-operating
further supported by guidance material from the Hong Kong IA. items is a $(0.4) billion fall in surplus from changes made to Jackson
The GWS Framework is expected to be effective for Prudential upon VM-21 hedging model, further details of which are set out in the US
designation by the Hong Kong IA in the second quarter of 2021, section in the discussion of RBC changes.
subject to transitional arrangements.
The corporate transactions previously discussed were positive overall

The GWS methodology is largely consistent with that applied and contributed $0.5 billion to surplus and the payment of the 2019
under LCSM with the exception of the treatment of debt instruments. second interim and 2020 first interim dividends reduced the surplus
Prudential’s initial analysis indicates that all debt instruments by $(0.8) billion.
(senior and subordinated) issued by Prudential will meet the
transitional conditions set by the Hong Kong IA and will be included The Group’s LCSM position is resilient to external macro movements
as eligible Group capital resources. If this were the case the as demonstrated by the sensitivity disclosure contained in note I(i)
31 December 2020 shareholder LCSM ratio10 (over GMCR) would of the Additional unaudited financial information, alongside further
increase by 35 percentage points to 363 per cent. This is subject information on the basis of calculation of the LCSM measure.
to final approval by the Hong Kong IA.
Estimated Group LCSM capital position10

31 Dec 2020 31 Dec 2019
Total Shareholder* Total Shareholder*
Available capital ($ billion) 37.9 15.8 33.1 14.0

Group minimum capital requirement (GMCR) ($ billion) 11.5 4.8 9.5 4.5
LCSM surplus (over GMCR) ($ billion) 26.4 11.0 23.6 9.5
LCSM ratio (over GMCR) (%) 329% 328% 348% 309%
* The shareholder LCSM amounts exclude the available capital and minimum capital requirements of the participating business in Hong Kong, Singapore and Malaysia.

Prudential plc
Financing and liquidity

Net core structural borrowings of shareholder financed businesses
31 Dec 2020 $m 31 Dec 2019 $m
Mark-to- Mark-to-
IFRS market EEV IFRS market EEV
basis value basis basis value basis
Total borrowings of shareholder-financed businesses 6,633 885 7,518 5,594 633 6,227
Less: holding company cash and short-term investments (1,463) – (1,463) (2,207) – (2,207)
Net core structural borrowings of shareholder-financed
businesses 5,170 885 6,055 3,387 633 4,020
Net gearing ratio* 20% 15%
* Net core structural borrowings as proportion of IFRS shareholders’ equity plus net debt, as set out in note II(ii) of the Additional unaudited financial information.
The total borrowings of the shareholder-financed businesses Other sources of liquidity

increased by $1.0 billion, from $5.6 billion to $6.6 billion in 2020. In addition to its net core structural borrowings of shareholder-
This reflected the issuance of $1,000 million 3.125 per cent notes in financed businesses set out above, the Group has access to funding
April 2020 raised for general corporate purposes including to support via the medium-term note programme, the US shelf programme
the growth of the business. The Group had central cash resources of (the platform for issuance of SEC-registered bonds in the US market),
$1.5 billion at 31 December 2020 (31 December 2019: $2.2 billion), a commercial paper programme and committed revolving credit
resulting in net core structural borrowings of the shareholder-financed facilities. All of these are available for general corporate purposes.
businesses of $5.2 billion at end of December 2020 (31 December
2019: $3.4 billion). Prudential plc seeks to maintain its financial Prudential plc has maintained a consistent presence as an issuer in
strength rating which derives, in part, from the high level of financial the commercial paper market for the past decade and had $501 million
flexibility to issue debt and equity instruments which is intended in issue at the end of 2020 (31 December 2019: $520 million).
to be maintained and enhanced in the future.
As at 31 December 2020, the Group had a total of $2.6 billion of
At 31 December 2020, the Group’s net gearing ratio as defined in the undrawn committed facilities, expiring in 2025. Apart from small
table above was 20 per cent. We estimate that this will rise to circa drawdowns to test the process, these facilities have never been drawn,
28 per cent post the separation of Jackson (based on the balance sheet and there were no amounts outstanding at 31 December 2020.
at 31 December 2020, assuming no pre-separation dividend and
before allowing for the 19.9 per cent retained stake in Jackson). On a In addition to the Group’s traditional sources of liquidity and financing,
Moody’s basis, which is the basis management intend to use going Jackson also has access to funding via the Federal Home Loan Bank
forward to manage leverage and which differs to the above by taking of Indianapolis with advances secured against collateral posted by
into account gross debt, including commercial paper, and also allows Jackson. Given the wide range of Jackson’s product set and breadth
for a proportion of the surplus within the Group’s with-profits funds, of its customer base including retail, corporate and institutional clients,
the equivalent ratio is 33 per cent, before allowing for the 19.9 per cent further sources of liquidity also include premiums and deposits.
retained stake in Jackson. Following the demerger, as a pure-play Asia
and Africa business, Prudential will target a Moody’s debt-leverage Group free surplus generation from continuing operations9
ratio of around 20 to 25 per cent4 over the medium term. Prudential Free surplus generation is the financial metric we use to measure
may operate outside this range temporarily to take advantage of the internal cash generation of our business operations and is based
growth opportunities with attractive risk-adjusted returns as they (with adjustments) on the capital regimes that apply locally in the
arise, while still preserving its strong credit ratings. various jurisdictions in which the Group operates. For life insurance
operations, it represents amounts emerging from the in-force business
As discussed in the Chief Executive’s report, Prudential is considering during the year, net of amounts reinvested in writing new business.
raising new equity of around $2.5-3 billion. Such a transaction, For asset management and other non-insurance operations (including
if executed, would maintain and enhance the Group’s financial the Group’s central operations and Africa operations) it is taken to
flexibility in light of the breadth of the opportunities to invest in be IFRS basis shareholders’ equity, net of goodwill attributable to
growth and aim to increase the Group’s investor base in Asia. shareholders, with central Group debt shown on a market value basis
and subordinated debt recorded as free surplus to the extent that
it is classified as available capital under the Group’s capital regime.
32 Prudential plc
Analysis of movement in Group free surplus9
Group overview
Asia – operating free surplus generated before restructuring costs 1,895 1,772 7 1,762 8
Central costs and eliminations (net of tax):
Net interest paid on core structural borrowings (328) (451) 27 (453) 28
Corporate expenditure (419) (403) (4) (406) (3)
Strategic report
Other items and eliminations (111) (69) (61) (69) (61)
Net operating free surplus generated before restructuring costs
and US 1,037 849 22 834 24
Restructuring and IFRS 17 implementation costs (net of tax) (147) (87) (69) (87) (69)
US – operating free surplus generated net of restructuring costs 1,073 1,120 (4) 1,120 (4)
Net Group operating free surplus generated for continuing operations* 1,963 1,882 4 1,867 5
Governance
Redemption of subordinated debt for continuing operations – (529)
External dividends (814) (1,634)
Non-operating and other movements (1,200) 654
Net impact of Athene equity investment in Jackson 63 –
Foreign exchange movements 136 190
Increase in Group free surplus from continuing operations* 148 563
Change in amounts attributable to non-controlling interests 209 (9)

Free surplus at 1 Jan from continuing operations 9,736 9,182
Free surplus at 31 Dec from continuing operations 10,093 9,736
Comprising:
Free surplus of life insurance and asset management operations 7,679 5,997
Central operations (including Africa) 2,414 3,739
* Before amounts attributable to non-controlling interests.
The total net Group operating free surplus generation, after including Asia operating free surplus generation9,12 from insurance and asset
operating free surplus generated by the US business and deducting management business increased by 8 per cent1 to $1,895 million
restructuring costs was $1,963 million (2019: $1,882 million3). reflecting recent business growth, higher asset management earnings
This comprises $2,886 million (2019: $2,861 million3) operating free and lower levels of new business investment as Covid-19 containment
surplus generation from the life and asset management business measures introduced by the authorities across the region lowered
(net of attributable restructuring costs) offset by centrally incurred sales in the year.
costs and eliminations of $(923) million (2019: $(979) million3).
US operating free surplus generation (after deducting restructuring
costs) fell (4) per cent compared with 2019, which included a
$355 million benefit following the integration of the John Hancock

business acquired in 2018.

Prudential plc
Cash remittances
Holding company cash flow13
Actual exchange rate
2020* $m 2019* $m Change %
From continuing operations

Asia 716 950 (25)
Jackson – 509 (100)
Other operations 55 6 817
Total net cash remitted from continuing operations 771 1,465 (47)
From discontinued operations
M&G plc – 684 (100)
Net cash remitted by business units 771 2,149 (64)
Central outflows (435) (522)
Dividends paid (814) (1,634)
Other movements (264) (1,999)
Total holding company cash flow (742) (2,006)
Cash and short-term investments at the beginning of the year 2,207 4,121
Foreign exchange and other movements (2) 92
Cash and short-term investments at the end of the year 1,463 2,207
* The holding company cash flow describes the movement in the cash and short-term investments of the centrally managed Group holding companies.
Remittances from our Asia business were $716 million (2019: Dividend policy
$950 million3). In order to support the planned separation process, Reflecting the Group’s capital allocation priorities, dividends will
there were no remittances from Jackson during the period. $55 million be determined primarily based on Asia’s operating capital generation
remittances from other operations reflects intragroup interest income after allowing for the capital strain of writing new business and
which is not expected to recur. recurring central costs, with a portion of capital generation retained for
reinvestment in the business. Dividends are expected to grow broadly
Cash remittances were used to meet central costs of $(435) million in line with the growth in Asia operating free surplus generation net of
and to pay dividends of $(814) million. Central costs include net right-sized central costs, and will be set taking into account financial
interest paid of $(294) million and a net tax benefit, which is not prospects, investment opportunities and market conditions.
expected to recur going forward, of $94 million.
The Board has approved a 2020 second interim ordinary dividend
Other movements of $(264) million include the proceeds of the of 10.73 cents per share. Combined with the first interim ordinary
issuance of $1 billion of senior debt in April 2020 offset by central dividend of 5.37 cents per share the Group’s total 2020 dividend
contributions to the funding of Asia strategic growth initiatives, is 16.10 cents per share.
principally payments for bancassurance distribution agreements,
including TMB and UOB. Further information is contained in note I(iii) Starting from the 2021 first interim dividend, the Board intends
of the Additional unaudited financial information. to apply a formulaic approach to first interim dividends, which
will be calculated as one-third of the previous year’s full-year
Cash and short-term investments totalled $1.5 billion at the end ordinary dividend.
of December 2020 (31 December 2019: $2.2 billion3).
The Group will seek to manage its financial condition such that
it has sufficient resources available to provide a buffer to support
the retained businesses in stress scenarios and to provide liquidity
to service central outflows.
34 Prudential plc
Asia The resilience and quality of our business is also evident in customer
Group overview
Operational and financial highlights retention levels of 90 per cent (2019: 90 per cent), which combined
Prudential’s Asia businesses delivered a resilient financial performance with our recurring premium, health and protection focused business
in 2020. While Covid-19 related containment measures impacted our model, with renewal premiums8 increasing 6 per cent1 to $20.1 billion,
new sales and associated new business profit levels, we also delivered supported an overall 13 per cent1 increase in adjusted life insurance
a step-change in our digital capabilities. While the nature and severity operating profit2 and an 8 per cent1 increase in operating free
of Covid-19 restrictions varied significantly across our markets, surplus generation9,12.
our enhanced digital and physical capabilities combined with our
Strategic report
diversified and high quality platform supported a strong sequential These qualities enabled us to continue to grow scale and value,
quarterly recovery in sales in the third and fourth quarters of the even in more challenging operating conditions, with our overall Asia
year from a low in the second quarter, illustrating the strength of embedded value increasing to $44.2 billion at 31 December 2020
our franchise. (31 December 2019: $39.2 billion3).

Governance
New business profit 2,201 3,522 (38) 3,533 (38)
Adjusted operating profit* 3,667 3,276 12 3,256 13
EEV operating profit* 4,387 6,138 (29) 6,150 (29)
Operating free surplus generation* 1,895 1,772 7 1,762 8
* Before restructuring costs.

New business performance
Life EEV new business profit and APE new business sales (APE sales)

New New New New New
APE business APE business APE business APE business APE business
sales profit sales profit sales profit sales profit sales profit
Hong Kong 758 787 2,016 2,042 (62) (61) 2,037 2,063 (63) (62)
China JV 582 269 590 262 (1) 3 590 262 (1) 3
Indonesia 267 155 390 227 (32) (32) 379 220 (30) (30)
Malaysia 346 209 355 210 (3) – 349 207 (1) 1
Singapore 610 341 660 387 (8) (12) 653 383 (7) (11)
Other life insurance markets 1,133 440 1,150 394 (1) 12 1,160 398 (2) 11
Total Asia 3,696 2,201 5,161 3,522 (28) (38) 5,168 3,533 (28) (38)
Total Asia excluding Hong Kong 2,938 1,414 3,145 1,480 (7) (4) 3,131 1,470 (6) (4)
Total new business margin 60% 68% 68%

Life insurance new business APE sales decreased by (28) per cent1 Over 2020, we continued to benefit from the resilience our diverse
to $3,696 million and related new business profit decreased by platform provides. Our diverse geographic portfolio saw four markets
(38) per cent1. Outside Hong Kong, overall new business APE sales increase APE sales compared with the prior year, including Thailand
were (6) per cent1 lower and new business profit decreased by up 16 per cent1, Taiwan up 11 per cent1 and Vietnam up 9 per cent1.
(4) per cent1. This is also evident from a new business profit perspective, with seven
markets reporting growth, led by China JV up 3 per cent1 among our
The impact of Covid-19 related disruption varied materially in terms larger markets and Thailand and Vietnam, up 38 per cent1 and
of severity and duration across the region. Restrictions eased in many 18 per cent1 respectively, in other markets.
markets as the year progressed. In Mainland China internal travel and
business activity resumed from the end of March and restrictions in Outside of Hong Kong, sales from our bancassurance channel
Hong Kong eased from the end of August, though the border between were stable with last year, underpinned by growth in China JV
Mainland China and Hong Kong remains closed. In Indonesia, after an (APE bancassurance sales up 34 per cent1), Thailand (up 21 per cent1),
initial relaxation of lockdown measures in June, a further four-week Indonesia (up 15 per cent1) and Vietnam (up 35 per cent1). We also
period of lockdown was imposed between mid-September and saw increased agency momentum in the second half of the year.
mid-October and the country re-entered lockdown again in early
2021. Significant containment restrictions remain in place in Malaysia, There has been a significant acceleration of our digital capabilities
Vietnam, the Philippines and Thailand, with reduced restrictions over 2020, with virtual sales accounting for 27 per cent of bank sales
in place in Hong Kong domestic, Taiwan, Singapore and India. from July to December and 28 per cent of all agency sales from April
to December. This compares with very low amounts in prior years.
Our agency channel was supported by over 2.2 million of ‘online to
offline’ leads generated by our Pulse health and wealth super-app,
which, together with direct sales in Pulse, generated $211 million
of APE sales23 in the year.

Prudential plc
The quality and diversity of our platform contributed to a strong The sales environment in Indonesia remained challenging following a
sequential recovery in APE sales as Covid-19 related restrictions deterioration of Covid-19 infections through the summer, culminating
were lifted, with discrete third quarter production of $925 million1 in the re-introduction of the highest-level movement restrictions in
sequentially 33 per cent1 higher than the second quarter and fourth September, which remain in place today in parts of Indonesia. Despite
quarter sales 18 per cent1 above the third quarter and 10 per cent1 the challenging environment, we achieved strong performance in the
higher than the first quarter of 2020, prior to Covid-19 restrictions sharia segment with APE sales growing 6 per cent and new business
being applied in many of the markets in which we operate. profit 27 per cent. Meanwhile, the fourth quarter saw the highest
overall sales of 2020 (19 per cent higher than APE sales in the first
The fourth quarter of 2020 was the highest APE sales quarter of the quarter) and was driven by 60 new products launched in 2020,
year for overall Asia and for nine markets. As we pivoted to standalone including lower ticket standalone protection products. While this
protection products of lower case size to meet rising consumer product strategy saw new sales case count rise by 12 per cent at FY20,
demand, total new policies increased by 1 per cent and new protection overall APE sales volumes were (30) per cent1 below the prior year
policies grew by 10 per cent in the fourth quarter compared with the driving a similar reduction in new business profit.
same period in the prior year.
In Malaysia, APE sales were (1) per cent1 below the prior year, with a
The development of new business profit mainly reflects the impact decline in the first half sales largely offset by a recovery in the second
of change in geographic mix, particularly sharply lower APE sales in half of 14 per cent (compared with the second half of the prior year),
Hong Kong where the reduction in new business profit was broadly despite the reintroduction of partial Covid-19 related restrictions in
in line with APE sales. Outside Hong Kong, new business profit was October, driven by strong agency production across our traditional
only (4) per cent1 lower compared with a (6) per cent1 reduction in and takaful markets. The Takaful business grew APE sales by
APE sales, with improved new business margins partly driven by new 26 per cent compared with 2019, with new business profit increasing
health and protection product launches which saw seven markets by 29 per cent. Overall new business profit increased by 1 per cent1,
increasing their health and protection mix. Health and protection reflecting our increased focus on standalone smaller case size
products continue to be a significant proportion of sales, contributing protection products.
27 per cent of APE sales in 2020 (2019: 27 per cent).
In Singapore, APE sales fell by (7) per cent1 reflecting Covid-19
Overall, Hong Kong APE sales were (63) per cent1 below the prior year. restrictions with declines in the first half of the year partly offset by
This was principally a result of a very sharp reduction in APE sales to an increase in the second half of 5 per cent1 when compared with the
Mainland China customers, reflecting the impact of the border closure second half of the prior year. Strong agency momentum following the
early in the year and consequent reduction in Mainland Chinese relaxation of Covid-19 restrictions saw APE sales in the second half
visitors and associated APE sales to these customers. While domestic of the year being 63 per cent higher than the level in the first half.
Hong Kong APE sales were also impacted by Covid-19 related New business profit reduced by (11) per cent1, as lower interest rates
restrictions, new business production improved markedly over the resulted in a lower margin. Singapore continues to develop products
course of the year, with APE sales in Q3 rising 20 per cent over Q2 and digital capabilities with the launch in December of three bite-sized
and Q4 rising 60 per cent over Q3. The strong sequential sales growth digital products on Pulse (PRUSafe Dengue, PRUSafe BreastCancer,
was supported by product innovation and ongoing development PRUSafe ProstateCancer) and the onboarding of the PRUCancer360
of our broader digital capabilities. In particular, our increased focus product on UOB’s Mighty banking app.
on standalone protection products, with lower case sizes, to meet
rising consumer demand saw domestic new sales policy count We have made good initial progress with our recent investment in
reach 98 per cent of prior year levels in the fourth quarter. Overall distribution in Thailand, where our APE sales were up 16 per cent¹,
Hong Kong new business profit was (62) per cent1 lower, broadly reflecting strong growth of 21 per cent in bancassurance channel.
in line with the reduction in APE sales. New business profit grew by a stronger 38 per cent, supported by
the product mix shift to health and protection which accounted for
Our China JV delivered an encouraging performance despite Covid-19 25 per cent of APE sales (2019: 16 per cent). Our distribution capability
related disruption, increasing new business profit by 3 per cent1. will be further strengthened by our partnership with TMB which
This was supported by the agency force focus on protection products, commenced on 1 January 2021 and our digital partnership with The1,
which accounted for 53 per cent of sales from this channel and Thailand’s largest loyalty platform.
as a result agency channel margins climbed to 85 per cent (2019:
74 per cent). We benefited materially from our diversified distribution
model, particularly the strength in bancassurance which saw strong
and accelerating growth of 34 per cent in APE sales throughout the
year. Overall APE sales were only (1) per cent1 lower compared with
the prior year and second half APE sales 4 per cent1 higher than the
prior year.
36 Prudential plc
EEV basis results
Group overview
New business profit 2,201 3,522 (38) 3,533 (38)

Profit from in-force business 1,933 2,366 (18) 2,371 (18)
Operating profit from long-term business 4,134 5,888 (30) 5,904 (30)
Asset management 253 250 1 246 3
Strategic report
Operating profit from long-term business and asset management
before restructuring costs 4,387 6,138 (29) 6,150 (29)
Non-operating profit 822 1,962 (58) 1,968 (58)
Profit for the year 5,121 8,069 (37) 8,087 (37)
Governance
Other movements (115) (842)
Net increase in embedded value 5,006 7,227
Embedded value at 1 Jan 39,235 32,008
Embedded value at 31 Dec 44,241 39,235
% New business profit/average embedded value 5% 10%

% Operating profit/average embedded value 10% 17%
Asia EEV operating profit decreased compared with the prior year to The non-operating profit of $822 million (2019: $1,968 million1) largely
$4,387 million (2019: $6,150 million1), driven by lower new business comprises increases in asset values following the fall in interest rates
profit and a lower profit from in-force business. and higher equity markets, partially offset by the impact of lower
interest rates on expectations of future asset returns.
The profit from in-force business reflects the expected return and
effects of operating assumption changes and operating experience Overall, Asia segment embedded value increased by 13 per cent3
variances, which in combination, were (18) per cent1 below the prior to $44.2 billion in the 12 months to 31 December 2020 (31 December
year. The expected return was (9) per cent1 below the prior year 2019: $39.2 billion3). Of this, $42.8 billion (31 December 2019:
reflecting the impact of lower interest rates in reducing the risk $37.8 billion3) relates to the value of the long-term business and
discount rate under our active basis European Embedded Value includes our share of our India associate valued using embedded value
methodology. Reflecting the high quality of our in-force business principles which is lower than its market capitalisation. The remainder
and prudent assumption setting, operating assumption changes represents Asia asset management and goodwill attributable to
and operating experience variances are again positive, driven by shareholders which are carried at IFRS net asset value within the
product repricing effects as well as positive claims variances across Group’s EEV. At 31 December 2020, 47 per cent (31 December 2019:
our businesses, among other factors. 48 per cent3) of total Asia long-term embedded value excluding
goodwill is attributable to Hong Kong.

Asset management segment operating profit after tax was up
3 per cent1 on the prior year at $253 million (2019: $246 million1),
which is discussed in more detail below.
Total embedded value for Asia long-term business operations, excluding goodwill
31 Dec 2020 31 Dec 2019
$m $m
Free surplus 5,295 3,624

Required capital 3,445 3,182
Net worth 8,740 6,806
Value of in-force business before deduction of cost of capital and time value of options and guarantees 36,729 32,396
Cost of capital (749) (866)
Time value of options and guarantees* (1,912) (493)
Net value of in-force business 34,068 31,037

Embedded value 42,808 37,843

Prudential plc
Asia analysis of movement in free surplus9

Existing business – transfer to net worth 1,878 1,914 (2) 1,901 (1)
Expected return on existing business 101 80 26 79 28
Changes in operating assumptions and experience variances 222 147 51 151 47
Operating free surplus generated from in-force life business
before restructuring costs 2,201 2,141 3 2,131 3
Operating free surplus generated from in-force life business
and asset management before restructuring costs 2,454 2,391 3 2,377 3
Investment in new business (559) (619) 10 (615) 9
Operating free surplus generated before restructuring costs 1,895 1,772 7 1,762 8
Operating free surplus generated 1,813 1,741 4 1,731 5
Non-operating profit 444 1,195
Net cash flows paid to parent company (716) (950)
Foreign exchange movements on foreign operations,
timing differences and other items 169 (357)
Total movement in free surplus 1,710 1,629
Free surplus at 1 Jan 4,220 2,591
Free surplus at 31 Dec 5,930 4,220
Representing:
Long-term business 5,295 3,624
Asset management 635 596
Free surplus at 31 Dec 5,930 4,220
In-force operating free surplus generation9,12 was $2,201 million, (31 December 2019: $4.7 billion and 253 per cent). If our with-profits
up 3 per cent1 compared with the prior year. Excluding the effect of funds in Hong Kong, Singapore and Malaysia are added the surplus
operating assumption changes and experience variances, in-force increases to $23.6 billion (31 December 2019: $18.8 billion). We seek
free surplus generation was in line with the prior year1 with the growth to safeguard our business from market volatility through our strong
of the in-force portfolio being dampened by the effect of lower interest focus on protection products and our prudent asset and liability
rates compared with the prior year. Operating assumption changes management strategy.
and experience variances were positive, again illustrating the high
quality nature of the in-force business. IFRS profit
Overall Asia adjusted operating profit2 increased by 13 per cent1
Investment in new business was $(559) million, 9 per cent1 below that to $3,667 million, driven by a 14 per cent1 increase in life insurance
in 2019. This reflects lower APE sales volumes, offset by business mix adjusted operating profit2, alongside a 2 per cent1 increase
effects and lower interest rates. at Eastspring.
Overall higher in-force generation and lower investment in new This growth reflects the benefits of our focus on high quality
business led to operating free surplus generated9 before restructuring recurring premium business, which accounts for 90 per cent of our
costs increasing by 8 per cent1 to $1,895 million. new business, and diversified portfolio of scale businesses, with over
88 per cent of our total life income14 (excluding other income described
The non-operating profit of $444 million includes the benefit of the below) driven by insurance margin and fee income (2019: 86 per cent1),
reinsurance transaction undertaken by Hong Kong as part of the again supporting profit progression across market cycles.
Group’s on-going asset/liability management as discussed earlier
under corporate transactions. 2019 non-operating profits included Our Asia life insurance adjusted operating profit2 growth is
$278 million3 of gains from the reduction in the Group’s stake in ICICI broad‑based and at scale. Overall, nine insurance markets reported
Prudential Life Insurance Company and the disposal of Prudential double-digit growth1, with three insurance markets delivering
Vietnam Finance Company. growth of 20 per cent1 or more. At a market level, highlights include
Hong Kong up 20 per cent1 to $891 million, Singapore up 18 per cent1
Local statutory capital to $574 million, Malaysia up 14 per cent1 to $309 million, China
We maintained a strong balance sheet with a shareholder LCSM up 15 per cent1 to $251 million and Thailand up 24 per cent1 to
surplus over the regulatory minimum capital requirement of $210 million. Adjusted operating profit2 in Indonesia was $519 million,
$8.2 billion and coverage ratio of 338 per cent at 31 December 2020 marginally lower than the prior year.
38 Prudential plc
Profit margin analysis of Asia long-term insurance and asset management operations17
Group overview
2020 2019 2019
Margin Margin Margin
$m bps $m bps $m bps
Spread income 296 74 321 108 319 106

Fee income 11 282 101 286 104 283 104
Strategic report
With-profits 117 16 107 18 107 18
Insurance margin 2,648 2,244 2,234
Other income 3,148 3,229 3,225
Total life income 6,491 6,187 6,168
Expenses:
Acquisition costs (1,904) (52)% (2,156) (42)% (2,156) (42)%
Administration expenses (1,539) (227) (1,437) (252) (1,430) (249)
Governance
DAC adjustments 382 430 426
Share of related tax charges from joint ventures
and associates (46) (31) (30)
Long-term insurance business pre-tax adjusted
operating profit 3,384 2,993 2,978
Eastspring 283 283 278

Adjusted operating profit from long-term business
and asset management before restructuring costs 3,667 3,276 3,256
Tax charge (495) (436) (432)
Adjusted operating profit after tax for the year before
restructuring costs 3,172 2,840 2,824
Non-operating profit after tax 210 885 899
Profit for the year after tax before restructuring costs 3,382 3,725 3,723
Our adjusted operating profit2 continues to be based on high-quality With-profits earnings relate principally to the shareholders’ share in
drivers. The overall 14 per cent1 growth in Asia life insurance adjusted bonuses declared to policyholders. As these bonuses are typically
operating profit2 to $3,384 million (2019: $2,978 million1) was driven weighted to the end of a contract, under IFRS, with-profits earnings
principally by 19 per cent1 growth in insurance margin-related consequently emerge only gradually over time. The 9 per cent1 growth
revenues and reflects our ongoing focus on recurring premium health in with-profits earnings reflects the ongoing growth in these portfolios.
and protection products and the associated continued growth of our
in-force business. Other income primarily represents amounts deducted from premiums
to cover acquisition costs and administration expenses. As such, the
Fee income was in line with the prior year, while spread income (2) per cent1 decrease from 2019 largely reflects lower new business

decreased by (7) per cent1 driven by lower interest rates in the year. volumes, whereas new business acquisition expense fell 12 per cent1
to $(1,904) million. The ratio of shareholder acquisition costs to
shareholder-related APE sales (excluding with-profits-related sales)
increased to 68 per cent (2019: 66 per cent on an actual exchange
rate basis), reflecting changes to product and geographical mix.
Administration expenses, including renewal commissions, increased
by 8 per cent1 reflecting in-force business growth.

Prudential plc
Asset management
2020 $m 2019 $m Change %
Total external net flows* (9,972) 8,340 n/a
External funds under management* ($bn) 93.9 98.0 (4)

Funds managed on behalf of M&G plc ($bn) 15.7 26.7 (41)
Internal funds under management ($bn) 138.2 116.4 19
Total funds under management ($bn) 247.8 241.1 3
Analysis of adjusted operating profit

Retail operating income 390 392 (1)
Institutional operating income 256 244 5
Operating income before performance-related fees 646 636 2
Performance-related fees 7 12 (42)
Operating income (net of commission) 653 648 1
Operating expense (336) (329) (2)
Group’s share of tax on joint ventures’ adjusted operating profit (34) (36) 6
Adjusted operating profit 283 283 –
Adjusted operating profit after tax 253 250 1
Average funds managed by Eastspring $227.1bn $214.0bn 6

Fee margin based on operating income 28bps 30bps -2bps
Cost/income ratio8 52% 52% –
* Excluding $15.7 billion of funds managed on behalf of M&G plc.
Eastspring’s total funds under management were $247.8 billion at Eastspring’s adjusted operating profit2 of $283 million was up
31 December (31 December 2019: $241.1 billion3), reflecting favourable 2 per cent compared with the prior year on a constant exchange rate
internal net inflows and higher equity markets, partly offset by external basis (level on an actual exchange rate basis). Operating income
net outflows. Compared with 2019, Eastspring’s average funds under (net of commission) increased by 1 per cent3 with the benefit of higher
management increased by 6 per cent3 (7 per cent16 on a constant average funds under management being partly offset by adverse client
exchange rate basis). Funds under management were 13 per cent3 higher and asset mix effects that reduced the fee margin based on operating
than at the end of June ($219.7 billion3) as equity markets recovered and income to 28 basis points (2019: 30 basis points3). Cost discipline
asset flows began to recover from the volatility in the first half. remains robust, with operating costs in line with the prior year,
with the resulting cost/income ratio8 the same at 52 per cent.
Eastspring continues to benefit from strong, positive net flows from
internal insurance funds, recording $8.5 billion (2019: $9.7 billion). Return on segment equity
Overall third-party flows related to external funds under management The benefit of our focus on profitable health and protection,
were negative $(10.0) billion, reflecting the adverse impact of higher with‑profit and asset management businesses is evident in the
market volatility, as a result of Covid-19, on retail funds, most notably attractive 26 per cent (2019: 30 per cent) operating return delivered
in a number of retail bond funds in Thailand in the first half of 2020. on average segment equity8 over 2020.
Highlights included strong flows into our China A Fund, and Global
Innovation Fund in respect of our equity products, and Income Plus
and Active Bond Fund Plus on the fixed income side. As market
volatility subsided over the second half of the year, third-party net
flows22 improved materially, with the fourth quarter seeing net inflows
of $0.5 billion. In addition, as anticipated, there were net outflows from
funds managed on behalf of M&G plc of $(10.0) billion in 2020, with
further outflows of around $(6) billion expected in the first half of 2021.
40 Prudential plc
United States At 31 December 2020, Jackson National Life’s RBC ratio was
Group overview
Operational and financial highlights 347 per cent (31 December 2019: 366 per cent). At the point of
All of the results below reflect Jackson Financial Inc. (which we refer proposed separation, Jackson expects to have an RBC ratio24 in excess
to as Jackson), the entity that is proposed to be demerged, except for of 450 per cent and total financial leverage21 in the range of 25 to
the discussion on local statutory capital which covers Jackson Financial 30 per cent, subject to market conditions. Jackson expects to achieve
Inc.’s subsidiary, Jackson National Life, only. Post its separation this level of RBC at the point of separation by contributing proceeds of
from the Group, Jackson will no longer publish EEV results and the its debt and hybrid capital raising to its regulated insurance subsidiaries.
discussion below therefore focuses on IFRS and capital measures.
Strategic report
All amounts have been prepared on the basis of the Prudential Group’s
accounting policies and methodologies and are consistent with the
Group’s reporting in 2019. This will differ from the financial information
that Jackson will report as part of the demerger process, which will be
prepared under US GAAP and will include certain non-GAAP financial
measures which Jackson management believes will be more relevant
to manage the business as a standalone entity.
Governance
2020 $m 2019 $m Change %
APE new business sales (APE sales) 1,923 2,223 (13)

Adjusted operating profit* 2,796 3,070 (9)
RBC ratio (%) 347 366 (19) ppts
* Before restructuring costs.

New business
APE sales
2020 $m 2019 $m Change %
Variable annuities 1,662 1,470 13

Fixed annuities 33 119 (72)
Fixed index annuities 100 382 (74)
Total retail annuity APE sales 1,795 1,971 (9)
Total institutional product APE sales 128 252 (49)
Total APE sales 1,923 2,223 (13)
Despite challenging market conditions, Jackson delivered a 13 per cent In line with Jackson’s disciplined approach to pricing and risk
increase in variable annuity sales, reflecting the strength and depth management, pricing actions taken in the first half of 2020 in response
of its leading distribution franchise and value-added customer to changing market conditions and to preserve statutory capital,
proposition. Jackson believes that the investment freedom and resulted in an expected and material reduction in new fixed annuity
optional guaranteed benefits Jackson offers its customers support and fixed index annuities sales, evident particularly from the beginning

its strong brand recognition with distributors and advisers18. of the second quarter. This, combined with lower institutional sales,
resulted in an overall (13) per cent reduction in APE sales.
Jackson has maintained its leading position in the US retail variable
annuity market19. This market position reflects the attractiveness of
its product, breadth of distribution across multiple channels, and the
productivity of Jackson’s wholesaler field force, which is among the
most productive in the industry, with sales per agent over 10 per cent
higher than the nearest competitor20.

Prudential plc
IFRS profit
Adjusted operating profit
US segment adjusted operating profit2,7 was $2,796 million in 2020, down (9) per cent from the prior year. This reduction largely reflects the
impact of DAC adjustment effects in the current and prior year, alongside the expected reduction in spread related earnings following the
reinsurance contract with Athene in June 2020. Offsetting these falls, fee income was $3,386 million, 3 per cent higher than the prior year
as result of higher average account balances.
A further breakdown of the drivers of IFRS profitability is set out below.
Profit margin analysis of US long-term insurance and asset management operations17

2020 2019
Margin Margin
$m bps $m bps
Spread income 521 112 642 112

Fee income 3,386 178 3,292 182
Insurance margin 1,298 1,317
Other income – 26
Total life income 5,205 5,277
Expenses:
Acquisition costs (991) (52)% (1,074) (48)%
Administration expenses (1,744) (71) (1,675) (68)
DAC adjustments 317 510
Long-term insurance business pre-tax adjusted operating profit 2,787 3,038
Asset management 9 32
Adjusted operating profit from long-term business and asset management
before restructuring costs 2,796 3,070
Tax charge (313) (437)
Adjusted operating profit after tax for the year before restructuring costs 2,483 2,633
Non-operating loss after tax (2,730) (3,013)
Loss for the year after tax before restructuring costs (247) (380)
Spread income declined (19) per cent in 2020, primarily as a result Non-operating items
of the Athene reinsurance transaction, as well as lower asset yields, The non-operating result was negative $(3,510) million pre-tax
partially offset by lower interest credited reflecting lower average (2019: $(3,795) million) and contributed to a net loss after tax of
crediting rates compared with 2019. The margin of 112 basis points $(247) million (2019: $(380) million). The non-operating result over
benefited from prior year swap transactions. Excluding that 2020 includes a loss of $(4,296) million from short-term investment
benefit, the spread margin would have been 88 basis points fluctuations and amortisation of previous acquisition accounting
(2019: 101 basis points). adjustments offset by a $786 million pre-tax gain as a result of the
Athene reinsurance transaction.
Insurance margin represents profits from insurance risks, including
variable annuity guarantees and profits from the legacy life businesses In the US, Jackson provides certain guarantees on its annuity products,
and was marginally lower than that earned in 2019. the value of which would typically rise when equity markets fall
and long-term interest rates decline. Jackson charges fees for these
Acquisition costs have fallen by 8 per cent following lower sales guarantees which are in turn used to purchase downside protection,
in the year. Administration expenses increased by 4 per cent to in particular options and futures to mitigate the effect of equity
$(1,744) million in 2020 as a result of higher asset-based commissions, market falls.
as average separate account balances increased, and the
non‑recurrence of commission income (treated as a negative expense) Jackson designs its hedge programme to protect the economics of the
earned under the John Hancock reinsurance arrangement in 2019. business from large movements in investment markets and does not
Excluding the asset-based commission, the administration expense seek to hedge on an accounting basis. It therefore accepts a degree
ratio would be 34 basis points (2019: 33 basis points). of variability in the accounting results.
DAC adjustments, being the cost deferred on sales in the period The $(4,296) million discussed above principally arises from the steep
net of amortisation of amounts deferred previously, have fallen by rise in equity markets following the low at the end of the first quarter of
$(193) million to $317 million. This follows lower deferrals from lower 2020 that led to equity derivative losses taken out as part of Jackson’s
sales and higher amortisation of prior period DAC. DAC amortisation hedging programme being in excess of the corresponding reduction
increased as the impact of changes to the longer-term economic in guarantee liabilities and the effect of lower interest rates on the value
assumptions underpinning the amortisation calculation, following an of its guarantees. Hedge costs were also elevated due to the high
expectation of lower interest rates in the future, more than offset the levels of volatility observed in the period.
benefits of increases in DAC deceleration in the period as a result of
higher equity markets at the end of 2020 as compared with the start
of the year.
42 Prudential plc
Local statutory capital – Jackson National Life (Jackson)
Group overview
2020 2019
Required
capital at
Total ‘Company
Adjusted Action
Capital Level’
(TAC) (CAL) Surplus Ratio Surplus Ratio
$m $m $m % $m %
Strategic report
1 Jan 5,221 1,426 3,795 366 4,315 458
Capital generation from new business written 191 153 38 (23) (144) (75)
Operating capital generation from business in force 798 (177) 975 100 1,531 141
Operating capital generation 989 (24) 1,013 77 1,387 66
Other non-operating movements (1,832) 115 (1,947) (108) (1,524) (104)
US reinsurance transaction 524 (251) 775 67 – –
Investment by Athene 500 – 500 25 – –
Governance
Adoption of NAIC reforms – – – – 142 (17)
Hedge modelling revision (139) 251 (390) (80) – –
Dividends paid – – – – (525) (37)
31 Dec 5,263 1,517 3,746 347 3,795 366

The movement in surplus over the course of 2020 was driven by: —— Surplus benefited from a $500 million investment by Athene and
a further $775 million as a result of the reinsurance of the in-force
—— Operating capital generation from the in-force business was fixed annuity and fixed index annuity portfolio in June.
$975 million, in line with our expectations post the Athene
transaction. This is lower than 2019 which benefited from a —— At 31 December 2019, Jackson early adopted the provisions of
$355 million release of incremental reserves following the the National Association of Insurance Commissioners Valuation
integration of the John Hancock business acquired in 2018. Manual Minimum Standards No. VM-21 (VM-21). As announced
The impact of new business improved by $182 million, largely on 28 January 2021, Jackson determined that a simplifying
as a result of expected fall in fixed annuity and fixed index modelling assumption was not consistent with its intent in the
annuity sales following repricing actions in the first half of 2020. adoption of VM-21 and the revised modelling adopted for
calculating reserves and capital reduced surplus by $(390) million
—— Non-operating items reduced surplus by $(1,947) million driven through a reduction in TAC and an increase in CAL.
primarily by the impact of market movements where falling interest
rates, rising equity markets and elevated volatility have combined
to result in derivative losses, net of reserve changes, and an
increase in required capital. This included a reduction of
$(193) million in deferred tax assets being admitted into statutory
surplus and an increase in surplus of $140 million from changes in
respect of formal recognition by the regulator of guaranteed asset
management revenue.


Prudential plc
Group reporting segments after proposed separation of Jackson —— China JV

In presenting its results for 2020, the Group continues to report —— Hong Kong
its business using the following segments: —— Indonesia
—— Malaysia
—— Asia (including insurance and asset management business); and —— Singapore
—— US (including Jackson and US asset management business). —— Growth markets and other (including Africa)
Other operations are classified as unallocated to a segment, which —— Eastspring
includes the Group’s head office functions in London and Hong Kong The Group’s head office functions will continue to be unallocated to
and Africa insurance operations. a segment. The US has been classified as discontinued following the
In preparation for the planned separation of Jackson, from 2021 the Board’s decision to proceed with a demerger in the second quarter
Group has revised its internal management information to focus on the of 2021.
following revised segments, which will be used for external reporting
from half year 2021.
A summary of the Group’s key performance indicators by these segments going forward are as set out below.
Adjusted operating EEV for long-term
APE sales New business profit profit* business
2020 $m 2019 $m 2020 $m 2019 $m 2020 $m 2019 $m 2020 $m 2019 $m
China JV 582 590 269 262 251 219 2,798 2,180

Hong Kong 758 2,016 787 2,042 891 734 20,156 18,255
Indonesia 267 390 155 227 519 540 2,630 2,737
Malaysia 346 355 209 210 309 276 4,142 3,535
Singapore 610 660 341 387 574 493 8,160 7,337
Growth markets and other ‡ 1,245† 1,232† 440 394 835† 737† 4,975† 3,858†
Eastspring n/a n/a n/a n/a 283 283 n/a n/a
Total 3,808† 5,243† 2,201 3,522 3,662† 3,282† 42,861† 37,902†
* Further analysis of Adjusted operating profit for Asia is set out in note I(v) in the Additional unaudited financial information.
† Includes amounts relating to Africa.
‡ Adjusted operating profit includes other of $119 million (2019: $125 million) and primarily comprises of taxes for joint ventures and associates and other non-recurring items.
Mark FitzPatrick
Group Chief Financial Officer and Chief Operating Officer
Notes
1 On a constant exchange rate basis. 11 In 2020, given the significant market volatility in certain 19 LIMRA: through the third quarter of 2020, Jackson
2 Adjusted IFRS operating profit based on longer-term months during the year, average liabilities used to accounted for 16.5% of new sales in the U.S. retail
investment returns is management’s primary measure derive the margin for fee income in Asia have been variable annuity market and ranked number 1 in
of profitability and provides an underlying operating calculated using quarter-end balances throughout variable annuity sales.
result based on longer-term investment returns and the year as opposed to opening and closing balances 20 Market Metrics Q3 2020 Sales, Staffing, and
excludes non-operating items. Further information only to provide a more meaningful analysis. The 2019 Productivity Report: Jackson’s variable annuity sales
on its definition and reconciliation to profit for the year margin have been amended for consistency albeit per wholesaler are more than 10% higher than its
is set out in note B1.1 of the IFRS financial statements. impacts are minimal. nearest competitor.
3 On an actual exchange rate basis. 12 Operating free surplus generated before 21 Calculated on a US GAAP basis as the ratio of total
4 Calculated on a Moody’s total leverage basis. restructuring costs. debt (including senior debt, hybrid debt and preferred
5 Approximately half of the corporate expenditure 13 Net cash amounts remitted by business units are securities) to total debt and shareholders’ equity
is incurred in sterling and our assumptions forecast included in the holding company cash flow, which (excluding Accumulated Other Comprehensive
an exchange rate of £1=$1.2599. is disclosed in detail in note I(iii) of the Additional Income).
6 As compared with head office expenditure of unaudited financial information. This comprises 22 Excluding money market funds and funds managed
$(490) million in 2018 and before a planned $10 million dividends and other transfers from business units on behalf of M&G plc.
increase in Africa costs as previously disclosed. that are reflective of emerging earnings and capital 23 APE sales substantially from full-premium products
7 Attributed to the shareholders of the Group generation. sold through referrals to agents and a small amount
before deducting the amount attributable to the 14 Total insurance margin ($2,648 million) and fee income of revenue from 37 new digital products.
non‑controlling interests. This presentation is applied ($282 million) of $2,930 million divided by total life 24 Representing the RBC ratio of Jackson National Life
consistently throughout the document. income excluding other income of $3,343 million that reflects the capital and capital requirements of
8 See note II of the Additional unaudited financial (Comprised of total life income of $6,491 million less Jackson National Life and its subsidiaries, including
information for definition and reconciliation to other income of $3,148 million). Jackson National Life NY.
IFRS balances. 15 Central expenses comprises other income and 25 The term ’Non-operating items’ is used in this report to
9 For insurance operations, operating free surplus expenditure of $(748) million (2019: $(926) million refer to items excluded from adjusted IFRS operating
generated represents amounts maturing from the on an actual exchange rate basis) and restructuring profit based on longer-term investment returns from
in-force business during the year less investment and IFRS 17 implementation costs of $(208) million continuing operations, including short-term
in new business and excludes non-operating items. (2019: $(110) million on an actual exchange rate basis). investment fluctuations in investment returns on
For asset management businesses, it equates to 16 On a constant exchange rate basis Eastspring’s shareholder-backed business, corporate transactions
post-tax operating profit for the year. Further average funds under management over the year and amortisation of acquisition accounting
information is set out in ‘movement in Group free to 31 December 2019 were $211.5 billion (actual adjustments. For the avoidance of doubt this analysis
surplus’ of the EEV basis results. exchange rate basis: $214.0 billion). Average funds is not intended to align with ‘results of operating
10 Surplus over Group minimum capital requirement and under management over the year to 31 December activities’ as discussed in IAS 1 Presentation of
estimated before allowing for second interim ordinary 2020 were $227.1 billion. Financial Statements.
dividend. Shareholder business excludes the available 17 For discussion on the basis of preparation of the
capital and minimum requirement of participating sources of earnings in the table see note I(iv) of
business in Hong Kong, Singapore and Malaysia. the Additional unaudited financial information.
Further information on the basis of calculation of 18 Cogent Annuity Brandscape+37 Net Promoter Score
the LCSM measure is contained in note I(i) of the (‘NPS’) for Jackson variable annuities, compared to
Additional unaudited financial information. an industry average NPS of 0.
44 Prudential plc
C O
Group Chief Risk and Compliance Officer’s report on the risks

facing our business and how these are managed
James Turner FCA FCSI FRM This section explains the main risks inherent in our business and
Group overview
Group Chief Risk how we manage those risks, with the aim of ensuring an appropriate
and Compliance Officer risk profile is maintained. Although Jackson is preparing to be a fully
independent business, until the proposed demerger is effected
Jackson’s risks (as with those of the Group’s other businesses) will
continue to be managed within the Group Risk Framework and this
report reflects this position.
Strategic report
1. Introduction
The Group
2020 was a truly eventful year. The Covid-19 pandemic swept across
the world and has resulted in significant humanitarian suffering and
material and prolonged disruption to social and economic activity.
The business had to consider and navigate the risks arising from the
Covid-19 on multiple fronts. These included capital and liquidity risks
arising from abrupt market dislocation as well as risks associated with
Governance
the disruption to the Group’s operations across Asia, Africa, the US and
UK. Concurrently, the business has maintained uninterrupted delivery
of services for its policyholders, and has been committed to doing the
right thing for both its customers and employees throughout the crisis.
Our Group Risk Framework and risk The Risk, Compliance and Security function has successfully
appetite have allowed us to control transitioned into, and maintained, new ways of working across multiple
time zones to provide strong stewardship and enhanced monitoring
our risk exposure throughout 2020.

of these risks during the most acute phases of the pandemic’s impact.
Through these extraordinary circumstances, the function has also

Our governance, processes and provided risk opinions, guidance and assurance on critical activity,
controls enable us to deal with including Athene’s reinsurance of $27.6 billion of Jackson’s fixed and
fixed index annuity portfolio and $500 million equity investment into
uncertainty effectively, which is Prudential’s US business, the proposed demerger of Jackson from
the Group and the revision to its hedge modelling for US statutory
critical to the achievement of standards for calculating reserves and capital. At the same time,
the function retained its focus on managing the risks of the ongoing
our strategy of capturing long-term business, performing its defined role in providing risk management
support and oversight, as well as objective challenge to ensure the
structural opportunities and helping Group remained within its risk appetite.
our customers achieve their long- The Group continues to engage constructively with the Hong Kong
Insurance Authority (IA) as its Group-wide supervisor and is
term financial goals. transitioning to a new supervisory framework. The Group’s mature
and well-embedded risk framework will enable decisions to be taken
with confidence as the business seeks to capture the opportunities
in the growth markets in which it is now focused while continuing
to operate prudently with discipline.

The world economy
At the start of 2020 the prospects for global growth appeared to be
improving. This positive momentum was abruptly reversed by the
Covid-19 pandemic, leading to the shutdown of much of the world’s
economy and a sharp recession. In response to this unprecedented
shock, governments and central banks deployed massive fiscal and
monetary stimulus measures to mitigate the impact on the labour force
and restore confidence in financial markets. Driven largely by the
strong macro policy response, global economies have started to
recover although this remains far from complete. In Asia, China has
been leading the economic rehabilitation, benefiting other Asian
economies to an extent, although the regional recovery to date has
been highly uneven. The economic environment in Asia is expected
to remain challenging given the limited headroom for additional
conventional monetary easing, increasing inflation risks from weaker
foreign exchange rates, supply chain disruptions, and increasing fiscal
pressures. Viewed more broadly, the pandemic has increased the

debt burden of many economies and may result in sovereign debt
sustainability issues, increasing the dependence on low interest rates
by governments.

Prudential plc
facing our business and how these are managed / continued
Financial markets Many governments continue to face the challenge of reconciling the
2020 began with risk assets performing well until concerns over inter-connectedness of the global economy with pressure to prioritise
the economic impact of the Covid-19 outbreak dented investor national self-interests. The experience of the pandemic may provide
confidence, eventually leading to a global sell-off that unfolded at a further impetus to the regionalisation or fragmentation of global
extraordinary speed. The S&P 500 index plunged by 35 per cent trade, investment and standards, and risks undermining efforts in
from an all-time high on 19 February 2020 to its low point on international cooperation and coordination. Into 2021, accessibility to
23 March 2020. Interest rates in major markets declined significantly, Covid-19 vaccine supplies, which may become a prolonged challenge,
falling to historical lows as investors fretted over the risks to the has the potential to contribute to an increase in geopolitical tensions.
economic outlook. Credit spreads widened significantly, in line A key source of geopolitical risk during 2020 was the US-China
with the plunge in equity markets. relationship and its wider impact on international relations, and
this looks likely to continue during President Biden’s term in office.
The stress on financial markets was broadly eased by the central banks Hong Kong’s perceived level of autonomy will remain influential
maintaining accommodative monetary policies and implementing in geopolitical tensions, with potential global trade and economic
various support programmes. Since their trough in March 2020, consequences. Responses by the US, UK and other governments
financial markets have rallied strongly, initially driven by broad to the enactment and application of the national security law in Hong
reductions in infection rates in some countries, optimism with respect Kong and other constitutional or legislative changes in the territory,
to the restart of the global economy, and, in the US, a small group of which continue to develop, may impact Hong Kong’s economy.
large-cap stocks that has buoyed the cap-weighted index. Risk assets
in particular continued to rally strongly in the second half of 2020. Being a key market for the Group which also hosts regional and
head office functions, this could potentially impact Prudential’s sales,
Risk asset valuations appear elevated and display some disconnect operations and product distribution. For internationally active groups
with economic fundamentals, and may therefore be subject to the which operate across impacted jurisdictions such as Prudential, these
risk of a correction given the renewed lockdowns implemented government responses and measures add to the complexity of legal
across the world towards the end of 2020 and into 2021, the logistical and regulatory compliance. Compliance with Prudential’s legal or
challenges to the roll out of Covid-19 vaccination programmes (which regulatory obligations in one jurisdiction may conflict with the law or
may be more prolonged than initially anticipated) and the development policy objectives of another jurisdiction, or may be seen as supporting
of new strains of the coronavirus. On interest rates, the consensus the law or policy objectives of that jurisdiction over another, creating
outlook is of an environment in which they will remain low-for-longer. additional legal, regulatory compliance and reputational risks for
The US Federal Reserve’s forward guidance has constrained the Group.
expectations of higher short-term yields in the foreseeable future,
while economic fundamentals and globally accommodative conditions Regulations
are likely to keep downward pressure on long-term yields. For credit Prudential operates in highly regulated markets, and the nature
assets, risks of a further round of widespread pressure on corporate and focus of regulation and laws remain fluid. A number of national
liquidity – as experienced during 2020 – remain, given the stretched and international regulatory developments are in progress, with a
credit fundamentals of corporate borrowers, although the magnitude continuing focus on solvency and capital standards, conduct of
of the pre-funding and liquidity-raising that has been accomplished business, systemic risk regulation, corporate governance and senior
in 2020 is expected to mitigate this to an extent. management accountability, and macroprudential policy. Some of
these changes will have a significant impact on the way that the Group
(Geo)political landscape operates, conducts business and manages its risks. With geopolitical
During the first half of 2020, the civil unrest increasingly seen in many tensions elevated, the complexity of sanctions compliance is
places across the world was partially curtailed by the Covid-19 increasing and continues to represent a challenge for international
restrictions put in place by governments. The second half of the year, businesses. These regulatory developments will continue to be
saw an increase in popular protests against long-standing social issues monitored at a national and global level and form part of Prudential’s
and inequalities and were in some cases triggered by national elections engagement with government policy teams and regulators. The
in the US, Africa and Asia. An observable trend in recent protest immediate regulatory and supervisory responses to Covid-19 have
movements, aided by social media, is the speed and frequency at which been broad and have included increased scrutiny of the operational
they can gather momentum and their evolving forms of leadership. resilience, liquidity and capital strength (including the impact of
The stability of governments is likely to be tested in different ways and making dividend payments) of financial services companies as well
potentially on a more frequent basis as a result, as will the resilience of as changes that have helped the Group to continue to support its
businesses. As a global organisation, the Group has well-established customers through non-face-to-face contact. The financial burden in
local and global plans to mitigate the business risks from disruption. addressing the pandemic is likely to influence changes in governmental
These have operated well when deployed across the Group during fiscal policies, laws or regulations aimed at increasing financial stability,
the Covid-19 crisis and also locally during the outbreaks of unrest and this may include measures on businesses or specific industries
seen during 2020 and continued into 2021 in markets where the Group to contribute to, lessen or otherwise support, the financial cost to
operates. Operational resilience will continue to be critically evaluated governments of treating patients and meeting the logistical challenges
and enhanced as the longer-term lessons from the pandemic response of providing vaccines. It is possible that requirements are imposed on
in particular, become clearer. Governmental responses to the private insurance companies and healthcare providers to cover costs
pandemic have involved a necessary balancing of the impacts to associated with the treatment and prevention of Covid-19 beyond
people’s health and lives, their individual rights and liberties, and contractual or policy terms.
economic growth. These considerations, and the dynamics between
and within them, have become increasingly politicised and another
source of polarisation and popular discontent which, in some places,
have also provided impetus to protest movements.
46 Prudential plc
Against this evolving regulatory backdrop, constructive engagement A strong sense of purpose for an enterprise is a driver of long-term
Group overview
continues with Prudential’s Group-wide supervisor, the Hong Kong IA, profitability, and this is making companies evaluate their place in,
on the Group-wide Supervision (GWS) Framework. The GWS and contribution to, society. The ‘why and how’ a business acts
Framework is expected to be effective for Prudential upon designation has become arguably at least as important as what it produces or
by the Hong Kong IA in the second quarter of 2021, subject to the services that it provides. Understanding and managing the
transitional arrangements. The primary legislation was enacted in July environmental, social and governance (ESG) impact and requirements
2020 and will come into operation on 29 March 2021. The framework of its business is fundamental to Prudential’s brand, reputation and
adopts a principle-based and outcome-focused approach, and allows ultimately its long-term success. Ensuring high levels of transparency
Strategic report
the Hong Kong IA to exercise direct regulatory powers over the and responsiveness to stakeholders is a key aspect of this. Recent
holding companies of multinational insurance groups, reinforcing events have highlighted the structural inequalities in our societies and
Hong Kong’s position as a preferred base for large insurance groups in are prompting organisations to question where they stand on these
Asia Pacific and a global insurance hub. During 2020, the Hong Kong important issues. Prudential’s ESG Strategic Framework is designed
IA engaged with the Group and other relevant stakeholders in the to deliver on its purpose of ‘helping people get the most out of life’.
development of the GWS Framework, which will be anchored It includes a focus on inclusivity: inclusivity of access to quality
on the requirements for three pillars: capital, risk and governance, healthcare, protection and savings for our customers; inclusivity of
and disclosure. the working environment for our people; and inclusivity in the Group’s
Governance
support of the transition to low-carbon in the economies, markets and
Societal developments communities in which it operates.
The experience of the pandemic has underlined the ability of evolving
demographic, geographical and environmental factors to change
the nature, likelihood and impact of extreme events. These factors
can also drive public health trends such as increasing obesity,
with consequential potential impacts to Prudential’s underwriting

assumptions and product design. While insights can be gleaned from
the current pandemic, the unique set of variables associated with
extreme events means that their impact on the functioning of society,
and the disruption to business operations, staff, customers and sales,
cannot be predicted or fully mitigated. The Group has been actively
managing the impact of the crisis as it has developed over 2020 and
into 2021, including assisting affected policyholders and staff in
meeting their resulting needs.
In support of increased ease of access and social inclusion, and to

meet evolving customer needs, the Group is increasing its use of digital
services, technologies and distribution methods for the products and
services that it offers. The Covid-19 pandemic has accelerated these
developments, with the Group’s businesses having implemented
virtual face-to-face sales of select ranges of products in many of its
markets, and adoption of Prudential’s Pulse application has continued
to increase. The digital health platform is now available in 15 markets
in 11 languages, with total downloads having reached 20 million as
of February 2021. Changes to the Group’s use of technology and
distribution models have broad implications, touching on Prudential’s
conduct of business, increasing the risks of technology and data being

compromised or misused and potentially leading to new and
unforeseen regulatory issues.

Prudential plc
2. Key internal, regulatory, economic and (geo)political events over the past 12 months
Q1 2020
In January 2020, the virus responsible for what initially The California Consumer Protection Act (CCPA) comes into
appeared to be viral pneumonia is identified as a novel coronavirus. force on 1 January 2020, creating data privacy rights to California
The resulting disease is subsequently named Covid-19, and over consumers. Jackson ensures compliance with the Act in December
2020 the coronavirus begins its spread across the globe. Across its 2019. The National Association of Insurance Commissioners (NAIC)
markets the Group rolls out initiatives to support customers and staff. implements changes to the US statutory reserve and capital
framework for variable annuities, effective from 1 January 2020.
In January, Prudential Vietnam announces an exclusive Jackson chooses to early adopt the changes as at 31 December 2019
bancassurance partnership with Southeast Asia Commercial Joint for US statutory reporting.
Stock Bank (SeABank), a fast-growing bank in Vietnam with around
1.2 million customers and almost 170 branches, for a 20-year term. The Covid-19 pandemic shuts down much of the world’s
economy and triggers a sharp recession. Equity markets sell off at an
On 20 March, the Hong Kong IA published the Insurance extraordinary speed, volatility spikes, credit spreads widen sharply
(Amendment) (No. 2) Bill as part of its submission to the Hong Kong and interest rates in major markets decrease to new historical lows.
LegCo, a key step towards GWS implementation. Central banks maintain accommodative monetary policies and
implement various asset purchase and support programmes to
In Singapore, a revised risk-based capital framework (RBC2) restore confidence in financial markets. Governments deploy
for insurers comes into force as at 31 March 2020. massive fiscal stimulus to mitigate the economic fallout and the
unprecedented shock on the labour force.
Q2 2020
On 18 June 2020 the Group announces the reinsurance of The Network for Greening the Financial System publishes its
$27.6 billion of Jackson’s fixed and fixed index annuity portfolio Guide for Supervisors in May 2020 which outlines recommendations
by Athene, and a $500 million equity investment into Prudential’s for integrating climate-related and environmental risks into
US business in return for an 11.1 per cent economic interest. prudential supervision.
Shriti Vadera joins the Board as a Non-executive Director and Markets rally sharply during Q2 on the back of asset purchases,
member of the Nomination & Governance Committee on 1 May direct intervention by the US Federal Reserve in credit markets,
2020, and succeeds Paul Manduca as Chair of the Board and stimulus programmes, the gradual rebound in economic activity
of the Nomination & Governance Committee on 1 January 2021. enabled by the progressive easing of lockdown measures and
a broad reduction in virus infection rates.
IAIS releases the requirements for a Covid-19 tailored Data
Collection exercise for 2020. The original Data Collection exercise, A broad easing of Covid-19 restrictions begins to take place
released in March for the purpose of monitoring the build-up of across many countries in the latter half of Q2 and into Q3, including
systemic risk for insurers, is paused for 2020. In April 2020, the IAIS in some countries with high infection rates, with many countries
also releases the requirements for the 2020 ICS and Aggregation taking steps to mitigate a second wave of infections. Other countries,
Method Data Collection exercises. such as the US and those in Central and South America and South
Asia continue to see high daily case numbers.
48 Prudential plc
Key
Prudential
Regulatory
(Geo)political
Markets/economies
Group overview
Q3 2020
In August, and building on its earlier announcement in May, US GDP increases by $1.6 trillion over Q3, partially offsetting
the Group announces its intention to fully separate Jackson from the the decrease of $2.0 trillion in Q2, as consumer spending rebounds
Group. This is followed by a further announcement in January 2021 strongly. Meanwhile, China’s GDP growth improves from
confirming that the separation will be facilitated by way of demerger, 3.2 per cent year-on-year in Q2 to 4.9 per cent in Q3. Growth in all
Strategic report
which is proposed to complete in Q2 2021. major investment activities return to positive levels, with real growth
rising from -1.1 per cent year-on-year in August to 2.4 per cent
The Insurance (Amendment) (No. 2) Ordinance, being the in September.
enabling primary legislation providing for the GWS Framework was
enacted on 24 July 2020 and will come into operation on 29 March Volatility in the financial markets remain elevated. Equity markets
2021. The relevant subsidiary legislation, including the Insurance briefly fall in September, accompanied by a sell-off in US treasuries,
(Group Capital) Rules, was tabled before the Legislative Council on although this is short-lived and avoids a collapse of similar levels as
Governance
6 January 2021 and will also come into operation on 29 March 2021. seen in March. As credit market conditions stabilise, central banks,
The GWS Framework is expected to be effective for Prudential including the US Federal Reserve and European Central Bank (ECB),
upon designation by the Hong Kong IA in the second quarter of 2021, lower the pace of their asset purchases.
A new national security law for Hong Kong is implemented
The US Federal Reserve adopts a new flexible average inflation on 30 June 2020. The US response includes enactment of the
targeting strategy and introduces new forward guidance on Hong Kong Autonomy Act which introduces potential sanctions on
interest rates that delays future increases until the economy reaches financial institutions doing significant business with Chinese officials

maximum employment and inflation rises to 2 per cent and is on materially contributing to the alleged erosion of Hong Kong’s
track to moderately exceed this level for some time. autonomy. Over Q3 and Q4 the US introduces sanctions on a range
of individuals and entities in connection to a number of issues.
On 31 July 2020, Carrie Lam postpones the September LegCo

elections for one year, citing coronavirus concerns.
Q4 2020
Covid-19 cases surge in Q4 across the US and Europe. Towards Moves to ban an opposition party in 2019 trigger anti-
the end of 2020, major European economies start to reintroduce establishment protests in Thailand in early 2020. Protest activity
restrictions on movement and business to various degrees. Amid this peaks in mid-October and spikes again mid-November, with protest
increase in infection rates, vaccine approvals and roll-outs begin to leaders threatening to resume demonstrations with increased
take place in the UK and other countries. intensity in early 2021.
Against the backdrop of the US election and positive Covid-19 In the run-up to the Uganda presidential elections on 14 January
vaccine news, equity markets continue to rally in November and 2021, violence breaks out in Kampala with dozens killed in the first
volatility reaches new post-March lows. Central banks of major few weeks of electoral campaigning.
economies keep interest rate levels on hold. In Europe, the Pandemic

Emergency Purchase Programme resolves to continue bond In early October, Nigeria is rocked by the outbreak of nationwide
purchases until June 2021. In the US, a second stimulus package demonstrations against police brutality that leaves a reported
worth $900 billion passed in December. 56 people dead.
The US elections take place amid a surge in coronavirus case On 23 October, China’s Central Bank, the People’s Bank of
numbers across the country. After legal challenges from President China, publishes a draft banking law recognising, and providing a
Trump are denied by the courts and the storming of the US Capitol regulatory framework for, its planned central bank digital currency,
buildings by protestors, Joe Biden is inaugurated as the 46th the digital yuan.
US president on 20 January 2021, taking control of both houses
of Congress. On 11 November 2020, China’s National People’s Congress
Standing Committee determines that Hong Kong LegCo members
On 15 November, at the annual Association of Southeast can be disqualified on various grounds including endangering
Asian Nations (ASEAN) Leaders Summit, 15 countries formally sign national security, with four members being immediately disqualified.
the Regional Comprehensive Economic Partnership (RCEP) trade In protest, the remaining 15 member pro-democracy bloc resign
deal, making it the world’s largest trading bloc. Signatories aim to en masse.
work through ratification of the deal in 2021. The RCEP comprises
all ten ASEAN economies, plus China, Japan, South Korea, Australia On 30 December 2020, the EU and China reach an agreement
and New Zealand. in principle on the Comprehensive Agreement on Investment,
which covers market access. Both sides commit to finalising detailed
negotiations on the investment protections covered by the
Agreement, which will require ratification, within two years.

Prudential plc
A
B C O
3. Managing the risks in implementing our strategy
This section provides an overview of the Group’s strategy, the significant risks arising from the delivery of this strategy and current
risk management focus. The risks outlined below, which are not exhaustive, are discussed in more detail in section 5.
Our strategy Significant risks arising from Risk management focus

the delivery of the strategy
Group-wide Transformation risks —— Continuing development of the transformation risk framework,

Our strategy is to around key change including risk appetite, and focus on, and ensuring consistency in,
capture the long-term programmes, including transformation risk management across the Group’s business units.
structural opportunities those related to the —— Provision of independent risk assurance, challenge and advice
for our markets and Group’s digital strategy on first line programme risk identification and assessments.
geographies, while —— Focus on the financial and non-financial stability of Jackson
operating with as a standalone business.
discipline and seeking
to enhance our Group-wide —— Ongoing compliance with in-force regulations and management
capabilities through regulatory risks of new regulatory developments.
innovation to deliver —— Engagement with national governments, regulators and industry
high-quality resilient groups on macroprudential and systemic risk-related regulatory
outcomes for our initiatives, international capital standards, and other initiatives with
customers. Group-wide impacts.
—— Implementation of the Group-wide Supervision Framework, which
is expected to be effective for Prudential upon designation by the
Hong Kong IA in the second quarter of 2021, subject to transitional
arrangements.
Information security —— Operationalisation of the Group-wide governance model and strategy
and data privacy risks for cyber security management focusing on automation, business
enablement, efficiency, and continuous improvement.
—— Continued focus on compliance with applicable privacy laws across
the Group and the appropriate and ethical use of customer data.
Business disruption —— Continued application of the Group’s global business continuity
and third-party risks management framework, with an enhanced focus on operational
resilience as it relates to business disruption tolerance levels and
customer impacts. Embedding of insights from the Covid-19 pandemic.
—— Applying the distinct oversight and risk management required over the
Group’s third parties, including its strategic partnerships for product
distribution, non-traditional services and processing activities.
Conduct risk —— Implementing and embedding the Group-wide customer conduct
risk management framework and policy, with particular focus on sales
practices and the Group’s digital ecosystem.
—— Enhancement of conduct risk oversight using data analytics.
Model and data risks —— Focus on requirements for data and AI and complex tooling ethics
principles and framework.
—— Ongoing risk assessment of tools used.
People and culture —— Focus on Group Culture as a key mechanism to support sound
risk management behaviours, practices and awareness.
—— Embedding responses and insights from Group-wide employee
engagement surveys through enhancements to the Group
Risk Framework.
ESG – commitments —— Assessing the potential financial impacts from climate-related
and disclosure transition risk in the asset book and integration of climate risk into
the Group Risk Framework.
—— Supporting the Group ESG Committee in its responsibility to deliver
the Group’s ESG Strategic Framework and develop its disclosures.
50 Prudential plc
Group overview
Our strategy Significant risks arising from Risk management focus
the delivery of the strategy
Strategic report
Asia Financial risks —— Maintaining, and enhancing where necessary, risk limits and
Serving the protection implementing business initiatives to manage financial risks, including
and investment needs asset allocation, bonus revisions, product repricing and reinsurance
of the growing middle where required.
class in Asia.
Persistency risk —— Implementation of business initiatives to manage persistency risk,
including additional payment methods, enhancing customer
experience, revisions to product design and incentive structures.
Governance
Ongoing experience monitoring.
Morbidity risk —— Implementation of business initiatives to manage morbidity risk,
including product repricing where required. Ongoing experience
monitoring.
Africa As its presence in Africa expands and grows in materiality, the Group will continue to increase its focus
Providing savings, on Prudential Africa’s most significant risks. A number of significant Group-wide risks detailed above

health and protection are considered material in the region, and these include:
solutions to customers —— Financial crime and security risks, where the focus is on implementation of Group policies and standards;
in Africa. —— Transformation risks, where the focus is on overseeing and managing parallel initiatives while developing
local capabilities to meet the demands of a fast-paced transformation agenda; and
—— Regulatory risks, where the focus is on active monitoring of the local regulatory landscape and adoption
of Group processes in order to meet international regulatory standards.
United States Financial risks —— Maintaining, and enhancing where necessary, risk limits, hedging
Providing asset strategies (including mitigating measures against basis risk), modelling
accumulation and tools and risk oversight appropriate to Jackson’s product mix with a
retirement income view to demerger from the Prudential Group.
products to US retirees.
Policyholder —— Continued monitoring of policyholder behaviour experience
behaviour risk and review of assumptions.
The aggregate Group exposure to its key risk drivers is monitored

B C I O
and managed by the Risk, Compliance and Security function, which
4. Risk governance is responsible for reviewing, assessing, providing oversight and
a System of governance reporting on the Group’s risk exposure and solvency position from
Prudential has in place a system of governance that promotes and the Group economic, regulatory and ratings perspectives.
embeds a clear ownership of risk, processes that link risk management
to business objectives and a proactive Board and senior management During 2020, the Group has continued to review and update its
providing oversight of risks. Mechanisms and methodologies to review, policies and processes for alignment with the requirements of its
discuss and communicate risks are in place together with risk policies Group-wide supervisor. The Group has also focused on development
and standards to enable risks to the Group to be identified, measured of its Group-wide customer conduct risk framework and policy;
and assessed, managed and controlled, monitored and reported. its AI ethics principles; and enhancements to its operational resilience.
Material risks are retained selectively when it is considered that The following section provides more detail on our risk governance,
there is value in doing so, and where it is consistent with the Group’s risk culture and risk management process.
risk appetite and philosophy towards risk-taking. The Group Risk
Framework, which is owned by the Board, details Prudential’s
risk governance, risk management processes and risk appetite.
The Group’s risk governance arrangements are based on the ‘three

lines of defence’ model, comprising risk taking and management,
risk control and oversight, and independent assurance.

Prudential plc
Risk management b Group Risk Framework

i. Risk governance and culture
Prudential’s risk governance comprises the Board organisational
R isk structures, reporting relationships, delegation of authority, roles
me and responsibilities, and risk policies that have been established
n as
tio ur
ifi
ca em to make decisions and control activities on risk-related matters.
e
nt
nt
e
The risk governance structure is led by the Group Risk Committee,

id
an
sk
da
supported by independent Non-executive Directors on risk committees
Ri
ss e
of the Group’s main subsidiaries. The Group Risk Committee reviews
ss m
Risk governance Business
and culture strategy and approves changes made to the Group Risk Framework and to
ent
relevant policies. It also reviews and approves new risk policies and
recommends to the Board any material policies which require Board
approval. A number of core risk policies and standards support the
Framework to enable risks to the Group to be identified, measured
and assessed, managed and controlled, monitored and reported.
The risk governance arrangements for the Group’s major businesses

Capital Stress and were delayered and strengthened in 2020 with the implementation
management scenario testing of direct lines of communication, reporting and oversight of the risk
committees of these businesses by the Committee. To support the
Mo
enactment of these arrangements, the terms of reference for the major

l
ro
ni
nt
business risk committees were aligned and approved locally, and include
to
co
nd
ra
an a standing invitation for the Group Chief Risk and Compliance Officer
d
re e
po ag
rt n (CRCO) and the requirement for risk escalations to the Committee.
Ma
Culture is a strategic priority of the Board, which recognises its
importance in the way that the Group does business. A Group-wide
culture framework is currently being implemented to unify the Group
Identified major risk categories towards its shared purpose of helping people get the most out of life.
Components of the framework include principles and values that define
how the Group expects business to be conducted in order to achieve
R is k its strategic objectives, inform expectations of leadership and guide
tion s fr ESG activities. The culture framework components are intended to be
it ua om
ls ou supportive of sound risk management practices by requiring a focus
cia rb
Econo tical risks
n risk
geopo
n u
na on longer-term goals and sustainability, the avoidance of excessive
cy tion nal,
si
r fi
risk taking and highlighting acceptable and unacceptable behaviours.

rmatio
ne
r ri d
mic an
li
be an
o
ou
sks
ss
rup rati
M uid
The framework is supported through inclusion of risk considerations

to
ar it
an
liq
dis pe
ke y r
Transfo
di
ks
in performance management for key individuals; the building of

d
O
t a isk
risk
R is
nd
nd
nce appropriate skills and capabilities in risk management; and by ensuring

us tr
ra
Insu that employees understand and care about their role in managing risk
y
Cred
it risk through open discussions. The Group Risk Committee has a key role in
ct risk
Group Condu providing advice to the Remuneration Committee on risk management
risk considerations to be applied in respect of executive remuneration.
profile Regu
– lator
l risk ure deve y capital Prudential’s Group Code of Business Conduct and Group Governance
Socia and cult lopm
e o p le ents
p Manual include a series of guiding principles that govern the day-to-day
conduct of all its people and any organisations acting on its behalf. This is
k
ion r res
ris
Regu
Re mp
ce
isk
supported by specific risk-related policies which require that the Group

su
co
an
gu lian
s
isclo
rn
lat ce
latory
is k
act in a responsible manner. These include, but are not limited to, policies
ve
or
yr
Go
y
ransit
ate d
related to financial crime covering anti-money laundering and sanctions

or
ES
chan
at
and anti-bribery and corruption. The Group’s third-party supply policy

G
is
Clim
and t
ul
ks g
r
re
ge
a nd requires that human rights and modern slavery considerations are

al embedded across all of its supplier and supply chain arrangements.
L eg
Embedded procedures to allow individuals to speak out safely and
anonymously against unethical behaviour and conduct are also in place.
52 Prudential plc
ESG is overseen by the Board, which is responsible for determining measurement and management of the Group material risk profile in a
Group overview
strategy and prioritisation of key focus areas. In order to provide consistent and coherent way, which include the flows of management
greater senior executive involvement and holistic oversight of ESG information required, are also set out in the Group’s risk policies. The
matters material to the Group, in 2020, a Group ESG Committee was methods and risk management tools that the Group employs to mitigate
established. The Committee, chaired by the Group Chief Financial each of its major categories of risks are detailed in section 5 below.
Officer and Chief Operating Officer in his role as ESG sponsor,
was supported by senior functional leaders and representatives from Risk monitoring and reporting
the Group’s business units, including the chief investment officers The identification of the Group’s principal risks informs the
Strategic report
of the Group’s asset managers. The Group ESG Committee reported management information received by the Group Risk Committee
to the Board in 2020 through the Group Nomination & Governance and the Board. Risk reporting of key exposures against appetite
Committee, comprising the Group’s Chair, the Senior Independent is also included, as well as ongoing developments in the Group’s
Director, and the chairs of the Audit, Remuneration and Risk principal and emerging risks.
committees and was regularly attended by the Group Chief Executive.
The policies and procedures to support how the Group operates in iii. Risk appetite, limits and triggers
relation to certain ESG topics are included in the Group Governance The Group recognises that interests of its customers and shareholders,
Manual, which establishes standards for managing ESG issues across and a managed acceptance of risk in pursuit of its strategy, lies at the
Governance
the Group and sets out the policies and procedures to support how heart of its business, and that effective risk management capabilities
Prudential operates. Further details on the Group’s ESG governance represent a key source of competitive advantage. Qualitative
arrangements, including the establishment in early 2021 of a Board and quantitative expressions of risk appetite are defined and
Responsibility & Sustainability Working Group, are included in the operationalised through risk limits, triggers and indicators. The Risk,
ESG Report on pages 74 to 76. Compliance and Security function reviews the scope and operation
of these measures at least annually. The Board approves changes to
ii. The risk management cycle the Group’s aggregate risk appetite and the Group Risk Committee
Risk identification has delegated authority to approve changes to the system of limits,

In accordance with provision 28 of the UK Corporate Governance triggers and indicators.
Code, a process is in place to support Group-wide identification of
the Company’s emerging and principal risks and this combines both Group risk appetite is defined and monitored in aggregate by the
top-down and bottom-up views of risks at the level of the Group setting of objectives for its liquidity, capital requirements and
and its business units. The Board performs a robust assessment and non-financial risk exposure, covering risks to shareholders, including
analysis of these principal and emerging risks facing the Company those from participating and third-party business. Group limits operate
through the risk identification process, the Group Own Risk and within these expressions of risk appetite to constrain material risks,
Solvency Assessment (ORSA) report and the risk assessments while triggers and indicators provide additional defined points for
undertaken as part of the business planning review, including how escalation. The Group Risk Committee is responsible for reviewing the
they are managed and mitigated, which supports decision-making. risks inherent in the Group’s business plan and for providing the Board
with input on the risk/reward trade-offs implicit therein. This review
The ORSA is the ongoing process of identifying, measuring and is supported by the Risk and Compliance function, which uses
assessing, managing and controlling, monitoring and reporting the submissions from local business units to calculate the Group’s
risks to which the business is exposed. It includes an assessment of aggregated position relative to Group risk appetite and limits.
capital adequacy to ensure that the Group’s solvency needs are met
at all times. Stress and scenario testing, which includes reverse stress —— Capital requirements. Limits on capital requirements aim to
testing requiring the Group to ascertain the point of business model ensure that the Group maintains sufficient capital in excess of
failure, is another tool that helps to identify the key risks and scenarios internal economic capital requirements in business-as-usual and
that may have a material impact on the Group. The risk profile is a key stressed conditions, achieves its desired target rating to meet its
output from the risk identification and risk measurement processes business objectives, and supervisory intervention is avoided. The

and is used as a basis for setting Group-wide limits, management two measures currently in use at the Group level are the regulatory
information, assessment of solvency needs, and determining local capital summation method (LCSM) capital requirements
appropriate stress and scenario testing. The Group’s annual set of (both minimum and prescribed levels) and internal economic
principal risks is given enhanced management and reporting focus. capital requirements (ECap), which under the GWS Framework
will be determined by the Group Internal Economic Capital
Risk measurement and assessment Assessment (GIECA). In addition, capital requirements are
All identified risks are assessed based on an appropriate methodology monitored on local statutory bases.
for that risk. All quantifiable risks, which are material and mitigated
by holding capital, are modelled in the Group’s internal model, which —— Liquidity. The objective of the Group’s liquidity risk appetite is to
is used to determine economic capital requirements and is subject ensure that sufficient cash resources are available to meet financial
to independent validation and processes and controls around model obligations as they fall due in business-as-usual and stressed
changes and limitations. scenarios. This is measured using a liquidity coverage ratio (LCR)
which considers the sources of liquidity against liquidity
Risk management and control requirements under stress scenarios.
The Group’s control procedures and systems focus on aligning the levels
of risk-taking with the Group’s strategy and can only provide reasonable, Non-financial risks. The Group is exposed to non-financial risks,
and not absolute, assurance against material misstatement or loss. Risk including environmental, social and governance risks, as an outcome
management and control requirements are set out in the Group’s risk of its chosen business activities and strategy. It aims to manage
policies and define the Group’s risk appetite in respect of material risks these risks effectively to maintain its operational resilience and
and the framework under which the Group’s exposure to those risks is its commitments to customers and other external stakeholders,
limited. The processes to enable Group senior management to effect the and to avoid material adverse impact on its reputation.

Prudential plc
Risk management
Risk identification R isk
Risk identification covers Group-wide: n
me
as
tio ur
ca em
—— Top-down risk identification n tifi e
nt
—— Bottom-up risk identification
e
id
an
—— Emerging risk identification
sk
da
Ri
ss e
Risk measurement and assessment
ss m
Risk governance Business
Risks are assessed in terms of materiality. and culture strategy
ent
Material risks which are modelled are
included in appropriately validated
capital models.
Manage and control

Risk appetite and limits allow for the
Capital Stress and
controlled growth of our business, management scenario testing
in line with business strategy and plan.
Mo
l
ro
Processes that support the oversight
ni
nt
to
and control of risks include:
co
nd
ra
an
d
re e
po g
—— The Risk and Control Assessment rt na
Ma
process.
—— The Own Risk and Solvency
Assessment (ORSA).
—— Group approved limits and early
Risk governance and culture Business strategy
warning triggers.
Risk governance comprises the Board, Business strategy and the business plan
—— Large risk approval process.
organisational structures, reporting provide direction on future growth and
—— Global counterparty limit framework.
relationships, delegation of authority, inform the level of limits on solvency,
—— Financial incidents procedures.
roles and responsibilities, and risk liquidity and earnings and for our key risks.
—— Stress and scenario testing, including
policies. The Group-wide culture The Risk, Compliance and Security function
reverse stress testing.
framework includes principles and values provides input and opinion on key aspects
Monitor and report that define how business is conducted of business strategy.
Escalation requirements in the event of a in order to achieve its strategic objectives,
breach are clearly defined. Risk reporting inform expectations of leadership and
provides regular updates to the Group’s guide ESG activities.
Board and risk committees on exposures
against Board-approved appetite Capital management Stress and scenario testing
statements and limits. Reporting also Capital adequacy is monitored to ensure Stress and scenario testing is performed to
covers the Group’s key risks. that internal and regulatory capital assess the robustness of capital adequacy
requirements are met, and that solvency and liquidity, and the appropriateness of
buffers are appropriate, over the business risk limits. Recovery planning assesses
planning horizon and under stress. the effectiveness of the Group’s recovery
measures and the appropriateness of
activation points.
54 Prudential plc
Covid-19 risks and responses
Group overview
C
O The Group has responded in a number of ways to the risks arising
5. The Group’s principal risks from the coronavirus pandemic; some responses were part of existing
Broadly, the risks assumed across the Group can be categorised risk management processes and procedures, while others have been
as those relating to its financial situation; its business and industry; initiated specifically in response to the pandemic, in particular during
regulatory and legal compliance; and those relating to ESG. Principal the acute phases experienced in Q1 and Q2.
risks, whether materialising within the Group or at third parties on
which the Group relies, may have a financial impact and could also The Group Critical Incident Procedure (GCIP) defines specific
impact the performance of products or services provided to customers
Strategic report
governance to be invoked in the event of a critical incident, such as
and distributors and the ability to fulfil commitments to customers, a significant market, liquidity or credit-related event. This includes,
giving rise to potential risks to its brand and reputation. These risks, where necessary, the convening of a Critical Incident Group (CIG) to
which are not exhaustive, are detailed below. The materiality of these oversee, coordinate, and where appropriate, direct any activity during
risks, whether material at the level of the Group or its business units, a critical incident. In response to the economic and financial market
is also indicated. The Group’s disclosures covering risk factors are shocks triggered by the Covid-19 pandemic the Group CRCO invoked
aligned to the same categories and can be found at the end of the GCIP and convened a series of CIG meetings to provide high-
this document. cadence monitoring and management of potential threats to the capital
Governance
or liquidity position of the Group. Local Incident Management teams
In reading the sections below, it is useful to understand that there were also activated to monitor and manage the tailored response
are some risks that Prudential’s policyholders assume by virtue of required to support the operations, customers and employees of the
the nature of their products, and some risks that the Group and its Group’s businesses.
shareholders assume. Examples of the latter include those risks
arising from assets held directly by and for the Group or the risk that These risks arising from Covid-19, and the Group’s responses to them,
policyholder funds are exhausted. This report is focused mainly on are summarised below, with further information provided, where
risks to the shareholder but will include those which arise indirectly relevant, within the descriptions of the Group’s principal risks.

through policyholder exposures.
Risk areas Responses
Staff safety and wellbeing Proactive move to working from home arrangements across jurisdictions, with Local Incident
Management teams monitoring country-specific developments, undertaking risk assessments
and providing regular staff communications and support.
Customer outcomes are not met, Initiatives and campaigns rolled out across markets, including customer cash benefits,
increasing conduct risk goodwill payments, and extended grace periods for premium payments.
Disruption to the operations of the Group, Application of the Group and local business continuity plans. Local Incident Management
and its key partners teams activated to monitor, manage and lead a tailored response to ensure continuity of service
to existing customers.
Financial market and liquidity impacts, Invocation of the GCIP and convening of a CIG to monitor and manage threats to the Group’s
including to Group and business solvency or liquidity position.
unit solvency
Heightened risk of phishing and Group-wide phishing and targeted awareness campaigns. Heightened threat monitoring and
social engineering tactics review of cyber hygiene controls. Active management of connections to the Group network.

Sales impacts Roll-out of virtual face-to-face sales processes in most of the Group’s markets with appropriate
regulatory engagement, digital product offerings, oversight of incremental conduct and
operational risks and ongoing monitoring of the commercial impact to existing sales channels.
Insurance risks, in particular increased Close monitoring by the Group’s businesses and targeted management actions where necessary.
lapses and surrenders resulting from Covid-19-related claims have not been material to date, but are being closely monitored.
the broader economic effects as
well as increased and/or delayed
morbidity impacts

Prudential plc
Risks to the Group’s financial situation (including those from the external macroeconomic and geopolitical environment)
The global economic and geopolitical environment may impact on the Group directly by affecting trends in financial markets and
asset values, as well as driving short-term volatility. Risks in this category include the market risks to our investments and the credit
quality of our investment portfolio as well as liquidity risk.
Global economic and geopolitical conditions and reduced revenues. These pressures will impact on the business
Changes in global economic conditions can impact Prudential operating environments, for example, through changes to taxation,
directly; for example, by leading to reduced investment returns and and are likely to contribute to political pressures for governments.
fund performance and liquidity, and increasing the cost of promises
(guarantees) that have been made to the Group’s customers. Responses by the US, UK and other governments to the enactment
Changes in economic conditions, such as the abrupt and uncertain and application of the national security law in Hong Kong and other
longer-term impacts resulting from the Covid-19 crisis, can also have constitutional or legislative changes in the territory, which continue
an indirect impact on the Group; for example, leading to a decrease to develop, may impact Hong Kong’s economy. Being a key market
in the propensity for people to save and buy Prudential’s products, for the Group which also hosts regional and head office functions,
as well as changing prevailing political attitudes towards regulation. this could potentially impact Prudential’s sales, operations and
product distribution. For internationally active groups which operate
The geopolitical environment can also impact the Group in a wide across impacted jurisdictions such as Prudential, these government
range of ways, both directly and indirectly. Financial markets and measures and responses add to the complexity of legal and
economic sentiment have been highly susceptible to geopolitical regulatory compliance. Compliance with Prudential’s legal or
developments in recent years, with implications for the Group’s regulatory obligations in one jurisdiction may conflict with the
financial situation. We have seen in recent times that geopolitical law or policy objectives of another jurisdiction, or may be seen
tensions can result in the imposition of protectionist or restrictive as supporting the law or policy objectives of that jurisdiction over
regulatory and trading requirements by governments and regimes. another, creating additional legal, regulatory compliance and
The Covid-19 pandemic has further prompted governments to reputational risks for the Group. All these factors can increase the
rethink the current globalised nature of supply chains, while operational, business disruption, regulatory and financial market
accessibility to vaccine supplies has the potential to contribute to an risks to the Group and can directly impact its sales and distribution
increase in geopolitical tensions. These factors may have geopolitical networks. Developments in Hong Kong and the continuing impacts
and trading implications, the full extent of which may not be clear of the pandemic are being closely monitored by the Group and
for a while. Various governments have effected, or may effect, plans have been enacted to manage the disruption to the business,
the postponement of elections and other constitutional or legislative its employees and its customers within existing business resilience
processes in response to the pandemic, and the longer-term impact processes. Further information on the Group’s business disruption
from this increase in constitutional and political uncertainty remains risks are included below.
to be seen. The pandemic has had a negative impact on all
economies, with increased fiscal burdens, higher levels of borrowing Macroeconomic and geopolitical risks are considered material
at the level of the Group.
Market risks to our investments The Group’s market risks are managed and mitigated by the following:
(Audited)
—— The Group market risk policy;
This is the potential for reduced value of Prudential’s investments —— The Group Asset Liability Committee – a first-line risk
resulting from the volatility of asset prices, driven by fluctuations management advisory committee to the Group Chief Executive
in equity prices, interest rates, foreign exchange rates and property Officer which supports the identification, assessment and
prices. Interest rates in the Group’s key markets decreased to management of key financial risks significant to the achievement
historically low levels in Q1 2020, with the stance of central banks of the Group’s business objectives;
making it likely they will remain extremely low for a while. —— Risk appetite statements, limits and triggers;
A persistently low interest rate environment poses challenges to —— Asset and liability management programmes which include
both the capital position of life insurers as well as to new business management actions such as asset allocation, bonus revisions,
profitability and this is a scenario that the Group is planning for. repricing and the use of reinsurance where appropriate;
—— Hedging derivatives, including equity options and futures,
The Group has appetite for market risk where it arises from interest rate swaps and swaptions and currency forwards;
profit‑generating insurance activities to the extent that it remains —— The monitoring and oversight of market risks through the regular
part of a balanced portfolio of sources of income for shareholders reporting of management information; and
and is compatible with a robust solvency position. —— Regular deep dive assessments.
As noted above, in response to the economic and financial market

shocks triggered by the Covid-19 pandemic, the Group CRCO
invoked the GCIP and convened a series of CIG meetings to provide
high-cadence monitoring and management of any potential threats
to the capital or liquidity position of the Group.
56 Prudential plc
Group overview
Risks to the Group’s financial situation (including those from the external macroeconomic and geopolitical environment) continued
Market risks to our investments continued In Asia, our exposure to interest rate risk arises from the guarantees
(Audited) of some non-unit-linked products with a savings component,
including the Hong Kong with-profits and non-profit business.
Equity and property investment risk. In Asia, the shareholder This exposure exists because of the potential for an asset and liability
exposure to equity price movements results from unit-linked mismatch, where long-dated liabilities and guarantees are backed
Strategic report
products, where fee income is linked to the market value of the funds by short-dated assets, which cannot be eliminated but is monitored
under management. Further exposure arises from with-profits and managed through local risk and asset liability management
businesses where bonuses declared are based broadly on historical committees against risk appetite aligned with the Group’s
and current rates of return from the Asia business’s investment limit framework.
portfolios, which include equities.
Interest rate risk results from the cost of guarantees in the variable
In Jackson, investment risk arises from the assets backing customer annuity and fixed index annuity business, which may increase when
policies. Equity risk is driven by the variable annuity business, interest rates fall. The level of sales of variable annuity products with
Governance
where the assets are invested in both equities and bonds and the guaranteed living benefits is actively monitored, and the risk limits
main risk to the shareholder comes from providing the guaranteed we have in place help to ensure we are comfortable with the level of
benefits offered. The exposure to this is primarily controlled by interest rate and market risks incurred as a result. Derivatives are also
using a derivative hedging programme, as well as through the use used to provide some protection. Jackson is also affected by interest
of reinsurance to pass on the risk to third-party reinsurers. rate movements to its fixed annuity book where the assets are
primarily invested in bonds and shareholder exposure comes from
Basis risk is the inherent risk associated with imperfect hedging and is the mismatch between these assets and the guaranteed rates that
caused by variables or characteristics that drive differences between are offered to policyholders. As at 1 June 2020, this risk has been

the value of an underlying position and the hedge instruments used to substantially transferred as part of the reinsurance transaction with
offset changes in its value. Within Jackson’s variable annuity business, Athene, leaving only a limited exposure from residual policies
basis risk can arise from differences between the performance of the including those from the blocks acquired externally (ie from the
Separate Account funds in which policyholders choose to invest and REALIC and John Hancock businesses).
that of the instruments used to replicate these funds for hedging and
liability modelling purposes, which are primarily linked to the S&P Foreign exchange risk. The geographical diversity of Prudential’s
500 index. This risk exposure is proportionate to the magnitude of businesses means that it has some exposure to the risk of foreign
liability risk/hedge position which fluctuates with equity and interest exchange rate fluctuations. Some entities within the Group that
rate levels. While the market sell-off in Q1 2020 increased this liability write policies, invest in assets or enter into other transactions in
risk/hedge exposure, the subsequent rally in equity markets over local currencies or currencies not linked to the US dollar. Although
2020 has had a corresponding opposite and positive impact. Jackson
this limits the effect of exchange rate movements on local operating
continues to actively evaluate the costs and benefits of ways to results, it can lead to fluctuations in the Group financial statements
further mitigate basis risk. when results are reported in US dollars. This risk is accepted within
our appetite for foreign exchange risk.
Interest rate risk. This is driven by the valuation of Prudential’s
assets (particularly the bonds that it invests in) and liabilities, which In cases where a non-US dollar denominated surplus arises in an
are dependent on market interest rates and expose the Group to the operation which is to be used to support Group capital, or where
risk of those moving in a way that is detrimental. Some products that a significant cash payment is due from a subsidiary to the Group,
Prudential offers are sensitive to movements in interest rates. As part this currency exposure may be hedged where it is believed to be
of the ongoing management of this risk, a number of mitigating economically favourable to do so. Further, the Group generally
actions to the in-force business have been taken, as well as repricing

does not have appetite for significant direct shareholder exposure
and restructuring new business offerings in response to recent to foreign exchange risks in currencies outside the countries in
relatively low interest rates. Nevertheless, some sensitivity to interest which it operates, but it does have some appetite for this on fee
rate movements is still retained. The impact of lower interest rates income and on equity investments within the with-profits fund.
may also manifest through reduced solvency levels in some of the Where foreign exchange risk arises outside appetite, currency
Group’s businesses, impairing their ability to make remittances, swaps and other derivatives are used to manage the exposure.
as well as reduced new business profitability.
The Group’s appetite for interest rate risk is limited to where assets
and liabilities can be tightly matched and where liquid assets or
derivatives exist to cover interest rate exposures.

Prudential plc
Liquidity risk without having to resort to external sources of funding. The Group
(Audited) has a total of $2.6 billion of undrawn committed facilities that can be
made use of, expiring in 2025. Access to further liquidity is available
Prudential’s liquidity risk arises from the need to have sufficient liquid through the debt capital markets and an extensive commercial paper
assets to meet policyholder and third-party payments as they fall programme is in place, and Prudential has maintained a consistent
due, and the Group considers this under both normal and stressed presence as an issuer in the market for the past decade.
conditions. It includes the risk arising from funds composed of illiquid
assets and results from a mismatch between the liquidity profile of A number of risk management tools are used to manage and mitigate
assets and liabilities. Liquidity risk may impact on market conditions this liquidity risk, including the following:
and valuation of assets in a more uncertain way than for other risks
like interest rate or credit risk. It may arise, for example, where —— The Group’s liquidity risk policy;
external capital is unavailable at sustainable cost, increased liquid —— Risk appetite statements, limits and triggers;
assets are required to be held as collateral under derivative —— Regular assessment by the Group and business units of LCRs
transactions or where redemption requests are made against which are calculated under both base case and stressed scenarios
Prudential’s external funds. Liquidity risk is considered material and are reported to committees and the Board;
at the level of the Group. —— The Group’s Liquidity Risk Management Plan, which includes
details of the Group Liquidity Risk Framework as well as gap
Prudential has no appetite for any business to have insufficient analysis of liquidity risks and the adequacy of available liquidity
resources to cover its outgoing cash flows, or for the Group as a resources under normal and stressed conditions;
whole to not meet cash flow requirements from its debt obligations —— Regular stress testing;
under any plausible scenario. —— Our contingency plans and identified sources of liquidity;
—— The Group’s ability to access the money and debt capital markets;
The Group has significant internal sources of liquidity, which are —— Regular deep dive assessments; and
sufficient to meet all of our expected cash requirements for at least —— The Group’s access to external committed credit facilities.
12 months from the date the financial statements are approved,
Credit risk A number of risk management tools are used to manage and mitigate
(Audited) this credit risk, including the following:
Credit risk is the potential for a reduction in the value of investments —— A credit risk policy and dealing and controls policy;
which results from the perceived level of risk of an investment issuer —— Risk appetite statements and portfolio-level limits that have
being unable to meet its obligations (defaulting). Counterparty risk is been defined on issuers, and counterparties;
a type of credit risk and relates to the risk of the counterparty to any —— Collateral arrangements for derivative, secured lending reverse
contract we enter into being unable to meet their obligations causing repurchase and reinsurance transactions which aim to provide
the Group to suffer a loss. a high level of credit protection;
—— The Group Credit Risk Committee’s oversight of credit and
Prudential invests in bonds that provide a regular, fixed amount of counterparty credit risk and sector and/or name-specific reviews;
interest income (fixed income assets) in order to match the payments —— Regular assessments; and
needed to policyholders. It also enters into reinsurance and —— Close monitoring or restrictions on investments that may be
derivative contracts with third parties to mitigate various types of of concern.
risk, as well as holding cash deposits at certain banks. As a result,
it is exposed to credit risk and counterparty risk across its business. The total debt securities4 at 31 December 2020 were $125.8 billion
The assets backing the Jackson general account portfolio and the (31 December 2019: $134.6 billion). Credit risk arises from the debt
Asia shareholder business means credit risk is considered a material portfolio in the Asia business comprising the shareholder, with-profit
risk for the Group’s business units. and unit-linked funds, the value of which was $89.6 billion at
31 December 2020. The majority (69 per cent) of the portfolio is in
The Group has some appetite to take credit risk to the extent that unit-linked and with-profits funds. The remaining 31 per cent of the
it remains part of a balanced portfolio of sources of income for debt portfolio is held to back the shareholder business.
shareholders and is compatible with a robust solvency position.
58 Prudential plc
Group overview
Credit risk continued Shareholder exposure by rating

(Audited)
AAA 7%
In the general account of the Group’s US business, $36.0 billion AA+ to AA- 7%
of debt securities are held to support shareholder liabilities. The A+ to A- 38%
Strategic report
shareholder-backed debt portfolio of the Group’s other operations BBB+ to BBB- 40%
was $0.2 billion as at 31 December 2020. Further details of the Below BBB-
composition and quality of our debt portfolio, and exposure to loans, and unrated 8%
can be found in the IFRS financial statements.
Group sovereign debt. Prudential invests in bonds issued by

national governments. This sovereign debt holding represented
28 per cent or $18.0 billion1 of the shareholder debt portfolio of the
Governance
Group as at 31 December 2020 (31 December 2019: 22 per cent or
$18.8 billion of the shareholder debt portfolio). The particular risks
associated with holding sovereign debt are detailed further in our
disclosures on risk factors.
The exposures held by the shareholder-backed business and Shareholder exposure by sector
with-profits funds in sovereign debt securities at 31 December 2020
Government 29.89%
are given in note C1 of the Group’s IFRS financial statements.

Financial 22.05%
Corporate debt portfolio. In the Asia shareholder business, Utilities 11.06%
corporate debt exposures totalled $13.9 billion of which $12.4 billion Consumer,
or 89 per cent were investment grade rated. In the US general non-cyclical9.37%
account, corporate debt exposures amounted to $26.6 billion Industrial 5.59%
following the Athene transaction, and the portfolio remains of high Energy 5.56%
credit quality with 97 per cent5 remaining investment grade rated. Consumer,
cyclical4.92%
Bank debt exposure and counterparty credit risk. Prudential’s Communications4.45%
exposure to banks is a key part of its core investment business, Technology 3.09%
as well as being important for the hedging and other activities Basic materials 2.50%
undertaken to manage its various financial risks. Given the Other 1.52%
importance of its relationship with its banks, exposure to the sector
is considered a material risk for the Group. The exposure to derivative
counterparty and reinsurance counterparty credit risk, which
includes the recently announced reinsurance agreement with
Athene Life Re, is managed using an array of risk management tools,
including a comprehensive system of limits. Where appropriate,
Prudential reduces its exposure, buys credit protection or uses
additional collateral arrangements to manage its levels of
counterparty credit risk.
At 31 December 2020: European Embedded Value (EEV) basis results
—— 92 per cent of the Group’s shareholder portfolio (excluding all

government and government-related debt) is investment grade
rated2. In particular, 52 per cent of the portfolio is rated2 A-
and above (or equivalent); and
—— The Group’s shareholder portfolio is well diversified: no individual
sector3 makes up more than 15 per cent of the total portfolio
(excluding the financial and sovereign sectors). The exposures
held by the shareholder-backed business and with-profits funds
in bank debt securities at 31 December 2020 are given in note C1
of the Group’s IFRS financial statements.

Prudential plc
Risks from the nature of our business and our industry

These include the Group’s non-financial risks (including operational and financial crime risk), transformation risks from significant
change activity and the insurance risks assumed by the Group in providing its products.
Transformation risk Operational risk. Prudential defines operational risk as the risk of
Prudential has a number of significant change programmes under loss (or unintended gain or profit) arising from inadequate or failed
way to deliver the Group’s strategy for growth, improve customer internal processes, personnel or systems, or from external events.
experiences, strengthen its operational resilience and control This may arise from employee error, model error, system failures,
environment, and meet regulatory and industry requirements. fraud or other events which disrupt business processes or has a
If the Group does not deliver these programmes to defined timelines, detrimental impact to customers. Activities across the scope of
scope and cost, this may negatively impact on its operational our business, including operational activity, regulatory compliance,
capability; control environment; reputation; and ability to deliver and those supporting ESG activities more broadly can expose us
its strategy and maintain market competitiveness. to operational risks. A large volume of complex transactions is
processed by the Group across a number of diverse products and are
Transformation risk remains a material risk for Prudential. The subject to a high number of varying legal, regulatory and tax regimes.
Group’s transformation and change programmes inherently give rise Prudential has no appetite for material losses (direct or indirect)
to design and execution risks, and may introduce new, or increase suffered as a result of failing to develop, implement or monitor
existing, business risks and dependencies. Implementing further appropriate controls to manage operational risks.
strategic transformation initiatives may amplify these risks. In order
to manage these risks, the Group’s Transformation Risk Framework The Group’s outsourcing and third-party relationships require
aims to ensure that, for both transformation and strategic initiatives, distinct oversight and risk management processes. A number of
strong programme governance is in place with embedded risk important third-party relationships exist which provide the
expertise to achieve ongoing and nimble risk oversight, and regular distribution and processing of Prudential’s products, both as market
risk monitoring and reporting to risk committees is delivered. counterparties and as outsourcing partners, including new IT and
technology partners. In Asia, the Group continues to expand its
Prudential’s current portfolio of transformation and significant strategic partnerships and renew bancassurance arrangements, and
change programmes include the proposed demerger of Jackson from in Africa Prudential is continuing its expansion through acquisitions.
the Group; the expansion of the Group’s digital capabilities and use These third-party arrangements support Prudential in providing a
of technology, platforms and analytics; and improvement of business high level and cost-effective service to our customers, but they also
efficiencies through operating model changes (covering data, make us reliant on the operational resilience and performance of our
systems and people). Programmes related to regulatory/industry outsourcing partners.
change such as the transition to the Hong Kong IA’s GWS Framework,
changes required to effect the discontinuation of inter-bank offered The Group’s requirements for the management of material
rates (IBORs) in their current form and the implementation of IFRS 17 outsourcing arrangements, which are in accordance with relevant
are also ongoing. See below for further detail on these regulatory applicable regulations, are included through its well-established
changes. The Group is cognisant that the speed of technological Group-wide third-party supply policy. Third-party management
change in the business could outpace its ability to anticipate all the is also included and embedded in the Group-wide framework and
unintended consequences that may arise. While the adoption of risk management for operational risk (see below).
innovative technologies such as artificial intelligence has opened up
new product opportunities and channels, it also exposes Prudential The performance of the Group’s core business activities places
to potential information security, operational, ethical and conduct reliance on the IT infrastructure, provided by our external IT and
risks which, if not managed effectively, could result in customer technology partners, that supports day-to-day transaction
detriment and reputational damage. The Transformation Risk processing and administration. This IT environment must also be
Framework therefore operates alongside the Group’s existing risk secure, and an increasing cyber risk threat needs to be addressed as
policies and frameworks in these areas to ensure appropriate controls the Group’s digital footprint increases and the sophistication of cyber
and governance are in place to mitigate these risks. threats continue to evolve – see separate information security risk
sub-section below. Exposure to operational and other external
Non-financial risks events could impact operational resilience by significantly disrupting
In the course of doing business, the Group is exposed to systems, operations and services to customers, which may result
non‑financial risks. A combination of the complexity of the Group, in financial loss, customer impacts and reputational damage.
its activities and the extent of transformation in progress creates a Operational challenges also exist in keeping pace with regulatory
challenging operating environment. The Group’s main non-financial changes. This requires implementing processes to ensure we are,
risks are detailed below. These risks are considered to be material and remain, compliant on an ongoing basis, including regular
at the level of the Group. monitoring and reporting.
60 Prudential plc
Group overview
Risks from the nature of our business and our industry continued
Non-financial risks continued —— Regulatory change teams in place to assist the business
in proactively adapting and complying with regulatory
Group-wide framework and risk management for operational risk developments;
The risks detailed above form key elements of the Group’s —— On financial crime risks (see below), screening and transaction
operational risk profile. A Group-wide operational risk framework monitoring systems are in place and a programme of compliance
Strategic report
is in place to identify, measure and assess, manage and control, control monitoring reviews is undertaken, as well as regular risk
monitor and report effectively on all material operational risks across assessments;
the business. The key components of the framework are: —— A framework is in place for emerging risk identification and
analysis in order to capture, monitor and allow us to prepare
—— Application of a risk and control self-assessment (RCSA) process, for operational risks that may crystallise beyond the short-term
where operational risk exposures are identified and assessed as horizon;
part of a periodical cycle. The RCSA process considers a range —— Corporate insurance programmes to limit the financial impact
of internal and external factors, including an assessment of the of operational risks; and
Governance
control environment, to determine the business’s most significant —— Reviews of key operational risks and challenges within Group
risk exposures on a prospective basis; and business unit business plans.
—— An internal incident management process, which identifies,
quantifies and monitors remediation conducted through root These activities are fundamental in maintaining an effective system
cause analysis and application of action plans for risk events that of internal control, and as such outputs from these also inform core
have occurred across the business; RCSA, incident management and scenario analysis processes and
—— A scenario analysis process for the quantification of extreme, reporting on operational risk. Furthermore, they also ensure that
yet plausible manifestations of key operational risks across the operational risk considerations are embedded in key business

business on a forward-looking basis. This is carried out at least decision-making, including material business approvals and in setting
annually and supports external and internal capital requirements and challenging the Group’s strategy.
as well as informing risk oversight activity across the business; and
—— An operational risk appetite framework that articulates the level Business disruption risk. Events in 2020 have shown how material
of operational risk exposure the business is willing to tolerate, business disruption risk is to effective business operations and
covering all operational risk categories, and sets out escalation delivery of business services to policyholders, and the potential
processes for breaches of appetite. impact to our customers and the market more broadly. The Group
continuously seeks to develop greater business resilience through
Outputs from these processes and activities performed by individual planning, preparation, testing and adaption. Business continuity
business units are monitored by the Risk function, which provides an management (BCM) is one of a number of activities undertaken by
aggregated view of the risk profile across the business to the Group the Group Security function that helps the Group to protect its key
Risk Committee and Board. stakeholders and its systems, and business resilience is at the core
of the Group’s embedded BCM programme. The BCM programme
These core framework components are embedded across the Group and framework are appropriately linked to all business activities,
via the Group Operational Risk Policy and Standards documents, and includes business impact analyses, risk assessments, incident
which set out the key principles and minimum standards for the management plans, disaster recovery plans, and the exercising and
management of operational risk across the Group. The Group execution of these plans. Based on industry standards, the BCM
Operational Risk Policy, standards and operational risk appetite programme is designed to provide business continuity that matches
framework sit alongside other risk policies and standards that the Group’s evolving business needs and is appropriate to the size,
individually engage with key operational risks, including outsourcing complexity and nature of the Group’s operations. Prudential is also

and third-party supply, business continuity, financial crime, taking a broader, multi-functional approach to building greater
technology and data, operations processes and extent of business resilience, working with our external third-party providers
transformation. These policies and standards include subject matter and our service delivery teams to improve our ability to withstand,
expert-led processes that are designed to identify, assess, manage absorb and recover from disruption to our business services, while
and control operational risks, including: minimising the impact on our customers. The Group continuously
reviews and develops its contingency plans and its ability to respond
—— A transformation risk framework that assesses, manages and effectively when disruptive incidents occur, such as those resulting
reports on the end-to-end transformation life cycle, project from the Covid-19 pandemic and, prior to this, the Hong Kong
prioritisation and the risks, interdependencies and possible protests in 2019. Business disruption risks are closely monitored
conflicts arising from a large portfolio of transformation activities; by the Group Security function, with key operational effectiveness
—— Internal and external review of cyber security capability and metrics and updates on specific activities being reported to the
defences; Group Risk Committee and discussed by cross-functional
—— Regular updating and testing of elements of disaster-recovery working groups.
plans and the Critical Incident Procedure process;
—— Group and business unit-level compliance oversight and testing
in respect of adherence with in-force regulations;

Prudential plc
Non-financial risks continued During 2020, work to operationalise the revised organisational
structure and governance model for cyber security management
Information security risk and data privacy. Information security has continued. This change has resulted in a centralised Group-wide
and data privacy risks remain significant considerations for Information Security and Privacy function, leveraging skills, tools and
Prudential. This includes the risk of malicious attack on its systems, resources across the business under a ‘centre of excellence’ model.
network disruption and risks relating to data security, integrity, This global function is led by the Group Chief Information Security
privacy and misuse. The cyber security threat and criminal capability Officer and falls within the scope of the responsibilities of the Group
in this area continues to evolve globally in sophistication and Chief Digital Officer, working closely with the Group Risk and
potential significance with an increased level of understanding Compliance Function and Group CRCO to ensure appropriate
of complex financial transactions which increases the risks to the second line oversight. Cyber risk management is also conducted
financial services industry. The systemic risk of sophisticated but locally within business units with input from business information
untargeted attacks remains elevated, particularly during times of security officers and with oversight from local risk committees.
heightened geopolitical tensions and during the current disruption The Prudential plc Board is briefed at least twice annually on cyber
caused by the Covid-19 pandemic. The scale of the Group’s IT security by the Group CISO and executive training is provided to
infrastructure and network (and the services required to monitor and ensure that members understand the latest regulatory expectations
manage it), stakeholder expectations and high-profile cyber security and the threats facing the Group and that they have the means to
and data misuse incidents across industries mean that these risks are enable appropriate oversight in this area.
considered material at the level of the Group.
An updated Group-wide information security policy has been
Prudential and the insurance industry are making increasing use introduced that aligns to over 20 international standards such as
of emerging technological tools and digital services, or forming ISO 27001/2, MAS, and NIST Cyber Security Framework to ensure
partnerships with third parties that provide these capabilities. While full coverage and adoption of best practices. Local policies are also
this provides new opportunities, opening up markets, improving aligned to relevant local regulation or law. Our Group-wide privacy
insights and increasing scalability, it also comes with additional risks policy was developed in collaboration with industry experts to
which are managed within the Group’s existing governance and risk support a pragmatic approach to the evolving regulatory
management processes, including additional operational risks and environment globally and ensure compliance with all applicable
increased risks around data security and misuse. Automated digital laws and regulations. This approach ensures that all our stakeholders
distribution channels increase the criticality of system and process have confidence in our approach to information security and
resilience in order to deliver uninterrupted service to customers. risk management.
Developments in data protection requirements, such as the These developments have allowed the Group to progress on its
California Consumer Protection Act which came into force on cyber security strategy, which for 2020 has four key objectives:
1 January 2020, continue to evolve worldwide. This increases
financial and reputational implications for Prudential in the event —— Automation of key processes to provide near real-time
of a breach of its (or third-party suppliers’) IT systems. As well as information on cyber security risks, allowing for increased
protecting data, stakeholders expect companies and organisations response times scalability of defences to threat vectors across all
to use personal information transparently and appropriately. security disciplines. This also enables improved, and more rapid,
New and currently unforeseeable regulatory issues may also arise decision-making;
from the increased use of emerging technology, data and digital —— Using technology for the rapid enablement of the Group’s
services. This includes the international transfer of data which, as a businesses, which supports the Group Digital Transformation
global organisation, increases regulatory risks for Prudential. Given strategy while meeting the security requirements and
this, both information security and data privacy are key risks for the expectations;
Group. As well as having preventative risk management in place, it is —— Optimisations for efficiency in cyber security and data privacy
fundamental that the Group has robust critical recovery systems in management. This includes the delivery of centralised services
place in the event of a successful attack on its infrastructure, a breach across the Group in areas such as vulnerability management; and
of its information security or a failure of its systems in order to retain —— Continuous identification and implementation of improvements
its customer relationships and trusted reputation. to the people, processes or technology deployed on cyber
security and privacy management.
62 Prudential plc
Group overview
Non-financial risks continued Financial crime risk. As with all financial services firms, Prudential
is exposed to risks relating to money laundering (the risk that the
Model, user developed application (UDA) and robotics process products or services of the Group are used by customers or other
automation (RPA) risk. There is a risk of adverse consequences third parties to transfer or conceal the proceeds of crime); fraud
arising from erroneous or misinterpreted tools used in core business (the risk that fraudulent claims or transactions, or procurement
Strategic report
activities, decision making and reporting. The Group utilises various of services, are made against or through the business); sanctions
tools to perform a range of operational functions including the compliance (the risk that the Group undertakes business with
calculation of regulatory or internal capital requirements, the individuals and entities on the lists of the main sanctions regimes);
valuation of assets and liabilities, determining hedging requirements, and bribery and corruption (the risk that employees or associated
and in acquiring new business using artificial intelligence and digital persons seek to influence the behaviour of others to obtain an unfair
applications. Many of these tools are an integral part of the advantage or receive benefits from others for the same purpose).
information and decision-making framework of Prudential and errors
or limitations in these tools, or inappropriate usage, may lead to Prudential operates in some high-risk countries where, for example,
Governance
regulatory breaches, inappropriate decision-making, financial loss, the acceptance of cash premiums from customers may be common
or reputational damage. practice, large-scale agency networks may be in operation where
sales are incentivised by commission and fees, where there is a
The Group has no appetite for model, UDA and RPA risk arising higher concentration of exposure to politically-exposed persons,
as a result of failing to develop, implement and monitor appropriate or which otherwise have higher geopolitical risk exposure.
risk mitigation measures.
The Group-wide policies we have in place on anti-money laundering,
Prudential’s model, UDA and RPA risk is managed and mitigated fraud, sanctions and anti-bribery and corruption reflect the values,

using the following: behaviours and standards that are expected across the business.
Screening and transaction monitoring systems are in place and
—— The Group’s Model, UDA and RPA Risk Policy and relevant a series of improvements and upgrades are being implemented,
Guidelines; while a programme of compliance control monitoring reviews
—— Annual risk assessment of all tools used for core business is being undertaken. Risk assessments are performed annually
activities, decision making and reporting; at higher risk locations. Due diligence reviews and assessments
—— Maintenance of appropriate documentation for tools used; against Prudential’s financial crime policies are performed as part
—— Implementation of controls to ensure tools are accurate and of the Group’s business acquisition process. The Group continues
appropriately used; to undertake strategic activity to monitor and evaluate the evolving
—— Tools are subject to rigorous and independent model validation; fraud risk landscape, mitigate the likelihood of fraud occurring
and
and increase the rate of detection.
—— Regular reporting to the Risk-function to support the
measurement and management of the risk. The Group has in place a mature confidential reporting system
through which staff and other stakeholders can report concerns
relating to potential misconduct. The process and results of this
are overseen by the Group Audit Committee.
Insurance risks the risk and where it judges it to be more value-creating to do so

(Audited) rather than transferring the risk, and only to the extent that these
risks remains part of a balanced portfolio of sources of income for

Insurance risk makes up a significant proportion of Prudential’s shareholders and is compatible with a robust solvency position.
overall risk exposure. The profitability of its businesses depends
on a mix of factors, including levels of, and trends in, mortality The impact of Covid-19 to economic activity and employment levels
(policyholders dying), morbidity (policyholders becoming ill) across the Group’s markets has the potential to elevate the incidence
and policyholder behaviour (variability in how customers interact of claims, lapses, or surrenders of policies, and some policyholders
with their policies, including utilisation of withdrawals, take-up may choose to defer or stop paying insurance premiums or reduce
of options and guarantees and persistency, ie lapsing of policies), deposits into retirement plans. In particular extended restrictions
and increases in the costs of claims, including the level of medical on movement could affect product persistency in the Group’s Asia
expenses increases over and above price inflation (claim inflation). business. The pandemic may also result in elevated claims and policy
lapses or surrenders in a less direct way, and with some delay in time
The principal drivers of the Group’s insurance risk vary across its before being felt by the Group, due to factors such as policyholders
business units. Across Asia, where a significant volume of health and deferring medical treatment during the pandemic, or policyholders
protection business is written, the most significant insurance risks are lapsing or surrendering their policies on the expiry of grace periods
persistency risk, morbidity risk and medical inflation risk. In Jackson, for premium payments provided by the Group’s businesses. While
policyholder behaviour risk is particularly material, especially in the these impacts to the business have not been material to date, they
take up of options and guarantees on variable annuity business which are being closely monitored by the Group’s businesses with targeted
impacts profitability and is influenced by market performance and
management actions being implemented where necessary,

the value of policy guarantees. which includes additional Incurred But Not Reported (IBNR) claims
reserves in some markets where deferrals in non-acute medical
The Group has appetite for retaining insurance risks in the areas treatments due to movement restrictions have been observed.
where it believes it has expertise and operational controls to manage

Prudential plc
Insurance risks continued retaining the right to reprice our products each year and by having
(Audited) suitable overall claims limits within our policies, either limits per type
of claim or in total across a policy, annually and/or over the policy
The Group’s persistency assumptions reflect similarly a combination lifetime. Prudential’s morbidity risk is mitigated by appropriate
of recent past experience for each relevant line of business and underwriting when policies are issued and claims are received.
expert judgement, especially where a lack of relevant and credible Our morbidity assumptions reflect our recent experience and
experience data exists. Any expected change in future persistency expectation of future trends for each relevant line of business.
is also reflected in the assumptions. Persistency risk is managed by
appropriate training and sales processes (including active customer Prudential’s insurance risks are managed and mitigated using
engagement and service quality) and managed locally post-sale the following:
through regular experience monitoring and the identification of
common characteristics of business with high lapse rates. Where —— The Group’s insurance, product and underwriting risk policies;
appropriate, allowance is made for the relationship (either assumed —— The risk appetite statements, limits and triggers;
or observed historically) between persistency and investment returns —— Using persistency, morbidity and longevity assumptions that
and any additional risk is accounted for. Modelling this dynamic reflect recent experience and expectation of future trends,
policyholder behaviour is particularly important when assessing and industry data and expert judgement where appropriate;
the likely take-up rate of options embedded within certain products. —— Using reinsurance to mitigate mortality and morbidity risks;
The effect of persistency on the Group’s financial results can vary —— Ensuring appropriate medical underwriting when policies are
but depends mostly on product design and market conditions. issued and appropriate claims management practices when
claims are received in order to mitigate morbidity risk;
In Asia, Prudential writes significant volumes of health and protection —— Maintaining the quality of sales processes, training and using
business and so a key assumption is the rate of medical inflation, initiatives to increase customer retention in order to mitigate
which is often in excess of general price inflation. There is a risk that persistency risk;
the expenses of medical treatment increase more than expected, —— Using product repricing and other claims management initiatives
so the medical claim cost passed on to Prudential is higher than in order to mitigate medical expense inflation risk; and
anticipated. Medical expense inflation risk is best mitigated by —— Regular deep dive assessments.
Conduct risk Management of Prudential’s conduct risk is key to the Group’s

Prudential’s conduct of business, especially the design and strategy. Prudential’s conduct risks are managed and mitigated using
distribution of its products, is crucial in ensuring that the Group’s the following:
commitment to meeting customers’ needs and expectations are met.
The Group’s conduct risk framework, owned by the Group Chief —— The Group’s code of business conduct and conduct standards,
Executive, was further developed in 2020 and reflects management’s product and underwriting risk policies and other related policies;
focus on customer outcomes. —— Ensuring the quality of sales and marketing material via robust
review and sign off procedures;
Factors that may increase conduct risks can be found throughout —— Ensuring sales practices meet commitments to customers and
the product life cycle, from the complexity of the Group’s products, regulators via the use of well-designed monitoring programmes
to its diverse distribution channels, including virtual face-to-face relevant to the type of business (insurance or asset management),
sales and sales via online digital platforms. In alignment with the distribution channel (agency, bancassurance, or digital) and
Group’s purpose of helping people get the most out of life, Prudential ecosystem;
strives towards making health and protection coverage affordable —— Ensuring sales processes are designed to meet commitments to
and accessible to all. Through the Pulse by Prudential app, there customers and regulators and that they are operating effectively
is increased focused on making insurance more inclusive to via robust assurance programmes both pre and post
underserved segments of society, through bite-size low cost digital implementation;
products and services. Through this transition, Prudential must —— Maintaining the quality of sales processes and training, and using
continue to ensure the quality of its ongoing servicing of all its other initiatives such as special requirements for vulnerable
customers. Prudential mitigates conduct risk with robust controls, customers, to improve customer outcomes;
which are identified and assessed through the Group’s conduct —— Proper claims management and complaint handling practices;
risk assessment framework, regularly tested within its monitoring —— Regular deep dive assessments on, and monitoring of, conduct
programmes, and overseen within reporting to its Boards risks; and
and Committees. —— Conduct Risk Assessments.
64 Prudential plc
Group overview
Risks related to regulatory and legal compliance
These include risks associated with prospective regulatory and legal changes and compliance with existing regulations and laws –
including their retrospective application – with which the Group must comply with in the conduct of its business.
Prudential operates under the ever-evolving requirements set out Global regulatory developments and systemic risk regulation.
by diverse regulatory, legal and tax regimes which may impact Efforts to curb systemic risk and promote financial stability are
Prudential’s business or the way in which it is conducted. This covers also under way. At the international level, the Financial Stability
Strategic report
a broad range of risks including changes in government policy and Board (FSB) continues to develop recommendations for the asset
legislation, capital control measures, and new regulations at either management and insurance sectors, including ongoing assessment
national or international level. In addition to the risks arising from of systemic risk measures. The International Association of Insurance
regulatory change, the breadth of local and Group-wide regulatory Supervisors (IAIS) has continued its focus on the following
arrangements presents the risk that regulatory requirements are key developments.
not fully met, resulting in specific regulator interventions or actions
including retrospective interpretation of standards by regulators In November 2019 the IAIS adopted the Common Framework
which may result in regulatory censure or significant additional costs (ComFrame) which establishes supervisory standards and guidance
Governance
to the business. Furthermore, as the industry’s use of emerging focusing on the effective group-wide supervision of Internationally
technological tools and digital services increases, this is likely to lead Active Insurance Groups (IAIGs). Prudential was included in the
to new and unforeseen regulatory issues and the Group is monitoring first register of IAIGs released by the IAIS on 1 July 2020 and was
the regulatory developments and standards emerging around the designated an IAIG by the Hong Kong IA following an assessment
governance and ethical use of technology and data. against the established criteria in ComFrame.
In certain jurisdictions in which Prudential operates there are also The IAIS has also been developing the ICS (Insurance Capital
a number of ongoing policy initiatives and regulatory developments Standard) as part of ComFrame. The implementation of ICS will

that are having, and will continue to have, an impact on the way be conducted in two phases: a five-year monitoring phase followed
Prudential is supervised. Decisions taken by regulators, including by an implementation phase. The Aggregation Method is one of the
those related to solvency requirements, corporate or governance alternatives being considered to the default approach undertaken for
structures, capital allocation, financial reporting and risk the ICS during the monitoring period and the related proposals are
management may have an impact on our business. being led by the National Association of Insurance Commissioners
(NAIC). Alongside the current ICS developments, the NAIC is also
The focus of some governments toward more protectionist or developing its Group Capital Calculation (GCC) for the supervision of
restrictive economic and trade policies could impact on the degree insurance groups in the US. The GCC is intended to be a risk-based
and nature of regulatory changes and Prudential’s competitive capital (RBC) aggregation methodology. In developing the GCC,
position in some geographic markets. This could take effect, for the NAIC will also consider Group capital developments by the
example, through increased friction in cross-border trade, capital US Federal Reserve Board, which will inform the US regulatory
controls or measures favouring local enterprises such as changes association in its construction of a US group capital calculation.
to the maximum level of non-domestic ownership by foreign
companies. These developments continue to be monitored by the In November 2019 the FSB endorsed a new Holistic Framework (HF),
Group at a national and global level and these considerations form intended for the assessment and mitigation of systemic risk in the
part of the Group’s ongoing engagement with government policy insurance sector, for implementation by the IAIS in 2020 and has
teams and regulators. suspended G-SII designations until completion of a review to be
undertaken in 2022. Many of the previous G-SII measures have
Further information on specific areas of regulatory and supervisory already been adopted into the Insurance Core Principles (ICPs)
requirements and changes are included below. and ComFrame. As an IAIG, Prudential is expected to be subject to

these measures. The HF also includes a monitoring element for the
Group-wide supervision. From 21 October 2019, Prudential’s identification of a build-up of systemic risk and to enable supervisors
Group-wide supervisor changed to the Hong Kong IA. As a result, to take action where appropriate. As a result of the Covid-19
the Group currently applies the local capital summation method pandemic, this monitoring requirement was replaced with a
(LCSM) to determine Group regulatory capital requirements (both Covid-19-focused exercise for 2020, with annual monitoring
minimum and prescribed levels). The primary legislation was enacted expected to recommence in 2021. In November 2020 the IAIS
in July 2020 and will come into operation on 29 March 2021. launched a public consultation on phase 1 of a proposed liquidity
The relevant subsidiary legislation, including the Insurance (Group metric to be used as an ancillary indicator in the monitoring of the
Capital) Rules, was tabled before the Legislative Council on 6 January build-up of systemic risk. This followed a more general consultation
2021 and will also come into operation on 29 March 2021. This will on liquidity metrics earlier in 2020. Consultations on a phase 2
be supported by further guidance material to be released by the liquidity metric, as well as on macroeconomic elements of the HF,
Hong Kong IA. Prior to the GWS Framework becoming effective for are expected to follow. The FSB published its 2020 Resolution Report
the Group, which is expected in the second quarter of 2021 upon in November 2020, highlighting intra-group connectedness and
designation by the Hong Kong IA, Prudential remains subject to the funding in resolution as key areas of attention for its work on
Regulatory Letter signed with the Hong Kong IA. The letter outlines resolution planning. Resolution regimes will continue to be a
the interim supervision arrangements from October 2019 when it near-term focus in the FSB’s financial stability work, potentially
became the group-wide supervisor of the Group. being a key tool in informing decisions around the reformed G-SII
designation in 2022.

Prudential plc
Risks related to regulatory and legal compliance continued
In the US, various initiatives are under way to introduce fiduciary Inter-bank offered rate reforms. In July 2014, the Financial Stability
obligations for distributors of investment products, which may Board (FSB) announced widespread reforms to address the integrity
reshape the distribution of retirement products. Jackson has and reliability of IBORs. The discontinuation of IBORs in their current
introduced fee-based variable annuity products in response to form and their replacement with alternative risk-free reference rates
the potential introduction of such rules, and we anticipate that the such as the Sterling Overnight Index Average (SONIA) benchmark
business’s strong relationships with distributors, history of product in the UK and the Secured Overnight Financing Rate (SOFR) in the
innovation and efficient operations should further mitigate US could, among other things, impact the Group through an adverse
any impacts. effect on the value of Prudential’s assets and liabilities which are
linked to, or which reference IBORs, a reduction in market liquidity
In Asia, regulatory regimes are developing at different speeds, during any period of transition and increased legal and conduct risks
driven by a combination of global factors and local considerations. to the Group arising from changes required to documentation and
New local capital rules and requirements could be introduced in its related obligations to its stakeholders.
these and other regulatory regimes that challenge legal or ownership
structures, or current sales practices, or could be applied to sales Risk management and mitigation of regulatory risk at Prudential
made prior to their introduction retrospectively, which have a includes the following:
negative impact on Prudential’s business and reported results.
—— Risk assessment of the Business Plan which includes
IFRS 17. In May 2017, the International Accounting Standards Board consideration of current strategies;
(IASB) published its replacement standard on insurance accounting —— Close monitoring and assessment of our business environment
IFRS 17, ‘Insurance Contracts’. Some targeted amendments to this and strategic risks;
standard, including to the effective date, were issued in June 2020. —— The consideration of risk themes in strategic decisions;
IFRS 17, ‘Insurance Contracts’, as amended, will introduce —— Ongoing engagement with national regulators, government
fundamental changes to the IFRS-based reporting of insurance policy teams and international standard setters; and
entities that prepare accounts according to IFRS from 2023. IFRS 17 —— Compliance oversight to ensure adherence with in-force
is expected to, among other things, include altering the timing of regulations and management of new regulatory developments.
IFRS profit recognition, and the implementation of the standard
is likely to require changes to the Group’s IT, actuarial and finance
systems. The Group is reviewing the complex requirements of this
standard and considering its potential impact.
The Group’s ESG-related risks

These include environmental risks associated with climate change (including physical and transition risks), social risks arising
from diverse stakeholder commitments and expectations and governance-related risks.
The purpose of a business and the way in which it operates in range of stakeholders. Prudential seeks to ESG-related risks to
achieving its objectives, including in relation to ESG-related matters, its strategy and their negative implications to stakeholder through
are an increasingly material consideration for key stakeholders a transparent and consistent implementation of this strategy in its
in achieving their own objectives and aims. ESG-related risks key markets and across operational, underwriting and investment
may directly or indirectly impact Prudential’s business and the activities. The strategy is enabled by strong internal governance,
achievement of its strategy and consequently those of its key sound business practices and a responsible investment approach,
stakeholders, which range from customers, institutional investors, both as an asset owner and asset manager.
employees and suppliers, to policymakers, regulators, industry
organisations and local communities, all of whom have expectations, (a) Environmental risks
concerns and aims which may differ. Material risks associated with Prudential’s strategic ESG focus on stewarding the human impacts
key ESG themes may adversely impact the reputation and brand of climate change recognises that environmental concerns, notably
of the Group, its ability to attract and retain customers and staff, those associated with climate change, may pose significant risks
its ability to deliver on its long-term strategy and therefore the results to Prudential, its customers and other stakeholders. Prudential’s
of its operations and long-term financial success. investment horizons are long term and it is therefore exposed to the
potential long-term impact of climate change risks, which include the
The Prudential ESG Strategic Framework, developed in 2020, financial and non-financial impact of transition, physical and litigation
focuses on giving people greater access to good health and financial risks. A failure to understand, manage and provide greater
security, responsible stewardship in managing the human impact of transparency of its exposure to these climate-related risks may have
climate change and building human and social capital with its broad increasing adverse implications for Prudential and its stakeholders.
66 Prudential plc
Group overview
The Group’s ESG-related risks continued
The global transition to a lower carbon economy may have an playing a greater role in preventing and postponing illness in order to
adverse impact on investment valuations as the financial assets of protect its customers as well as making health and financial security
carbon-intensive companies re-price, and this could result in some accessible through an increased focused on digital innovation,
asset sectors facing significantly higher costs and a reduction in technologies and distribution methods for a broadening range of
demand for their products and services. The speed of this transition, products and services. As a result, Prudential has access to customer
Strategic report
and the extent to which it is orderly and managed, will be influenced personal data, including data related to personal health, and an
by factors such as public policy, technology and changes in market or increasing ability to analyse and interpret this data through the
investor sentiment. This climate-related transition risk may adversely use of complex tools, machine learning and artificial intelligence
impact the valuation of investments held by the Group, and the technologies. The Group therefore actively manages the regulatory,
potential broader economic impact may affect customer demand ethical and reputational risks associated with actual or perceived
for the Group’s products. Prudential’s stakeholders increasingly customer data misuse or security breaches. These risks are explained
expect and/or rely on the Group to support an orderly transition above. The increasing digitalisation of products, services and
based on an understanding of relevant country and company-level processes may also result in new and unforeseen regulatory
Governance
plans and which takes into consideration the impact on the requirements and stakeholder expectations which Prudential
economies, businesses and customers in the markets in which it monitors for, as well as ensuring support for its customers through
operates and invests. Understanding and appropriately reacting this transformation.
to transition risk requires sufficient and reliable data on carbon
exposure and transition plans for the assets in which the Group (c) Governance risks
invests. The direct physical impacts of climate change, driven by both Maintaining high standards of corporate governance is crucial for
specific short-term climate-related events such as natural disasters the Group and its customers, staff and employees, reducing the
risk of poor decision-making and a lack of oversight of its key risks.

and longer-term changes to climate and the natural environment,
will increasingly influence the longevity, mortality and morbidity risk Poor governance may arise where key governance committees have
assessments for the Group’s life insurance product underwriting and insufficient independence, a lack of diversity, skills or experience in
offerings and their associated claims profiles. Climate-driven events their members, or unclear (or insufficient) oversight responsibilities
in countries in which Prudential or its key third parties operate could and mandates. Inadequate oversight over remuneration increases
impact the Group’s operational resilience and its customers. More the risk of poor senior management behaviours. Prudential operates
information about the activities the Group is undertaking to increase across multiple jurisdictions and has a group and subsidiary
its understanding and risk management of these climate-related governance structure which may add further complexity to these
risks can be found in the Prudential plc ESG Report 2020, see considerations. Participation in joint ventures or partnerships where
pages 87 to 92. Prudential does not have direct overall control and the use of
third-party suppliers increases the potential for reputational risks
(b) Social risks arising from poor governance.
Social risks that could impact Prudential may arise from a failure
to consider the rights, diversity, wellbeing, and interests of people Risk management and mitigation of ESG risks at Prudential include
and communities in which the Group or its third parties operate. the following:
These risks are increased as Prudential operates in multiple
jurisdictions with distinct local cultures and considerations. As an —— The Group’s ESG Strategic Framework focused on strategic
employer, the Group aims to attract, retain and develop highly-skilled differentiators and enablers;
staff, which relies on having in place responsible working practices —— The Group Code of Business Conduct and Group Governance
and recognising the benefits of diversity and promoting a culture Manual including ESG linked policies;
of inclusion. The Group’s reputation extends to its supply chains, —— ESG risk identification including through emerging risk processes;

which may be exposed to factors such as poor labour standards and —— Deep dives into ESG themes including climate-related risks; and
abuses of human rights by third parties. Emerging population risks —— Integrating ESG considerations into investment processes
associated with public health trends (such as an increase in obesity)
Further information on the Group’s ESG governance is included
and demographic changes (such as population urbanisation and
in section 4 above, and further detail on the Group’s ESG Strategic
ageing) may affect customer lifestyles and therefore may impact
Framework and the management of material risks associated with
claims against the Group’s insurance product offerings. As a provider
ESG themes are included in the ESG Report 2020, see pages 70
of insurance and investment services the Group is committed to
to 117.
Notes
1 Excluding assets held to cover linked liabilities and those of the consolidated investment funds.
2 Based on middle rating from Standard & Poor’s, Moody’s and Fitch. If unavailable, NAIC and other external ratings and then internal ratings have been used.
3 Source of segmentation: Bloomberg Sector, Bloomberg Group and Merrill Lynch. Anything that cannot be identified from the three sources noted is classified as other.
4 From half year 2020, to align more closely with the internal risk management analysis, the Group altered the compilation of its credit ratings analysis to use the middle of the Standard
& Poor’s, Moody’s and Fitch ratings, where available. Where ratings are not available from these rating agencies, NAIC ratings (for the US), local external rating agencies’ ratings and
lastly internal ratings have been used. Securities with none of the ratings listed above are classified as unrated and included under the ‘below BBB- and unrated’ category. The total
securities (excluding sovereign debt) that were unrated at 31 December 2020 were $780 million (31 December 2019: $648 million). Previously, Standard & Poor’s ratings were used
where available and if not, Moody’s and then Fitch were used as alternatives.
5 Excluding assets in consolidated funds financed largely by external third-party (non-recourse) borrowings, for which the Group’s exposure is limited to the investment held
by Jackson. Including these assets, the US corporate debt portfolio is 93 per cent investment grade.

Prudential plc
Viability statement prepared in accordance with Provision 31 Period of viability assessment

of the UK Corporate Governance Code The Directors have assessed the viability of the Group for a period
The Group’s longer-term prospects longer than the 12 months required by the going concern statement.
Prudential aims to make healthcare affordable and accessible, protect
people’s wealth and empower customers to save for their goals, which The Directors performed the assessment by reference to the three-
can often be over a time frame of many years. As such, Prudential year plan period to 31 December 2023. Three years is considered an
considers that its purpose aligns closely with important societal needs, appropriate period as it represents the period covered by the detailed
including making health and financial security more accessible, business plan that is prepared annually on a rolling three-year basis.
improving financial inclusion and education and transitioning to a low In approving the business plan, the Directors reviewed the Group’s
carbon economy. Prudential is focused on addressing these increasing projected performance with regards to profitability, cash generation
needs, reflecting population demographics in our chosen markets. and capital position, together with the parent company’s liquidity
The drivers for this structural growth, such as the low penetration rates over this three-year period. This projection involves setting a number
across the Asian region, are discussed on pages 19 to 25 alongside the of economic and other assumptions that are inherently volatile over
activities we undertook during 2020 to expand our Asian and African a much longer reporting period. Such assumptions include foreign
footprint and enhance our capabilities, particularly through increased exchange rates, interest rates, economic growth rates, the impact
digitalisation. To enable the Group to focus exclusively on its high- on the business environment arising from the impact of Covid-19,
growth Asia and Africa businesses, the Group intends to pursue the geopolitical events and continued level of changes in regulation and
demerger of its US business allowing Jackson to focus on the distinct supervision. The Directors are satisfied that this period is sufficient
opportunities within the US retirement market. Further information to enable a reasonable assessment of viability to be made.
on the progress of this demerger is set out on pages 06 to 07.
In undertaking these activities, we aim to both meet the evolving The intended demerger of Jackson from the Group is expected
needs of our customers and provide sustainable growth for our to occur within the period covered by the viability statement.
shareholders, which will ultimately lead to the viability of our business The Directors have therefore considered the ability of the Group to
over the longer term. continue in its current form (ie the scenario in which the demerger
does not proceed) for the three-year period ending 31 December 2023
In 2020, the Covid-19 pandemic has impacted the global economy and as well as the viability of the Group in the more likely scenario that the
the related restrictions have applied to the Group’s individual markets demerger proceeds.
to varying degrees and at different periods. Our focus during this time
has been on supporting our communities, customers and staff through Assessment of principal risks over the period
the challenges created. The business has seen a short-term impact The Group’s business plan implements the Group’s strategic objectives
on sales but we believe the Covid-19 disruptions have also acted to through the business model and activities discussed on pages 14 to 15.
intensify the structural opportunities in Asia and Africa over the longer Matters considered as part of that planning process included the effect
term with a clear and increasing need for the broad-based products of current Covid-19 restrictions on people movement and face-to-face
we deliver. During the pandemic, the Group has continued to business activity and the continued rollout of Pulse by Prudential.
innovate, as demonstrated by the continued rollout of Pulse by Assessment of the risks to achieving the projected performance
Prudential, to ensure we can capture these opportunities post remains an integral part of the planning process. The Group’s approach
Covid-19. The long-term macro-economic impacts of the pandemic to risk management and a summary of the key risks facing the Group
remain uncertain but all of the Group’s activities are underpinned are set out on pages 45 to 69.
by ongoing risk management, implemented via the Group Risk
For the purposes of assessing the Group’s viability, the Directors
Framework and risk appetite limits described on pages 51 to 54.
considered those risks where the impact of possible adverse external
The Group as a whole and each of its life assurance operations are developments could be of such speed and severity to present a shock
subject to extensive regulation and supervision, which are designed to the Group’s financial position. The risks considered, from those
primarily to reinforce the Group’s management of its long-term detailed on pages 55 to 67 are: market risk, credit risk, liquidity risk
solvency, liquidity and viability to ensure that it can continue to meet and regulatory risk. The Directors considered the macroeconomic
obligations to policyholders. Further details on the current capital environment and geopolitical risks in the markets which the
strength of the Group are provided on pages 31 to 32. Group operates.
The Group’s management of wider environmental, social and

governance issues that could pose a risk in the future to the Group
is set out in the Environmental, Social and Governance report on
pages 70 to 117.
This risk and regulatory focus supports the sustainability of our

business over the longer term.
68 Prudential plc
Stress and scenario testing The impact on the business of known areas of regulatory change
Group overview
As noted above, underpinning the projections in the business plan are whose financial implications can be reasonably quantified is also
a number of economic and other assumptions. To evaluate the Group’s considered as part of the plan, for example the introduction of the
resilience to significant deteriorations in market and credit conditions Hong Kong Insurance Authority’s Group-wide Supervision regime and
and other shock events, these risks are grouped together into the implementation of RBC regimes in Hong Kong and other markets.
scenarios which are then applied to the assumptions underlying the As well as known areas of regulatory change, the Group is exposed to
business plans considered. Scenarios considered include those the risk of sudden and unexpected changes in regulatory requirements
reflecting the possible impacts of Covid-19 on new business, including at the Group and local levels. While unexpected changes cannot be
Strategic report
the uncertainty as to the duration of restrictions in individual markets fully anticipated and hence modelled, the risk of regulatory change
and the length of time for sales to recover to previous levels and is mitigated by capital held by the Group and its subsidiaries in excess
different timings of expected regulatory changes. Separately stresses of Group and local regulatory requirements, the Group and its
have been applied to the economic and non-economic assumptions subsidiaries’ ability to generate significant capital annually through
underlying the base case business plan. These stresses assess the operational delivery and the availability of compensating actions
potential impact of up or down interest rate movements combined designed to restore key capital metrics.
with corporate credit spread widening, a rating level downgrade on
part of the credit asset portfolio, falling equity values and insurance Conclusion on viability
Governance
stresses (such as changes in policyholder behaviour, including lapses, Based on this assessment, the Directors have a reasonable
and increased morbidity in Asia). In addition, the adequacy of liquid expectation that the Group will be able to continue in operation
resources of the Group’s parent company across the plan period has and meet its liabilities as they fall due over the three-year plan period
been assessed by considering a stress scenario assuming the closure of to December 2023.
short-term debt markets, as well as additional calls on central liquidity
by the business units. In this liquidity stress scenario, the Group would
have access to sufficient resources to meet the funding requirements

of the business, after taking into account the Group’s undrawn
committed liquidity facilities of $2.6 billion, on top of central cash and
short-term investment balances, which as at 31 December 2020 were
$1.5 billion.
The scenarios tested showed that the Group would be able to maintain
viability over the three-year period under assessment, after taking
account of the actions available to management to mitigate the impacts
on capital and liquidity in such scenarios. In addition, the Group
conducts an annual reverse stress test which gives the Directors an
understanding of the maximum resilience of the Group to extremely
severe adverse scenarios. The projections in the business plan, and
in the scenarios considered, do not assume that the Group accesses
or relies upon the proceeds from any potential equity raise in the
three-year period under assessment. This analysis assists in identifying
management actions that could be implemented to restore the
Group’s capital and liquidity resources from extreme positions.
This analysis also informs the Group’s recovery plan and liquidity
risk management plan.


Prudential plc
ESG report
Purpose and
responsibility
70 Prudential plc
A D

Introduction
Group overview
In 2020 we reviewed our Environment, Social and Governance (ESG) Stewarding the human impacts of climate change: We are a
strategy to evaluate how we use our capabilities to maximise our responsible steward in managing the human impact of climate change.
positive social and environmental impact. We are a signatory to the recommendations of the Financial Stability
Board’s Task Force on Climate-related Financial Disclosures (TCFD),
This strategic review reflected the changes to Prudential set out in this and as a significant asset manager and asset owner in regions forecast
Annual Report: our strategic focus on Asia and Africa, our continued to be severely impacted by global warming, Prudential has a distinctive
Strategic report
evolution into a digitally enabled business, and how the Covid-19 role to play in the transition to a low-carbon economy. We are
pandemic has highlighted the global need for access to healthcare. decarbonising our investment portfolio and actively engaging with
This review was informed by work done in parallel to refresh the policymakers and investee businesses to encourage sustainable
Company’s purpose which is to help people get the most out of life. development. The economies of East Asia, where our businesses are
We deliver on that purpose by making healthcare affordable and concentrated, have a greater reliance on manufacturing and primary
accessible, helping people accumulate wealth through growing their industries than more developed markets, where services account for a
assets, and empowering our customers to save for their goals. In this higher proportion of GDP. This means that the energy transition across
Governance
way, we ensure alignment of our creation of shareholder returns with the region is starting from a higher carbon intensity level and is likely
our creation of societal value given the nature of our business and the to proceed at a slower pace than for more advanced economies.
markets in which we operate. Recognising this, as we support the move to a lower-carbon economy
in these emerging markets, we strive to ensure that the transition is an
Our new ESG strategy distils the many ways in which we help our inclusive one for all of society – one that supports sustainable growth
stakeholders into three core themes, all of which are closely linked and economic health within our local markets and communities.
to our strategy and business model: We also recognise the importance of reducing the direct impact of
our own operations on the environment and we continue to increase

Making health and financial security accessible: Working at scale, our level of ambition in relation to our own emissions footprint.
we give people greater access to good health and financial security. This year we have set new and stretching targets for our Scope 1
Covid-19, the rise in non-communicable conditions such as heart and Scope 2 greenhouse gas emissions, with the aim of becoming net
disease and diabetes, and ageing populations threaten to widen carbon neutral across these two scopes by the end of 2030. We are
further the existing health, protection and savings gaps. Behind these in the process of assessing similar suitable targets in respect of the
megatrends lie countless individual stories of people who are anxious carbon emissions from our investments. We also seek to apply ESG
and struggling because of a lack of access to health and finance. considerations more broadly in our investment process and our
We are committed to enabling as many individuals as possible in fiduciary and stewardship duties, to ensure that our investment
the markets in which we operate to make the most of their lives. decisions are aligned with our values and support our primary focus
In particular, we are increasing our focus on underserved communities on healthy lives.
and moving beyond our traditional role of financial protection to
provide services that also prevent and postpone ill-health. Pulse, our Building social capital: We are committed to building both our own
health and wealth super-app now in live in 15 markets, is a key tool for human capital and our social capital with our broader stakeholders.
us in meeting that ambition. Essential, too, are the tireless efforts of our We seek to empower people and unlock their potential. We do this
colleagues, agents and other partners in developing product offerings by promoting diversity in representation and thought, and fostering
that meet the needs of our diverse customer base. Our community a culture of inclusion and a sense of belonging within our organisation.
investment programmes, focusing on education and financial literacy, Just as Prudential depends on the trust of our people, it also needs
also have an important role to play in building understanding of the the trust of the external world. As we develop our digital capabilities,
benefits of financial products, and in building financial capabilities we need also to prioritise digital responsibility throughout our
to ensure people can make informed financial decisions. organisation. We must always keep in mind that our purpose to help

people get the most out of life is the reason why we are investing
purposefully in artificial intelligence, big data and other technologies,
and that focus on the needs and interests of our users has to guide us
in how we interact with them and handle their personal data as our
capabilities develop.
This report covers the Group’s ESG strategy and activities. It also
presents the non-financial information statement and Section 172
Statement required by the UK Companies Act.

Prudential plc
ESG report / continued
Our ESG Strategic Framework

Following our ESG review, we have developed a new ESG Strategic The key features of our ESG framework are its three strategic pillars
Framework (the ‘framework’). This framework is fully aligned to which have clear alignment with our business strategy. Within each
our business strategy and our purpose of helping people to get of these, specific differentiating focus areas have been identified
the most out of life by making healthcare accessible and affordable, where it is believed there is an opportunity for Prudential to make
helping people accumulate wealth through growing their assets, a meaningful impact, and as such greater focus will be placed on
and empowering our customers to save for their goals. these differentiators.
Strategic Pillars
Making health
and financial
security accessible
Corporate purpose
Building
social capital Helping people
Read more on page 93 get the most
out of life
Stewarding the
human impacts
of climate change
Strategic Enablers
Good governance Community

and responsible engagement
business practices Responsible and investment
investment Read more on page 108
72 Prudential plc
The pillars and differentiators are: The following strategic enablers support these pillars:
Group overview
1 Making health and financial security accessible —— Good governance and responsible
—— Digital health innovation business practices
—— Inclusive offerings
—— Digitally enabled financial literacy
Strategic report
2 Stewarding the human impacts of climate change —— Responsible investment
—— Decarbonising our investment portfolio
—— Supporting an inclusive transition
Governance
3 Building social capital —— Community engagement and investment
—— Digital responsibility
—— Diversity, inclusion and belonging
Our 2020 ESG report is structured in line with this framework

and provides an update on our progress in the year across

each of the pillars and enablers.
The United Nations Sustainable Development Goals (SDGs) were adopted by all UN Member States in 2015 as a universal call to action to end
poverty, protect the planet and ensure all people enjoy peace and prosperity by 2030. They are universally recognised and have been globally
adopted by corporates as a means of articulating and measuring impact. They therefore provide a transparent and standardised mechanism of
illustrating our intended outcomes. The focus areas of the strategic framework have been aligned to the SDGs. The alignment process focused
on those SDGs where the Group can seek, over time, to make a meaningful impact because of the close relationship with our purpose and
business strategy.
We have aligned with the SDGs at a target-level for the following goals and intended outcomes
SDG SDG target Intended outcome

1 No poverty 1.4, 1.5 Increased access to quality healthcare services, and financial services for the poor
and the underserved, including microfinance.
Improved resilience of the poor and reduction in their exposure and vulnerability to
climate‑related extreme events and other economic, social and environmental shocks
and disasters.
3 Good health 3.8, 3.d Strengthened capacity of our local (and developing) markets, for early warning,
and wellbeing risk reduction and management of national and global health risks.
Increased access to quality healthcare and financial risk protection for all across Asia.
8 Decent work 8.3 Promoted development-oriented policies that support productive activities, decent
and economic job creation, entrepreneurship, creativity and innovation, including through access
growth to financial services.
13 Climate action 13.1, 13.3 Strengthened societal adaptive capacity for early warning, and risk reduction
for climate‑induced health impacts.
Improved education, awareness and human capacity on climate change mitigation,

adaptation, impact reduction and early warning.

Prudential plc
Development of the ESG Strategic Framework Oversight of ESG

In line with good practice, the framework was developed following ESG is overseen by the Board, which is responsible for determining
a rigorous analysis process, which identified key ESG stakeholder strategy and prioritisation of key focus areas. In order to provide
expectations from investors, rating agencies, government and greater senior executive involvement and holistic oversight of ESG
regulators, stock exchanges, NGOs, industry and independent matters material to the Group, in 2020 a Group ESG Committee was
organisations, media and employees. This approach was taken to established, superseding the previous ESG Executive Committee.
ensure that the framework ascertained the most material issues, The Committee is chaired by the Group Chief Financial Officer and
considered as broad a spectrum of stakeholders as possible, and was Chief Operating Officer, in his role as ESG sponsor. Membership of
tested robustly from their perspectives. The process also considered the Committee includes the Group Chief Risk and Compliance Officer,
upcoming regulation to shape a view of expectations, emerging policy the Group HR Director, and senior representatives from the Group’s
and peer themes to direction of travel, noting that this is a rapidly asset owner and asset management business units, including,
evolving area. This comprehensive internal and external stakeholder from 1 January 2021, the Chief Executives of Eastspring and PACS
engagement informed the materiality assessment for the purposes of (Prudential’s Singapore business). One of the Group ESG Committee’s
our 2020 ESG reporting. The Section 172 Statement below provides responsibilities is to oversee the Group’s progress towards fulfilling
information on stakeholder engagement throughout the year, which our commitment to report against the recommendations of the
was considered within the development of the ESG Strategic Financial Stability Board’s Task Force on Climate-related Financial
Framework where relevant. Disclosures (TCFD).
Through this analysis, the three strategic pillars, plus the differentiators In 2020, the Group ESG Committee reported to the Board through
and enablers, were identified and defined at a high level. These the Group Nomination & Governance Committee. The Board
proposals were discussed with a number of stakeholders across the recognises that the next 12 to 18 months will be critical for the
Group in order to ensure our ESG strategy was fully integrated into embedding of the ESG Strategic Framework within the Group, as well
the business, and to test and validate the proposed framework. This as for the progress of related matters such as the development and
stakeholder group included those responsible for ESG and responsible embedding of the Group’s purpose and values, progressing diversity
investment-related activities within the business units, along with and inclusion (D&I) priorities, and building upon employee
function leads (eg HR, Digital, Risk), business unit CEOs, the Group engagement activities. Therefore, in early 2021 the Board established
Executive Committee, and Board members. a Responsibility & Sustainability Working Group, to be chaired by Alice
Schroeder and comprising four Non-executive Directors, in order to
The Strategic Framework was formally reviewed by the Group ensure an appropriate level of Board engagement in, and oversight of,
ESG Committee and then considered by the Group Nomination & these matters during this critical period.
Governance Committee, which recommended it to the Group Board,
which formally approved it in December 2020. Our Group Governance Manual (GGM) sets out the policies and
procedures by which the Group operates. It establishes standards for
managing possible ESG issues across the Group. The GGM is subject
to a formal content review each year, taking into consideration both
internal and external factors.
As part of the Governance, Risk Management & Internal Control –

Annual Statement of Compliance certification, all businesses across
the Group assess their compliance position against each of the
requirements set out in the Group Code of Business Conduct, Policies
and Delegated Authorities. Any instances of GGM non-compliance
identified by the businesses through their annual attestation are
assessed by the Group policy owners and reported to the Group
Audit Committee.
74 Prudential plc
Our Group-wide policies relating to our ESG Strategic Framework, which are applicable to all entities, include:
Group overview
ESG Our Group-wide policies Owner and date
strategic pillar of last review
Making health and To ensure we treat our customers fairly, management of conduct risks is key. Prudential Group Chief
financial security mitigates conduct risk with robust controls, which are identified and assessed through the Executive
accessible Group’s conduct risk assessment framework, and regularly tested within its monitoring December 2020
programmes. The Group Customer Conduct Risk Policy provides this framework and includes
Strategic report
our Customer Conduct Standards, which set out the core values and standards that the Group
expects all employees and persons acting on behalf of it to observe, and which further support
our ESG strategy. These values and standards include specific requirements regarding
customers. In particular, the Group has committed to:
—— Treat customers fairly;

—— Provide and promote products and services that meet customer needs, are clearly
explained and deliver real value;
Governance
—— Maintain the confidentiality of our customer information;
—— Provide and promote high standards of customer service; and
—— Act fairly and in a timely way to address customer complaints and any errors we find.
Stewarding the Asset management businesses and insurance businesses (as asset owners) have distinct risks, Business unit
human impacts including investing in different markets and asset classes; therefore, each business manages responsible
of climate change ESG-related matters through the pursuit of business-specific responsible investment policies. executives

This is supported by our Group Code of Business Conduct and is underpinned by our
Group‑wide Responsible Investment Standards.
Our Environment Policy outlines our approach to understanding and managing the direct Group Chief Financial
environmental impact of the Group. This covers our measurement, monitoring, review Officer and Chief
and reporting of issues associated with our environmental performance. Operating Officer
July 2020
Building social Our Diversity and Inclusion Policy reflects our aspiration and aims to promote employee Group HR Director
capital diversity and provide equal opportunities to all who apply for and those who perform work July 2020
at every level of our organisation. The policy promotes diversity irrespective of sex, race, age,
ethnic origin, social and cultural background, marital or civil partnership status, pregnancy,
maternity and paternity, any gender reassignment, religion or belief, sexual orientation,
disability, or part-time/fixed-term working arrangements, and seeks to ensure appropriate
diversity of experience, skill sets and professional backgrounds. Further information on the
diversity of our Board, our policy in respect of this, how this is implemented and the associated
results in 2020 can be found in our Governance Statement on pages 120 to 169.
Our Employee Relations Policy outlines the way we engage with our employees and motivate Group HR Director
them to achieve success for the Group: promoting positive relationships with employees, July 2020
representative organisations and trade unions.

Our Performance and Learning Policy sets out the importance of our people and frames how Group HR Director
we invest in their development to deliver against our strategy and the future success of the July 2020
organisation. This includes our Performance Management Framework.
Our Remuneration Policy outlines our effective approach to appropriately rewarding our Group HR Director
employees in a way that aligns incentives to business objectives and performance, and enables December 2020
the recruitment, retention and incentivisation of high-calibre employees in line with our risk
appetite and Group Reward Principles.
Our Talent Policy demonstrates how we attract, select and develop the best people for roles Group HR Director
that will ensure high performance in the short term and future-proof leadership capability July 2020
through building business-relevant longer-term succession and talent pipelines. It sets out
our fair and effective approach to pursuing this.
Our Privacy Policy governs the protection of data and complies with the General Data Group Chief Digital
Protection Regulation. Our Global Information Security Policy supports our global approach Officer
to security and our commitment to protecting the data entrusted to us by customers. July 2020

Prudential plc
ESG Our Group-wide policies Owner and date

strategic enabler of last review
Responsible Asset management businesses and insurance businesses (as asset owners) have distinct risks, Business unit
investment including investing in different markets and asset classes; therefore, each business manages responsible
ESG-related matters through the pursuit of business-specific responsible investment policies. executives
This is supported by our Group Code of Business Conduct and is underpinned by our
Group‑wide Responsible Investment Standards.
Good governance The Group Code of Business Conduct sits at the heart of our Group Governance Manual, Group Chief
and responsible and highlights the ethical standards that the Board expects of itself, our employees, our agents Executive
business practices and others working on behalf of the Group. The Code is supported by a set of Group-wide December 2020
principles and values that define how the Group expects business to be conducted in order
to achieve its strategic objectives.
Our Anti-Bribery and Corruption Policy covers our values for reputation, ethical behaviour Group Chief Risk and
and reliability. As an organisation we are focused on financial practices that align to those values Compliance Officer
and we prohibit corruption or bribery within our working practices. July 2020
Our Anti-Money Laundering and Sanctions Policy outlines how we prohibit money laundering Group Chief Risk and
or terrorist financing in our working practices, setting out how we establish parameters to Compliance Officer
prevent this taking place across the organisation and the commitment we have to comply July 2020
with sanctions, laws and regulations by screening, prohibiting or restricting business activity,
and following up through investigation.
Our Security Policy outlines our commitment to ensuring that security aligns to industry- Group Chief Risk and
recommended practice for managing our regulatory and legal obligations. This includes Compliance Officer
how we manage incidents under the Speak Out programme, our whistleblowing process. July 2020
Our Tax Risk Policy includes our processes to manage tax-related risk, by identifying, Group Chief Financial
measuring, controlling and reporting on issues considered an operational, reputational Officer and Chief
or regulatory risk. Operating Officer
July 2020
Our Political Donations Policy outlines our position that as an organisation we do not donate Group Chief Financial
to political parties. This is defined as covering any political party or candidate or any other Officer and Chief
organisation that attempts to affect support for any political party. It is defined as covering Operating Officer
any payment or gift or contribution, direct or indirect, as defined by the UK’s Political Parties, July 2020
Elections and Referendums Act 2000. The policy covers expenditure on engagement activity
on public policy discussions and applies across the Group.
Our Third-Party Supply Policy covers how we manage and oversee our third-party Group Chief Financial
arrangements, through due diligence/selection criteria, contractual requirements, the ongoing Officer and Chief
monitoring of such relationships, and reporting and escalation. Additionally, the policy Operating Officer
considers the requirements of the UK Modern Slavery Act and the principles of the UN’s July 2020
Universal Declaration of Human Rights.
Our Health and Safety Policy covers our employees, business partners, customers and others Group Chief Financial
that may be affected by our operations. This details our health and safety core principles, Officer and Chief
our commitments and the measuring and reporting on our health and safety performance. Operating Officer
July 2020
Community Our Community Investment Policy covers how we are committed to working with the Group Chief
engagement communities in which we operate as active and supportive members. It also outlines our Financial Officer
and investment strategy for investing in the community and how we make investments and report against them. and Chief Operating
Officer and Group
HR Director
July 2020
76 Prudential plc
Non-financial information statement
Group overview
We recognise that to help our customers get the most out of life, The Group’s Strategic Report, including this ESG report and
we need to take a long-term view on a wide range of issues that affect the Section 172 Statement, includes information required by the
our business and the communities in which we operate. To do this, non‑financial reporting provisions contained in sections 414CA and
we maintain a proactive dialogue with our stakeholders to ensure that 414CB of the Companies Act 2006. These reporting requirements
we are managing these issues sustainably and delivering long-term are met in a number of sections of our Annual Report. The diagram
value. Further information on our engagement with our stakeholders below illustrates where the relevant material is presented.
Strategic report
can be found in our Section 172 Statement below.
Governance
Section 172 Statement: ESG Strategic Enabler:
Our people Good governance
Read more on pages 79 to 80
Business and responsible
model business

ESG Strategic Pillar:
Building
Read more on pages 14 to 15 practices
Principal Read more on page 113
social capital
risks
TE PU
OR Amore
RPRead onRP
OS
CO pages 55 to 67
Employees E
Human
rights
Governance,
Group-wide
policies and
due diligence
Anti-bribery
and anti- Read more on
pages 75 to 76 Social
corruption matters
matters
ESG Strategic Enabler:
Environmental ESG Strategic Pillar:
Good governance matters Making health
and responsible and financial
business practices security
accessible
ESG Strategic Pillar:
Stewarding the ESG Strategic Pillar:
human impacts Building
of climate change social capital


Prudential plc
A D

UK Companies Act, Section 172 Statement
Section 172 of the UK Companies Act requires each Director to act Consideration of stakeholders in key matters
in a way that he or she considers, in good faith, would be most likely addressed by the Board
to promote the success of the Company for the benefit of its members Decision to pursue the separation of Jackson
as a whole. In doing this, Section 172 requires a Director to have and focus on the Asian and African businesses
regard (among other matters) to the needs of employees, suppliers, The Group announced in March 2020 the Board’s decision to pursue
customers and other wider stakeholder interests. During 2020 we the proposed separation of Jackson to enable the Group to focus on
engaged with our various stakeholder groups closely and we took its Asia and Africa businesses. The Group Chief Executive’s report on
account of their concerns in our decision-making. Below we have page 06 sets out the Board’s decision and progress on the separation
outlined how we have engaged with our stakeholders and the of Jackson. In arriving at this strategic decision the Board took into
outcome of that engagement. account the needs of key stakeholders, including investors, colleagues
and customers. The Board believes that the Group, and Jackson after
We ensure that our Board meets its duty under Section 172 of the UK the proposed separation, should benefit from improved alignment
Companies Act in a number of ways. A briefing note is circulated in of management and employees to their businesses, customers and
advance of each Board meeting reminding Directors of their statutory shareholders, and simplified, more efficient, operating and reporting
duties under Section 172 and reiterating who the Group’s key structures. Jackson’s separation will complete Prudential’s
stakeholders are. The annual Board evaluation process takes into transformation from a diversified, global group into a focused business
account how the operation of the Board affects the consideration of exclusively targeting the long-term structural opportunities of Asia and
stakeholder issues and seeks to identify improvements in this area. Africa. Accordingly, the Prudential Board believes that the proposed
We ensure that our Section 172 obligations are taken into account in demerger will lead to an improvement in strategic, operational and
our Board succession planning and training, stakeholder engagement financial execution for both the Group and Jackson after the proposed
is addressed in the Board’s Terms of Reference, and there is guidance separation, which will enhance their speed and agility to adapt to their
for individuals who prepare Board papers that references Section 172 customers’ evolving needs and manage stakeholder relationships, and
duties and our key stakeholders. We ensure that we take account of improve financial outcomes for shareholders. The Board has regularly
any conflicts between different stakeholder concerns, and resolve consulted with significant investors as it determined this strategy.
such conflicts as smoothly as possible at the highest level necessary. As set out below, Board members met with significant investors during
the year and discussed the Group strategy proposals.
Good governance and responsible business practices are key strategic
enablers to building a sustainable long-term business, as discussed In addition, the Board has received regular briefings and engaged in
further in our ESG Report on page 111. Through our Group Code of regular communications to employees on the impact of changes arising
Business Conduct, we ensure that we maintain the highest standards from the proposed strategy on colleagues prioritising the fair treatment
of behaviour throughout our business. Our Group Code of Business of all employees.
Conduct sets out the standards the Board expects in relation to
employee behaviour, and our business units run mandatory training In determining the strategy of the proposed separation of Jackson,
programmes to highlight the personal obligations applicable to each the Board considered that this will enable the Group to focus on
individual. The Board reviews both the content of the Group Code meeting the protection and financial security needs of customers in
of Business Conduct and business unit compliance each year. growing markets in Asia and Africa through its differentiated product
Meanwhile, our Group-wide whistleblowing programme, Speak Out, and geographic portfolio and developing digital platform.
enables all stakeholders to raise concerns, helping to maintain the
highest standards of behaviour. Whistleblowing reporting is overseen Impacts arising from the Covid-19 pandemic
by the Group Audit Committee and business unit audit committees The Group Chief Executive’s report on page 06 sets out the ways
through quarterly reporting and through frequent discussion with the Board and Group have supported our stakeholders during
the Group Resilience Director, with any material issues reported to the Covid-19 pandemic.
the Board. On an annual basis, emerging trends and an assessment
of the effectiveness of our whistleblowing approach are reported ESG Strategic Framework
to the Group Audit Committee. A key factor in determining how the Group builds a sustainable
business that addresses the wider concerns and needs of the
Key stakeholder engagement communities in which it operates is the execution of its ESG strategy.
During 2020 we engaged with our various stakeholder groups In 2020, following the completion of the demerger of M&G plc, the
closely and we took account of their concerns in our decision-making. Board took the view that it was appropriate to consider the future
Three key areas of focus for the Board in 2020 were: the decision ESG strategy for the Group, aligned with its business strategy as an
to pursue the separation of Jackson in order to focus on the Asia Asia-focused Group. It was important that this ESG strategy addressed
and Africa businesses; the impact of the restrictions imposed by the needs of all stakeholders, and the importance of the global
governments across the world as a result of the Covid-19 pandemic; challenges of climate change and the Covid-19 pandemic, as the
and the articulation of our ESG strategy for our business. We describe business evolves to have a greater digital focus.
below how the Board considered the impact on its stakeholders across
each of these. The Board, facilitated by the Nomination & Governance Committee,
oversaw the process for the development of the ESG strategy,
Looking more widely, pages 14 to 15 of this report describes our including the consultation of stakeholder groups to consider their
business model and the outcomes we believe it delivers for each of our ESG expectations of the Group. These stakeholder groups included
key stakeholder groups. The discussion below sets out how the Group investors, regulators, NGOs, governments, employees and rating
has engaged with these key groups during 2020. agencies. A number of common themes emerged from these
consultations, including climate change, closing the protection gap
and human capital management. These helped inform the direction
78 Prudential plc
and areas of emphasis within the strategic framework, and specifically The scope of discussions focused on the Group’s strategy, in particular
Group overview
the three pillars as set out on page 72. The proposals were discussed shareholder views on the question of whether and when to pursue the
with a number of stakeholders across the Group in order to ensure separation of Jackson and focus on the Asian and African businesses,
our ESG strategy was fully integrated into the business, and to test and Board succession. The perspectives gained from these meetings,
and validate the proposed framework. All Board members were invited and the need for broad investor support, were considered by the
to provide their input at the start of the strategy development process Board when making key strategic decisions and communicating those
to shape the suggested areas of focus. They were invited, again, decisions to the market.
to comment on the strategic framework as it developed. Following
Strategic report
management approval by the Group ESG Committee, the framework The Chairman of the Remuneration Committee, Anthony Nightingale,
was then considered by the Nomination & Governance Committee and the senior Non-executive Director, Philip Remnant, have met
and the Board formally approved it in December 2020. Further details with a number of senior investors throughout the year, and the results
of the strategy and framework are set out on pages 72 to 74. of these meetings and extensive written communications were
considered when determining the Group’s Remuneration Policy.
The Board recognises that the next 12 to 18 months will be critical
for the embedding of the framework within the Group, as well as for the Our people
progress of related matters, such as the development and embedding of Ongoing employee engagement is one of the critical factors to ensure
Governance
the Group’s purpose and values, progressing D&I priorities, and building successful delivery of the Group’s strategic objectives and the Board
upon employee engagement activities in 2020. Therefore, in early is keen to increase its focus in this important area. In 2019, the Board
2021, the Board established a Responsibility & Sustainability Working expanded the role of two Non-executive Directors to include
Group in order to ensure an appropriate level of Board engagement in, responsibility for employee engagement: Kai Nargolwala covers
and oversight of, these matters during this critical period. our businesses in Asia and Africa, and Tom Watjen is responsible for
our UK and US workforce. Following Kai Nargolwala’s retirement as a
Other significant engagement with stakeholder groups Non-executive Director at the conclusion of the 2021 Annual General
Customers Meeting and the planned separation of the Jackson business,

The Group’s purpose is to help people get the most out of life. the Board intends to transfer responsibility for workforce engagement
We do this by making health and financial security accessible and activities to its newly established Responsibility & Sustainability
affordable, protecting people’s wealth and growing their assets. Working Group, which is expected to operate until the 2022 Annual
The needs of our customers are therefore central to what we do. General Meeting. The Working Group has a broad remit as described
on page 137. As part of this, it will also consider the best method for
We engage directly with our customers through contact centres, employee engagement in the longer term, to ensure this is tailored to
dedicated account managers, sales support units, business processing the culture and strategic priorities of the refocused Group following
and servicing, face-to-face advice (where possible), mobile phone the planned separation of the Jackson business, and make a
apps and telephone technical support teams. The development of recommendation to the Board for implementation following the
our digital proposition, specifically our digital health app, Pulse by 2022 Annual General Meeting.
Prudential, has enabled us to give our customers a greater range of
services, including through partnerships with others. This is described Kai Nargolwala and Tom Watjen discharged their duties through
in more detail in our Strategic report on page 24. We are attracting a range of interactions with staff during 2020 including:
a younger demographic and are able to respond quickly to emerging
needs. For example, we responded to the pandemic by providing free, —— Site visits
limited-time Covid-19 cover for new or existing customers or Pulse Our Non-executive Directors had the opportunity to visit
users in a number of markets. The Board has actively discussed and Prudential sites and to interact with our people face-to-face in small
supported the evolution of the digital strategy throughout 2020. groups and through formal meetings where physical meetings were
compatible with safe working practices.
The outcome of our engagements with customers is transmitted
—— Virtual events

through the business and used to shape the design of our products
and how and where we distribute those products, and ultimately to Particularly during the Covid-19 period, our Non-executive
inform strategic decisions made at Board level. Decisions about which Directors met colleagues through an array of remote events,
markets to access, what kind of products to offer and how to develop including the Asia Virtual Regional Conference, staff town halls and
our agency force, our bank partnerships and our digital capabilities, meetings of the Jackson D&I Council and the Global D&I Council.
are all driven by an understanding of what customers want, based on
engagement with those customers. —— Employee survey
95 per cent of staff participated in a Group-wide employee
Investors engagement survey carried out in May 2020. This level of
The Group has continued to maintain an open dialogue with investors participation substantially exceeded our expectations and the
to ensure that investors’ perspectives and concerns are considered market benchmark. The headline level of employee engagement
in the Board’s decision-making. During 2020, Executive Directors is encouraging and at par with all industries globally, as well as with
attended over 150 meetings, conferences and events with investors, the insurance and financial services industries. The table below
discussing topics including the Group’s strategy, financial performance includes a number of insights from the survey. The survey will
and future development. In addition, the former Chair, Paul Manduca, be repeated in order to assess our progress over time.
carried out 10 meetings with investors. The current Chair, in her then
capacity as Chair-elect and Non-executive Director, has attended —— Collaboration Jam
over 25 meetings with international and UK-based investors both During September 2020, all staff in Asia, Africa and our London
during her introduction to the business and as part of ongoing investor head office were invited to join a Collaboration Jam, a 72-hour
engagement. These investors included large current investors as well conversation facilitated online that focused on how the Group
as previous holders, but also included smaller institutional groups with can best live its purpose and culture. Over three days, more than
specific matters to discuss, such as the Group’s engagement with ESG 5,400 colleagues participated in the Jam, making a total of 14,000
and technology. The Board receives regular updates from the Group visits and posting nearly 30,000 observations.
Investor Relations team on the Group’s continuing wider engagement
with investors.

Prudential plc
The table below describes the key themes that interested our people during the year:
Theme
Culture —— During 2020, the Group reaffirmed our culture and articulated a renewed purpose, which is to help people get the
most out of life. We aspire to a culture that is purpose-led, customer-focused and digitally-savvy. Living the culture
around this purpose contributes to our success, sustainable growth, and ability to do the right thing for all
stakeholders, including customers, colleagues, shareholders, regulators and society at large. The Board discussed
progress in this area in February, April and July 2020.
—— Our people bring our culture to life by living the Company’s values. The May 2020 employee survey found that
employees are strongly positive about these values, with 83 per cent of respondents identifying favourably with
being empathetic, nimble, courageous, curious and ambitious. In September 2020, we hosted a three-day virtual
Collaboration Jam that saw our people come together to define the mindsets and behaviours that embody each
value. The values will serve as the basis for peer feedback, which will be incorporated into annual appraisals.
—— It is important for our stakeholders that people are able to raise a concern should they see something within the
organisation that conflicts with their personal or professional ethical standards. To this end, in 2020 we strengthened
our Speak Out platform, a secure, externally hosted channel where concerns can be reported confidentially and,
if preferred, anonymously so that concerns can be investigated impartially and independently.
—— The Board will receive further updates on the development of our purpose-led culture during 2021.
Covid-19 and —— While the Covid-19 pandemic unfolded at different times and with varying levels of impact across the footprint of
wellbeing the Group, all parts of the business were devoted to ensuring the physical, emotional and social health and safety
of our people, taking into account employee preferences during this time. Our response to the pandemic and
the ways in which we have protected our people have been a theme across the Board’s discussions during 2020.
The Remuneration Committee also received an update on this topic in September 2020.
—— Almost all employees have spent at least part of 2020 working remotely, in line with local restrictions and guidance.
—— No employees were furloughed or made redundant as a result of the pandemic. Our remuneration programmes
operated as usual during the pandemic period with medical insurance coverage extended to offer free Covid-19
testing where necessary. Employees received their regular remuneration during any periods of shielding or self-
isolation.
—— Asia has established a mental health strategy, emphasising virtual connections and community engagement as part
of our commitment to D&I.
—— All of our businesses have run regular sessions to support the physical, mental, emotional and social wellbeing of
our people. Mental health provision has been strengthened in a number of our insurer benefit arrangements.
—— The Collaboration Jam and employee survey earlier in the year highlighted the challenges of remote working and
work-life balance during the Covid-19 pandemic. To coincide with World Mental Health Day, we held our first global
wellbeing day in October. This consisted of a series of online sessions across all time-zones, including a session in
which our leaders shared their own stories about the mental health challenges that they have faced. Jackson and
our London office have offered regular sessions on different aspects of wellbeing and stress management.
—— The Board has received regular updates from management on how our people have been supported.
—— Beyond this, it is essential that the Group reacts to the trends in workforce expectations that have been intensified and
accelerated by the pandemic, particularly around new and more flexible ways of working. Each business is exploring
how we can meet the expectations of existing and future staff about flexibility around schedules and location.
Organisational —— The last 12 months have seen tremendous external challenges and significant changes within the organisation.
change —— Board members have received regular briefings about the planned changes and what they mean for our people.
—— While this has naturally been a time of some uncertainty and strain for our people, the Group has supported
employees through both the pandemic and the restructuring activity taking place in Jackson and London head office,
communicating regularly and clearly and prioritising the fair treatment of all our employees.
Diversity and —— In February 2020, the Remuneration Committee approved the 2019 UK Gender Pay Gap report, which was
inclusion published in March 2020. This showed a general closing of gender pay gaps in our UK workforce.
—— In July and December 2020, the Nomination & Governance Committee discussed the steps that the Group is taking
to leverage everyone’s potential, strength and diversity of thought, to create an open, transparent, supportive and
inclusive environment and culture of belonging.
—— In July, we established the Global D&I Council to empower employees and create a sense of belonging by respecting
and appreciating differences. Kai Nargolwala and Tom Watjen joined the Council’s meeting in November, when the
agenda included an update on the Collaboration Jam and sponsorship and mentorship for key talent.
—— Several Board members joined a Jackson session on D&I initiatives and their response to the Black Lives Matter
movement. This was discussed by the Board in July 2020.
—— During 2020, Jackson doubled the period of paid parental leave available to all new parents and quadrupled
the benefit to cover adoption expenses. During 2020, parental leave arrangements in Asia were also reviewed.
Changes included an increase in the period of paid leave by a third and the introduction of paid leave when an
employee becomes a parent through adoption or surrogacy.
—— In September 2020, we established the new role of Group Diversity and Inclusion Director, responsible for leading
our progress in building a workforce which reflects our communities and in creating a sense of belonging which
respects and values differences.
—— We have been included in the 2021 Bloomberg Gender-Equality Index, recognising our progress in this area.
80 Prudential plc
Regulators Suppliers
Group overview
Since the demerger of M&G plc, the Group has been subject to Each of our critical suppliers has a nominated contact within
the consolidated supervision of the Hong Kong Insurance Authority Prudential, and we meet those suppliers on a regular basis to address
(IA) as Prudential’s Group-wide supervisor. We have engaged with concerns on both sides. We wish to treat our suppliers fairly so we
the Hong Kong IA on a regular basis, with the Directors meeting both mutually benefit from our relationship. As an example, at the
with the regulator on a periodic basis and sharing an agreed range Group’s head office in London, to support our supply chain through
of management information. In September 2020 Mike Wells, the difficult trading circumstances triggered by the global pandemic,
Mark FitzPatrick, James Turner and Nic Nicandrou presented to we provided payment assistance from March 2020. We immediately
Strategic report
the Regulatory College of Supervisors on the Group’s strategy and switched to 10-day payment terms for all our London head office small
key business initiatives. The Board also considered and responded suppliers with under 100 employees. This has so far benefited 136
to feedback received from the College following its conclusion. suppliers with a total of £6 million of accelerated payments made to
assist their cash flow.
The Board receives regular updates on our engagement with the
Hong Kong IA regarding the shape of its legislative and regulatory On an annual basis, the Board reviews our approach to addressing
framework. We, along with other large insurers in the region, Modern Slavery in our supply chain.
have engaged directly with the supervisor on the development of
Governance
the proposed Group-wide Supervision (GWS) framework, which About this report
is expected to be effective for Prudential upon designation by the This report provides a summary of Prudential plc’s ESG performance.
Hong Kong IA in the second quarter of 2021, subject to transitional The contents meet the ESG ‘comply or explain’ requirements under
arrangements. Discussions covered areas such as capital, risk the Rules Governing Listing of Securities on the Stock Exchange of
management and governance issues impacting Prudential and Hong Kong Limited.
the industry.
More information on key topics, such as our tax strategy, can be found
The Hong Kong IA applies principles and standards to the Group in our regular financial reports and standalone reports, available on our

through existing requirements to ensure that we are a fit and proper website. We aim to disclose our ESG management and performance
controller of regulated insurance companies. The Hong Kong IA’s as transparently as possible. The Board of Prudential plc has approved
principles include financial integrity, effective corporate governance this report.
and sound risk management. We undertook a gap analysis of the
Group’s policies and processes against Hong Kong IA requirements Scope of the ESG report
for the proposed GWS framework. Information included in this report covers our activities in the 2020
calendar year, both at Group level and within our various operations
Governments and wider society globally, including Jackson. It does not include our joint venture
During 2020, a number of key points emerged from our engagements partnerships, unless otherwise stated.
with governments and legislatures, but the most pressing concern
has been how we cooperate with our governmental stakeholders Content of the ESG report
in response to the global health crisis. Covid-19 has underlined We have continued to evaluate which ESG matters are most material to
the importance of working together with governments and our the Group, with a focus on those that matter most to our stakeholders.
communities to increase life and health insurance penetration In 2020, as part of our ESG strategic review exercise, we considered
to protect individuals and families. We continue to work with and refreshed the material ESG issues. This included identifying
governments, regulators and politicians on ways to close this gap. emerging ESG trends, risks and opportunities directly applicable
With the roll-out of Pulse, we have increased our engagement with to the Group and our stakeholders. This informed the development
policymakers on health systems, health financing and the role of of the ESG Strategic Framework. Our 2020 ESG report is structured
technology across our markets. In Hong Kong, we have been actively in line with this framework and provides an update on our progress
advocating for a digital health strategy framework to the city’s top in the year across each of the pillars and enablers.

policymaker in collaboration with the local business community.
This report includes all mandatory ESG reporting requirements
Our vision is to establish a digital health ecosystem for the city and
outlined within the Hong Kong Stock Exchange Listing Rules and all
the Guangdong-Hong Kong-Macao Greater Bay Area. During 2020,
ESG general disclosures and KPIs in the guidance determined to be
we have also engaged with policy, regulatory and political stakeholders
material, with the exception of A1.3 (Total hazardous waste produced
on COP26 and related themes such as inclusion, the need for a just and
and intensity) and A2.5 (Total packaging materials used for finished
inclusive energy transition and the role of private finance in improving
products produced), which are not relevant to Prudential plc given
responsible investment frameworks.
the nature of the business.
We respond to ad hoc requests from NGOs and hold meetings with
Where there are laws and regulations in respect of matters deemed as
them throughout the year. During 2020, many of our stakeholders
material which may have a significant impact on Prudential, these are
were concerned with the impact of Covid-19 on the communities
noted within the relevant section of this report. For example, regulatory
in which we operate. In response to the pandemic, we launched
and legislative developments are increasingly including references to
a $2.5 million Covid-19 relief fund to help support vulnerable
climate-related risks and incorporating reporting recommendations
communities and provide medical equipment to hospitals and clinics
such as those outlined in the Task Force on Climate-related Financial
in Asia. The Prudence Foundation partnered with the IFRC and
Disclosures (TCFD) framework. The Group’s governance processes
NatGeo to rapidly develop a Safe Steps Covid-19 campaign in
require all businesses and functions to demonstrate compliance with
response to the pandemic earlier this year. The campaign was
Group-wide and local regulatory and legal requirements as part of

distributed across networks in Asia and Africa. More details of
the annual controls attestation. Further detail on the supervision and
our community investment are set out on page 108.
regulation of the Group is set out in Prudential plc’s Form 20-F report
for 2020 which will be published on Prudential plc’s website.
Selected indicators are assured by Deloitte LLP and Deloitte’s

assurance statement can be found on the Prudential plc website.

Prudential plc
We recognise the importance of building trust in the markets where

we operate. We have worked with health ministries and insurance
regulators to understand the local health and financial landscape
and the challenges we can help to address. We have also used local
epidemiology to understand common health concerns in the region.
For example, in Thailand, specific prompts and questions have been
1. Strategic Pillar: Making health built into our symptom checker in recognition of the fact that many
and financial security accessible common diseases are related to poor water quality or source
contamination. We have also worked with public hospitals and doctors
to gain insights, which helps us to triage Pulse users appropriately.
We pursue with ambition the closure of the health, protection and
savings gaps in Asia and Africa. We see this as core to our purpose Our Pulse app was awarded ‘Technology Initiative of the Year’ at
to help people to get the most out of life – by making people healthier the Asia Insurance Industry Awards 2020. Pulse was also recognised
and wealthier. We are committed to closing these gaps by improving by the UK government for its positive impact in South-east Asia.
the health and financial wellbeing of those who interact with us, The Foreign, Commonwealth and Development Office has included
generating positive behavioural change towards healthier lives, Pulse in its ‘Great for Partnership’ initiative, a campaign to promote
and increasing access to healthcare for all. the best of the UK overseas.
To do this we focus on: digital health innovation – to promote inclusion As we continue to develop Pulse, we have embraced agile ways of
through affordability and accessibility, and healthier outcomes for working, exemplified by the use of ‘hot houses’. During these intense
those we interact with; inclusive offerings – to increase penetration workshops, a wide range of employees from across the Group with
in underserved populations, and bring diversity to our product offering, different skills and expertise collaborate to explore new ideas, design
reflective of our customer base; and digitally enabled financial literacy and implement solutions to deploy into our Pulse app within days,
– to build trust and understanding of protection benefits and options, providing immediate benefits to Pulse users.
and wider savings and digital capabilities. In doing this we support our
customers to prevent, postpone and protect against ill-health. Supporting the development of mobile health
The successful adoption of digital health tools like Pulse is dependent
Digital health innovation upon the accessibility and acceptance of mobile and digital health
As a leading health insurer in Asia, we are evolving from providing tools. We therefore work with a range of stakeholders in the markets
protection to playing a role in the prevention and postponement where we operate to understand the challenges and opportunities
of ill-health. To make this happen, we believe that the adoption associated with the development of mobile health in local markets.
of digital technology at scale is vital.
Our recent report, The Health of Asia Barometer, underscores the
Pulse by Prudential, our health and wealth super-app, is a core part unprecedented opportunity offered by digital health technologies
of our strategy to make health and wellness accessible and affordable. to improve access to healthcare in Asia. The report, published by
Using AI-powered tools and personalised services, Pulse, which is free The Economist Intelligence Unit, explores attitudes to healthcare
to download, empowers people to take control of their personal health, in Asia, highlighting the demand for tools and services to help people
anytime and anywhere. The app has been downloaded around in the region better navigate the healthcare system. The report,
20 million times in Asia and Africa, as of February 2021. which surveyed 5,000 adults across 13 markets, highlighted consumer
appetite towards the digitisation of health.
Initially launched in Malaysia in 2019, Pulse is now available across
15 markets in Asia and Africa, with relevant services available in local —— 54 per cent believe that medical care is accessible and affordable;
languages. Across our markets, the Pulse offering continues to evolve —— 81 per cent say technology has already improved their access
as we grow our local health and technology partners. Covid-19 has to health services; and
accelerated the impact of Pulse by Prudential, increasing the demand —— 71 per cent will rely on technology even more heavily to improve
for digital health tools and for healthcare services that can be accessed personal health and wellbeing.
remotely. More information on the roll-out of Pulse and our digital
health response to Covid-19 is available on pages 85 to 86. To fulfil the potential of digital healthcare, the report recommends
greater public-private collaboration, suggesting that governments
We are committed to developing Pulse into an end-to-end health partner with private companies to deliver digitally innovative ways
and wellness platform integrating primary care, wellness and chronic to promote and manage health and wellness among citizens.
disease management. We work collaboratively with a range of partners
to provide value-added services and subscription plans across the In 2020, we expanded our Singapore-based PRUFintegrate initiative
health and wellness spectrum to all users. To date, Pulse has integrated to include our global and regional teams and seven other Prudential
32 local and regional partners. Our partnership with Halodoc business units. The PRUFintegrate initiative is a partner network of
in Indonesia enables us to provide a range of telemedicine services fintech, insurtech, healthtech and medtech companies. We received
through Pulse, including consulting with doctors online and purchasing a total of 99 entries, and evaluated solutions from fintech companies
and arranging the delivery of prescriptions. We are also partnering based in Asia, Europe and Africa. Our focus in 2020 was on artificial
with Naluri, a Malaysian health tech start-up, to enhance our food intelligence, as well as the health, wealth and SME ecosystems on
journaling user experience within Pulse. This partnership will enable Pulse. This global outreach was made possible through the APIX
users in the region to access dieticians, helping users plan a healthy platform that was set up by the Monetary Authority of Singapore,
and balanced diet, contributing to their wellness goals. the ASEAN Bankers Association and the World Bank Group’s
International Finance Corporation.
82 Prudential plc
In the Philippines, we continue to support the development of mobile In response to outbreaks of dengue fever, a mosquito-borne viral
Group overview
digital health solutions. Following our 2019 white paper exploring disease, across South-east Asia, our businesses in Thailand, Cambodia
the current legal and regulatory framework for mobile health in the and Singapore have all launched affordable insurance plans to provide
Philippines, we launched the ‘Healthscape Dialogue Series’ during customers with cover for dengue fever. Prudential Thailand launched
2020. This seeks to build a multi-stakeholder platform to discuss the its first digital insurance plan, ‘PRUDengue’, in partnership with AIS, a
most pressing topics in Philippine healthcare, providing an important leading telecom operator in Thailand’s mobile network. AIS customers
forum for industry players across sectors to come together and discuss can purchase PRUDengue via Pulse, launched by Prudential Thailand
how to improve the access of more Filipinos to affordable and quality in June. Dengue fever has impacted nearly one million people in
Strategic report
healthcare services. Webinars over the course of 2020 have covered Thailand over the last 10 years. PRUDengue is an all-round and
the use of AI and mobile technology, preventative healthcare and affordable insurance plan to support the insured with a lump-sum
telemedicine. We also partnered with the Analytics Association of payout. PRUDengue’s basic package, with an annual premium
the Philippines to provide a webinar on digital transformation in life at THB249 (US$8), provides total benefits of up to THB70,000
insurance and the role of big data in achieving financial inclusion (US$2,332). Applicants are not required to complete any health
and better health for more Filipinos. or income check for this plan.
Inclusive offerings Prudential Cambodia has also launched an affordable insurance
Governance
As part of our commitment to making health and financial security solution for dengue fever and malaria. With an annual premium of
accessible, we recognise the importance of increasing penetration US$4, the product is Prudential Cambodia’s first micro-insurance
in the markets where we operate, providing products and services offering and demonstrates Prudential Cambodia’s ambition to making
to previously underserved populations. By bringing diversity to our insurance accessible to all Cambodians. With over 34,000 cases of
product offering, we will be able to better reflect the needs of our dengue fever in Singapore during 2020, Prudential Singapore
customer base, and integrate any lifestyle impacts from emerging launched its affordable insurance plan, PRUSafe Dengue, on Pulse.
social risks associated with major public health and demographic For a premium of S$5, PRUSafe Dengue provides a number of benefits
over a three-month period. In the Philippines, we have also begun to

trends into our product offering. This will include, but not be limited to,
lower-income groups, ageing populations, small and medium-sized develop bite-sized offerings to help increase insurance penetration
enterprises and sharia offerings. and to target specific protection needs of the market. Initial offerings
include dengue cover and a breast cancer product.
Demographics are changing in a number of our markets. In response
to Thailand’s rapidly ageing population, Prudential Thailand has In December, Prudential Singapore introduced the Spark Kindness
launched PRUTriple Eight (PRU888), a life insurance plan that allows Movement. The movement aims to narrow the protection gap by
for effective financial planning at every stage of a person’s life. Based on providing underprivileged families with financial support in the event
the latest projections by the United Nations Population Fund, Thailand of accidental death. For every PRUActive Protect or PRUCancer 360
will fully transition into an aged society by 2021, with the number of policy sold in December, we provided a complimentary two-year
senior citizens aged 60 and above expected to make up 20 per cent of Accidental Death Insurance Coverage of S$10,000 to a parent of a
the total population. As a result, the country will face emergent issues low-income family supported by our community partner, AMKFSC
concerning social security, healthcare costs and intergenerational Community Services Limited. This coverage provides hope to the
equity in a far shorter time than developed nations. This rapid speed children of these families by giving them the means to continue their
of ageing calls for appropriate response, policies and programmes to education. A total of 3,022 individuals from these families received
help resolve the issues. The PRU888 plan provides financial security to complimentary coverage through the Spark Kindness Movement
customers including death benefits as well as accidental death coverage and Prudential Singapore plans to extend this programme in the future
where we will pay eight times the normal death benefit up to age 88 to benefit more underserved populations.
while providing annual cashback and a maturity benefit at age 88.
In Taiwan, we offer a micro-insurance policy to a non-profit, the Taiwan
Prudential Indonesia continues to innovate to provide affordable Fund for Children and Families, to support disadvantaged families and

financial protection for Indonesians by launching Asuransi Jiwa children. During 2020 this policy has helped support 284 families.
Kumpulan Syariah PRUTect Care (PRUTect Care), Prudential Our Taiwan life business, PCA Life Assurance, continues to address
Indonesia’s first digital product available on our health and wealth child protection issues and in November launched its Child Health
super-app, Pulse. As a sharia-based offering, PRUTect Care provides white paper, to advocate for child health and protection in Taiwan.
basic natural death benefit coverage, as well as various optional PCA Life worked with the Research Centre of Big Data at Taipei
benefits, for a monthly contribution as low as Rp8,000 (US$0.50). Medical University to conduct research and analysis into the factors
To protect more Indonesians, Prudential collaborated with digital that affect child growth.
partners Gadjian and Kitabisa.com to offer PRUTect Care.
In Malaysia, our CSR initiative, PRUKasih, provides free temporary
In 2020, Prudential Indonesia launched Asuransi Jiwa Ayariah financial relief to urban low-income families coping with a sudden
PRUCinta (PRUCinta), its first sharia-based traditional life insurance loss of income due to illness, accident or death. Since this programme
product. A simple and affordable product, PRUCinta provides started in 2014, more than RM10 million (∼US$2.5 million) has been
optimised death compensation benefits covering a period of 20 years. paid out in claims, and during 2020, we supported 40,429 households
PRUCinta shows Prudential Indonesia’s aspirations to become a across 35 communities with PRUKasih. To help PRUKasih communities
leading contributor to the Indonesian sharia industry and to expand mitigate the effects of the pandemic, we provided free Covid-19
life insurance coverage to a broader segment of the population. coverage whereby a cash payment would be made in the event
of hospitalisation and/or death.

Prudential plc
Also in Malaysia, PruBSN Microtakaful Jariyah provided basic Cha-Ching – a global financial education programme
microtakaful coverage to 25,000 underprivileged families during Developed by Prudential to address the gap in financial literacy for
the year. This initiative is the first of its kind in Malaysia and provides children, Cha-Ching is a global financial education and responsibility
complimentary basic takaful coverage for a 12-month term to selected programme aimed at children aged seven to 12. Now in its 10th year,
heads of the household from low-income groups. Beneficiaries receive the programme continues to grow and expand across our markets
RM10,000 (∼US$2,500) in the event that their family breadwinner and is well received by educators, parents, children and government
passes away. stakeholders. We continue to develop a blended learning approach
to financial literacy, leveraging digital tools and platforms as well as the
In Ghana, we have collaborated with leading industry partners to school environment. Our aim is to ensure that Cha-Ching is accessible
deliver an innovative mobile insurance plan, SafeNet, to new and available to millions of children, parents and teachers across
customers. The partnership between Prudential Ghana, Vodafone, the world for free, providing them with the right foundations in
MicroEnsure and Enterprise will offer Ghanaians key insurance financial literacy.
benefits, including cover for hospital cash compensation, accidental
injuries or disabilities, and general life insurance. We have teamed The Cha-Ching Curriculum was developed in partnership with Junior
up with Enterprise as co-underwriters for SafeNet, a new mobile Achievement (JA), and has been successfully implemented in Asia for
insurance product that offers an easy way of buying flexible insurance. five years through strong partnerships with NGOs and governments
Vodafone, Ghana’s second-largest mobile network operator, is using a in eight markets: the Philippines, Indonesia, Malaysia, Vietnam,
platform developed by MicroEnsure to distribute SafeNet to Vodafone Taiwan, Singapore, Cambodia and Thailand. To date, more than
subscribers. In line with our commitment to help limit the economic 15,000 teachers have been trained to deliver the Cha-Ching
impact on customers of Covid-19, SafeNet will be offered to more than Curriculum in schools, with over 600,000 primary school students
nine million Vodafone subscribers as free insurance cover in the first having been taught the lessons of earn, save, spend and donate.
half of 2021.
The Cha-Ching Curriculum school implementation programme has
Helping to upskill small businesses also expanded into Africa, and in 2020 Prudence Foundation extended
In November 2020, Prudential Singapore brought together 80 small its partnership with JA in Africa, to teach the Cha-Ching Curriculum
and medium-sized enterprises (SMEs) across 50 industries and a to primary school students across six countries: Kenya, Ghana,
government agency – SkillsFuture Singapore (SSG) – to co-create the Zambia, Nigeria, Uganda and Côte d’Ivoire over the next three years.
SME Skills Accelerator programme. This one-year programme is part By adopting the proven teacher-led model for Cha-Ching, which has
of Prudential Singapore’s value-added services for SMEs to help them seen success in Asia, we will similarly work to improve financial literacy
upskill and support them in their innovation efforts. SMEs are entitled in Africa, in a sustainable and scalable way.
to curated training programmes that are subsidised by SSG on topics
such as design thinking, digital transformation and workplace learning. In Asia, the Cha-Ching cartoons continue to be broadcast on Cartoon
As part of the programme, SMEs get to join a network of like-minded Network, reaching over 31 million households every day. Cha-Ching
people to share best practices and improve processes. SMEs are also content is also accessed online via the website and through digital
connected to a dedicated skills manager who advises on the SMEs’ channels including social media, with over 86 million views to date.
upskilling needs.
In an effort to increase the reach and impact of Cha-Ching, we also
Recognising the significant impact of the Covid-19 pandemic on micro, introduced several new digital initiatives in 2020. These have
small and medium enterprises (MSMEs), Prudential Indonesia has supported the broader reach of Cha-Ching, particularly in the
supported MSMEs across Indonesia by holding a series of financial Covid-19 environment, which has limited in-person teaching,
literacy training webinars, in partnership with AKUMANDIRI, and these are intended to continue into 2021:
SMESCO and the Tangan di Atas Community. The initiative includes
a series of webinar sessions delivered by experts from Prudential —— The Cha-Ching Kid$ At Home programme, aimed at parents,
Indonesia, covering key financial literacy topics including the was launched amidst the backdrop of Covid-19. Available for free
importance of financial management, business capital, developing online, this consists of guides and at-home activities providing
business strategies, and cash flow management for business entities. families with an engaging and interactive way to teach financial
literacy at home. A digital media campaign was launched to raise
Promoting financial literacy awareness, reaching more than 3.7 million people via social media.
The promotion of financial literacy is a priority for Prudential and we The educational resources have been actively promoted by
actively seek to build trust and improve understanding of protection Prudential businesses through social media campaigns and public
benefits and options. In doing this we support our customers to webinars and have been viewed or downloaded over 25,000 times
prevent, postpone and protect against ill-health. Financial literacy is via the Cha-Ching website. In Singapore, Indonesia and Myanmar,
a key focus area for Prudence Foundation. More information on the employee volunteers have also been trained to deliver the
broader work of Prudence Foundation can be found in the Community Cha-Ching Curriculum online through webinars.
Engagement and Investment section on page 108 of this report.
84 Prudential plc
—— In September 2020, Prudence Foundation introduced the online #MoneyParenting
Group overview
Cha-Ching Financial Accreditation (CCFA), to acknowledge and During 2020, our Asian asset manager, Eastspring, launched its
support the teacher community working to deliver the Cha-Ching #MoneyParenting initiative. Following a survey of 10,000 parents
Curriculum in schools across Asia. The CCFA platform was across nine Asian markets, we found that 51 per cent of parents
launched in the Philippines, Indonesia and Vietnam and will expand in Asia do not know if they have been successful teachers and role
to further markets in 2021. This online assessment is endorsed by models for their children. Recognising that parents pass on their
education authorities and was developed in alignment with the attitudes and beliefs about finance to children, Eastspring is aiming
OECD Core Competencies Framework on Financial Literacy for to help parents become better role models and to provide them with
Strategic report
Youth and the ASEAN Teachers Competency Framework. To date, the knowledge, skills and tools to effectively teach their children about
over 4,000 teachers have registered and 2,400 have completed money and plan for their future. When asked what help they wanted
the CCFA online course. in order to teach their child how to use and manage money better,
—— In the Philippines, Prudence Foundation and JA have worked 43 per cent of parents across Asia said they wanted to learn more
closely with the Department of Education (DepEd) to incorporate about financial management themselves. In response to the survey
Cha-Ching into the national distance learning approach and its findings, Eastspring has launched a dedicated microsite on its
implemented in response to Covid-19. Cha-Ching printed materials website, providing tools and resources for parents to empower them
will be distributed to over 157,000 students at home, supplemented as they are teaching their children about the financial and social
Governance
by online teaching where possible. Cha-Ching lessons will also be responsibilities that come with money.
broadcast via TV and radio as part of DepEd’s implementation,
expected to reach over 56,000 students. Pulse roll-out and digital health initiatives
—— Cha-Ching videos and parent resources have been made available We have provided some examples to illustrate how we have begun
for free on the Pulse by Prudential app in Singapore with expansion to roll-out Pulse across our businesses. Our Pulse offering continues
into other markets expected in 2021. to develop as we work collaboratively with a range of partners to
provide value-added services and subscription plans across the health
and wellness spectrum to all users. As we design these services, we

In the US, the Jackson Charitable Foundation has reached more
than eight million students since 2017 by partnering with Discovery consider emerging population risks and public health trends, such as
Education and Junior Achievement USA. We provide free music rising levels of obesity, increasing urbanisation and ageing populations.
videos and classroom and at-home activities with Cha-Ching Money
Smart Kids to teach elementary school students how to earn, save, Hong Kong: The launch of Pulse in Hong Kong made us the first in the
spend and donate. The demand for virtual financial education market to offer an AI-powered chatbot to provide clinically validated
continues to increase, with Cha-Ching Money Smart Kids seeing information and recommendations for symptoms. Recognising the
record engagement in 2020. The Jackson Charitable Foundation specific needs of its customers, Pulse users in Hong Kong can access
has also sponsored 500 high schools to use Ramsey Education’s a digital Chinese Medicine Body Constitution Test. Useful information,
Foundations in Personal Finance curriculum for the 2020-21 school including hospital listings is now available on Pulse to make information
year, at no cost to the schools. Since this partnership began in 2018, easily accessible for customers.
the Foundation has committed $2.7 million toward financial education
for high school students across the country, reaching 100,000 Malaysia: In October 2020, we launched our Step Up Against Cancer
students in total. Challenge in Malaysia through Pulse to increase cancer awareness
and to highlight the importance of financial protection against cancer.
In Malaysia, in line with our commitment to uplift PRUKasih Users are challenged to take at least 5,000 steps a day in order to earn
communities and build their financial resilience, we introduced free cancer coverage. Users can connect their fitness device to the
education programmes focused on financial planning. We also rolled Pulse app, allowing them to earn different levels of cancer coverage,
out the PRUKasih Entrepreneurship Programme to equip participants depending on the number of steps they take.
with entrepreneurial skills and knowledge. To foster greater
collaboration between the public and private sectors on financial Indonesia: Following the release of Pulse in Indonesia, the

empowerment through education, we launched a five-part webinar #SehatBarengPulse (Get Healthy with Pulse) movement was launched.
series, featuring a range of panellists, including Malaysia’s Central The campaign encouraged users to lead a healthier lifestyle through
Bank, Bank Negara Malaysia. The webinar series included topics such a series of challenges, including lowering sugar intake and
as the state of financial education in the country and the creation of a cholesterol levels.
unified financial literacy curriculum.

Prudential plc
Vietnam: The launch of Pulse in Vietnam enabled users to access Thailand: To encourage social distancing during the pandemic,
features including Health Checkup, Symptom Check, Body Mass Prudential Thailand partnered with 10 hospitals in Thailand to offer
Index Measurement and Wrinkle Index Measurement. The app also customers access to specialist healthcare services and medication
includes hundreds of articles equipping users with medical information via telemedicine. Customers could choose to schedule a consultation
on healthy lifestyles, symptoms and treatments. Prudential Vietnam with a doctor via video conference, purchase and arrange for delivery
also introduced an online cancer insurance product, iProtect, on Pulse of prescription medicine to their homes or arrange for a home visit
in September. by a doctor if necessary.
Cambodia: Prudential Cambodia was the first to bring AI-based Africa: Across our eight markets in Africa, we provided customers,
preventative healthcare to Cambodia, through the launch of Pulse. staff and agents with a range of additional Covid-19 insurance cover
Health infrastructure in Cambodia in both the public and private at no cost to themselves. Prudential Africa also simplified its claims
sectors is underdeveloped, and convenient access to quality procedures and enabled claims to be made via WhatsApp. Additional
healthcare is difficult for most Cambodians. The initial Pulse roll-out training was provided to our agents and we enabled customers to
included a ‘hospital locator’ feature for users to access all hospitals buy insurance without the need to meet face-to-face with an agent.
and clinics covered under the National Social Security Fund, which
is a social health safety net for two million people employed in the Laos: Prudential Laos extended the grace period for premium
formal sector. payments from 30 days to 60 days. Free Covid-19 coverage was
also provided for all existing policyholders, as well as for new policies
Digital health response to the Covid-19 pandemic purchased between 1 May and 31 August 2020. Free Covid-19 cover
Hong Kong: Prudential was the first in the market to launch free was offered to the staff of hotels providing quarantine services. In May,
Covid-19 coverage to over 300,000 Hong Kong residents. Following Prudential Laos donated 3,000 face shields to the Ministry of Health
rapid take-up, we offered free protection to a further 200,000 Hong to protect frontline workers against Covid-19.
Kong residents. During the fourth wave of the Covid-19 outbreak,
Prudential Hong Kong announced that it would allocate HK$5 million The Philippines: Pulse launched in the Philippines in February 2020
to its Covid-19 Caring Fund, which provides additional financial and at the onset of the pandemic, was used to provide free Covid-19
support for individuals affected by Covid-19. Eligible applicants can protection and personal accident coverage – a one-time, 45-day
apply through the Pulse app to receive a subsidy of HK$10,000 to insurance product to protect the insured against death from Covid-19
relieve their financial burden caused by the pandemic. or accident. It was the first insurer in the country to offer extra
protection against Covid-19.
Singapore: Pulse was launched in Singapore in April 2020, and
was a key part of our response in supporting the community in the Malaysia: Prudential was the first insurer in Malaysia to introduce
fight against the virus. Users of the app were entitled to a daily Covid-19 coverage for our customers and this was subsequently
hospitalisation allowance if they were hospitalised for Covid-19. extended to non-customers at no additional cost. In the initial stages
Prudential Singapore also subsidised part of the consultation costs of the pandemic, we launched public service announcements and
for users until 30 June 2020, so it cost only S$15 per consultation. content on Pulse and various media channels to educate the public
Non-customers were eligible to receive a S$100 daily allowance about the virus and how to stay safe. We also supported the Ministry
(for up to three months of hospitalisation) if they were hospitalised of Health’s efforts to conduct more Covid-19 tests by reimbursing our
between the date of their Pulse app registration and 31 May 2020. customers for taking the test. Customers facing financial difficulties
were able to apply to our premium deferment relief programme.
Indonesia: In response to the Covid-19 pandemic, Prudential
Indonesia provided free Covid-19 coverage and was the first in the
market to offer additional protection for Covid-19. Prudential Indonesia
also extended the grace period for premium payments, simplified its
claims procedure and established a dedicated team for Covid-19
claims. Leveraging Pulse, Prudential Indonesia and Halodoc provided
premium-free Covid-19 rapid tests for members of the public in
Jakarta and Surabaya. Prudential Indonesia also launched PRUCekatan
to enable customers to consult with their agents and access
comprehensive protection solutions virtually, rather than through
face‑to-face meetings.
86 Prudential plc
Decarbonising our investment portfolio
Group overview
Our strategic focus on stewarding the human impacts of climate
change through decarbonisation of our investment portfolio over
time recognises that climate change presents long‑term risks to
the sustainability of our business. It also acknowledges that, as a
responsible corporate citizen, Prudential needs to play its part in the
2. Strategic Pillar: Stewarding the transition to a lower carbon global economy and the collective efforts
to limit the rise in global warming that can lead to catastrophic climate
human impacts of climate change
Strategic report
change. As a significant investor and an asset owner with long-term
investment horizons and liabilities, the Group is vulnerable to
We recognise that climate change presents a serious global challenge, climate-related transition risks, and in a position to invest in, and
with significant potential economic consequences and direct and develop, products linked to climate resilience. Our approach to
indirect impacts on people’s health and livelihoods, and we are reducing the carbon footprint of our investment portfolio is one which
proactive in enabling the transition to a low-carbon economy. We do supports sustainable growth and takes into consideration the impact
this by decarbonising our investment portfolio and working towards on the economies, businesses and customers in the markets in which
sustainable development and energy transition in all our markets. we operate and invest.
Governance
Reflecting the stage of their development, the economies in which we
operate tend have a greater reliance on fossil fuels and more exposure Approach to climate-related risk
to carbon intensive industries than in more developed markets. For Prudential is a signatory to the recommendations of the Financial
example, for the five largest South-east Asian economies of Indonesia, Stability Board’s Task Force on Climate-related Financial Disclosures
Thailand, Malaysia, the Philippines and Vietnam (plus China) an average (TCFD). Our approach to climate change and climate-related risk is
of 36.2 per cent of GDP was derived from mining, manufacturing covered below. To show how we are meeting TCFD requirements,
and other industrial activities in 2018. This compared to 18.6 per cent we have mapped our disclosures to each of its pillars. This is shown

and 17.5 per cent for the US and UK respectively in the same year. in a table at the end of this section of the report.
This means that the energy transition across the region is likely to
Initially categorised as emerging risks, the ESG risks associated with
proceed at a different pace than for more advanced economies.
our business, which include climate risk, have more recently been
Recognising this, as we support the move to a lower-carbon economy
upgraded to Group Principal Risk status. Recently, we have engaged a
in these emerging markets, we strive to ensure that the transition is an
dedicated climate risk consultancy to further refine our understanding
inclusive one for all of society – one that supports sustainable growth
of the nature and materiality of the risks posed by climate change to
and economic health within our local markets and communities.
the business.
The table below lists the key climate risks facing Prudential. The sections that follow provide further detail on the activities undertaken to assess,
manage and mitigate these risks.
Risk category Description Response
Assets The Group has financial exposure to assets in carbon- —— Development of metrics to measure the potential
intensive and carbon-reliant sectors that may fail to adapt, financial impacts from climate-related transition risk
innovate or pivot to a lower-carbon business model. in the asset book.
These assets are at risk of taxation, regulation and/or —— Use of scenario analysis to model the exposure assuming
reduced demand, leading to impairments or downgrades different pathways and different temperature scenario.
and/or stranding. Physical climate impacts can also lower
the value of assets held.

Insurance Given the complex interactions with other environmental, —— Qualitative assessment of the potential impacts
demographic and social changes, the impact of climate from climate risk on our insurance liabilities.
change on mortality and/or morbidity can be difficult
to reliably estimate on a standalone basis.
Data and model Methods for assessing and quantifying the financial —— Participation in industry groups and collaboration
limitations impact of climate risks continue to evolve in the industry with data and risk modelling providers to help drive
and also within the Group. The limitations in data and asset improvements in climate data quality and risk
and liability modelling make it more difficult to accurately modelling tools.
assess the financial impact on the Group, particularly for
longer-term time horizons.
Regulatory and The pace and volume of new climate-related regulation —— Regulatory change teams are in place to assist the
legislative across all markets could pose compliance and operational business in proactively adapting and complying with
compliance challenges that may necessitate multi-jurisdictional regulatory developments.
coordination. —— Constructive engagement with policymakers and NGOs.
Operational Operational impacts from physical risk events challenge —— Regular updating and testing of elements of
resilience operational resilience, including impacts to third parties disaster‑recovery plans and the Critical Incident
and the servicing of our customers. Procedure process.
—— The use of scenario analysis using data sources
(including IPCC data) to identify additional
vulnerabilities to physical risk.

Prudential plc
The risks are also influenced by the broader political, economic and The potential impact from climate risk on our insurance liabilities
societal backdrop in which the Group operates. These factors interact has also been investigated. To better understand the potential impact
with, and can amplify and shape, the impacts of climate-related risks. to our insurance liabilities, a qualitative assessment of the impact
Examples of risk factors that could exacerbate climate risks include of climate-related risk on insurance risk was carried out by Group
geopolitical issues, political processes, such as negotiations to curb Actuarial during the year. This established that over the short term,
emissions, or the unfolding Covid-19 pandemic, which is reshaping such as over the three years of the current business plan cycle, climate
global economic activity. change is not expected to materially increase or decrease claims for
our life and health business. Over the longer term, the financial impacts
Activity throughout 2020 from climate-related risks on our insurance liabilities could be more
Work to quantify and model the nature of our climate risk exposure significant, for example on reserving implications, if there is a step
has continued throughout 2020, consistent with our strategic focus on change in long-term morbidity and/or mortality expectations,
climate change risk and in alignment with the TCFD recommendations. and medical inflation. However, the overall financial impact will be
The Group Risk and Group Actuarial functions have led efforts to mitigated by our ability to reprice contracts and develop new products.
deepen understanding of the exposure to climate-related risks in our
asset management and asset owner businesses across the Group. Response to climate-related risks
Activity has included the identification of metrics to measure exposure We believe that the new strategic ESG framework and the long-term
to greenhouse emissions, measuring the carbon footprint of our asset goals to decarbonise the investment portfolio and support an inclusive
book, the selection of scenarios for stress testing assets, and investment transition are an important way in which we can meet to meet
in new tools to support carbon footprinting and scenario analysis. stakeholder expectations and fulfil our fiduciary obligations. It will
reduce the Group’s exposure to asset risk – which includes transition
A key activity has been the use of scenario analysis to model the risk – over time, while also contributing to efforts to decarbonise the
Group’s exposure to climate-related risk, assuming different transition global economy.
pathways and temperature scenarios (see case study). The modelling
has helped to further our understanding of the nature of the climate Recognising that transition risk represents the nearest-term and
risk the Group faces. This has reinforced that the main financial risk most impactful financial risk to the Group, the Group Risk function
is to the asset side of the balance sheet. This finding is consistent with undertook an initial transition risk analysis on insurance assets
our business model: as a major asset owner and manager, we rely on managed in segregated portfolios by the Group’s asset managers.
investment returns to meet the longer-term obligations of our liabilities
and thus are vulnerable to risks that interrupt or impair those returns.
The finding also reinforces the case for the strategic objective to
Case study
decarbonise the investment portfolio, which is both a way in which
Prudential can limit its exposure to potential transition risks, as well
as contribute to global efforts to decarbonise the global economy. Modelling climate change risk:
The role of scenario testing
During 2020, the Group undertook a stress testing exercise based
on the three scenarios laid out within the PRA Insurance Stress
Tests: orderly transition (temperature increases kept below 2°C ,
meeting the Paris Agreement); disorderly transition (temperature
increases kept below 2°C but with delayed and sudden policies);
and failure to meet the Paris Agreement (specifically, reaching a
temperature increase in excess of 4°C assuming no transition and
a continuation of current policy trends), with a time horizon up to
2100. The Group’s entire asset portfolio was included, and the
testing included the impact of physical and transition risk on the
asset portfolio for the chosen scenarios. The impacts of climate
change on insurance liabilities was also investigated.
These stress tests have informed discussions on how to assess

the Group’s business objectives and strategy and have provided
further insight into the capabilities and data required for future
stress modelling. These analyses have also been complemented
by reviewing alternative scenario testing methodologies using tools
provided by specialist vendors or open solutions.
The Group is continuing to explore and develop its scenario

analysis approach, including investigating the use of the Group’s
economic capital model, and ultimately formalise the process for
conducting sophisticated climate scenario analysis as part of the
Group’s risk management frameworks.
88 Prudential plc
This focused on investments where Prudential both maintains direct To help address industry issues, such as the limitation of climate-
Group overview
control of the mandate and exerts some influence over the investment related disclosures and evolution of data availability and climate risk
process. Provisional reports were produced using climate-related data modelling for financial market participants, we participate in industry
and metrics provided through a proprietary vendor tool. This facilitates bodies that can help drive improvements in risk management
a breakdown of the contributions of different sectors to the overall processes and lobby for improved standards.
carbon footprint metrics of the asset book and highlights the most
carbon-intensive sectors, including those most at risk of being We also seek to collaborate with peers and other investors to amplify
stranded. It also enables the most carbon-intensive companies held in the impacts of our activity in this area. These activities are described
Strategic report
the asset book – and thus the largest issuer contributors to the overall in more detail in the Responsible Investment section on page 101.
metrics – to be determined and monitored. We have also determined
the initial weighted average carbon intensity (WACI) of the listed equity As noted in the list of material risks, the pace and volume of regulatory
and corporate bond asset classes of our insurance investment portfolio. and legislative compliance developments poses a challenge to the
Group. As part of our ongoing government relations activity,
Building on this work, we are continuing to develop metrics that are we regularly engage with regulators and monitor evolving climate
appropriate for our business, to support an enhanced management risk-related initiatives that could develop into new regulation in the
and reporting process for climate risk. As well as WACI, other potential markets in which we operate. In a similar manner, we also engage
Governance
metrics under consideration include the percentage of the portfolio in constructively with policymakers and NGOs to shape the evolution
carbon-intensive sectors, stranded asset exposure as a percentage of of regulation and standards relating to climate risk. For example,
assets under management, and portfolio exposure to clean technology during 2020 Prudential Hong Kong joined an industry-wide task force
solutions. These metrics were considered at a Board Risk Committee established by the Hong Kong Insurance Authority and Hong Kong
workshop held to discuss the potential business impacts of transition Federation of Insurers to work on several areas within ‘green
and physical climate risks. Work to enhance the management and insurance’. More information on our engagement and regulatory
reporting of climate risk will continue in collaboration with our asset interactions, including those related to climate risks and opportunities,
can be found in the Responsible Investment section on page 101.

management and asset owner business units, with the aim of
integrating climate risk metrics and monitoring into broader investment
processes and aligning with the responsible investment framework. Supporting an inclusive transition
Our Asian markets include highly developed economies such as
We also continue to develop our scenario testing capabilities and have Hong Kong and Singapore that have diversified, service-led
engaged with a climate risk consultancy to perform a focused exercise economies and mature financial markets, and emerging markets that
using their scenario modelling capability. Investigating different are more dependent on primary and energy-intensive industries.
methodologies supports the Group’s ability to determine climate These emerging markets have a greater reliance on fossil fuels in their
scenarios appropriate to its nature, scale and complexity. The potential generation mix, and less developed financial systems.
impacts of different scenarios on the balance sheet were discussed in
2020 with the Technical Actuarial Committee (TAC), which sets the This means that the energy transition across the region is likely to
proceed at a slower pace than for advanced economies as reflected
methodology for the economic capital model. To date, the impacts
have been indirectly incorporated into the economic capital model in the countries’ Nationally Determined Contributions, as required by
via the market risk calibrations. No additional adjustment is considered the Paris Agreement. This point was highlighted by Mr Ravi Menon,
necessary at this time and this will be kept under regular review. Managing Director of the Monetary Authority of Singapore (MAS).
Speaking at a Financial Times Investing for Good Asia Digital
Our existing business continuity management programmes are Conference on 13 October 2020, Mr Menon noted that ‘Asia is at a
assessing the risk of natural disasters, including those caused by different stage of development, with millions of people still lacking
significantly altered climatic conditions, such as increased frequency access to electricity, modern sanitation, and drinking water. While
and severity of tropical storms or increased flooding. The Group demand for affordable energy will continue to grow strongly, most
remains focused on its operational resilience and is supplementing Asian economies are still heavily dependent on fossil fuels for their

existing activities with scenario analysis to identify additional areas energy needs and it is unrealistic to suddenly replace fossil fuels with
of vulnerability that may arise due to climate change, including assets, renewable energy.’
operations, third party supply chains and customers. Group Risk has
trialled a number of dedicated risk management platforms and has For Prudential, this means that, while we are committed to an objective
shared the outputs with local business continuity teams to help inform to decarbonise our investment portfolio, we are mindful of the need
assessment and management of physical risks to operations in to implement the strategy in a way that acknowledges the nature of
territories for which they are responsible. the markets in which we operate and seeks to share the financial and
social burden of the transition in a fair manner. Our support for an
Transparency and engagement inclusive transition aims to balance our responsibilities and obligations
As well as the work to enhance internal management and reporting to all our stakeholders.
of climate-related information, we participate in external benchmarks
to provide additional visibility to stakeholders on our climate-related We recognise the importance of coalition building in delivering an
activity. We aim continually to improve the transparency and utility inclusive transition. As a member of the Sustainable Development
of our reporting. Investment Partnership (SDIP), coordinated by the World Economic
Forum with support from the OECD, we work with public and private
In 2020, we continued to participate in CDP (formerly the Carbon sector institutions in emerging markets, particularly in South-east
Disclosure Project) and maintained our score with a B grading Asia, to scale domestic and international investment in sustainable
(2019: B). We continue to participate in ClimateWise and received an infrastructure and promote energy transition. The SDIP’s ASEAN Hub,
improved score of 68 per cent (2019: 51 per cent), which we believe whose Steering Group Prudential has co-chaired since 2017, launched
reflects the progress we have made over the year in our management a Sustainable Investment Innovation Roundtable in 2020, a monthly
and reporting of climate issues. forum to catalyse new ideas for scaling up investments to further
the SDGs.

Prudential plc
Capturing opportunities Next steps

We also recognise that the implementation of our strategic ESG Over the next three years, we will work to strengthen management
framework can generate opportunities for the Group. Some of these of climate risk across the Group. We will approach this as a Group-wide
opportunities will come through our efforts to take early mitigating cross-functional initiative, with participation from our asset owner and
action against the climate risks we identify, including incorporating asset manager businesses, risk, actuarial, and government relations
transition risk into investment decisions to reduce the risk of being colleagues.
exposed to stranded assets.
Scenario analysis will be an important area of focus as we plan to move
Others will come through supporting an inclusive transition. it into our mainstream risk management processes during 2021 and to
The infrastructure and capital expenditure required to enable the begin internally reporting findings within Group and business unit level
transition represents attractive investment opportunities in many management information. As we further investigate how climate risk
cases. For example, there is a role for institutions to both develop impacts our business in the long term, we aim to operationalise and to
new products and invest in structures and mechanisms that enable continue to increase the use of scenario testing. We plan to voluntarily
a managed withdrawal from reliance on coal-powered electricity run scenario tests emerging from regulators, such as the Bank of
within developing economies. England’s exploratory climate risk scenario for banks and insurers
in 2021.
In response to this, we have developed several responsible investment
products that channel our customers’ savings towards ESG-themed We are aware that many companies have set targets in alignment
investments, such as the Asia Sustainable Bond Fund recently with the Paris Agreement. We are in the process of assessing similar
launched by Eastspring. More information on our ESG-related suitable targets in respect of the carbon emissions from our
investment activity is available in the Responsible Investment section investments, given their importance within our overall emissions
on page 101. profile, and our overarching strategic commitment to decarbonising
our investment portfolio.
Climate change is also likely to drive demand for new health products,
given the linkage of climate change to human health through changes in In the interim, we continue to increase our level of ambition in relation
the incidence of diseases and the emergence of new diseases. We have to our own emissions footprint. This year we have set new and
launched a dengue alert service to customers in some Asian markets stretching targets for our Scope 1 and Scope 2 greenhouse gas
through our Pulse super-app. The decision to offer the application emissions, with the aim of becoming net carbon neutral across these
reflects the increasing incidence of dengue fever in the region, driven two scopes by the end of 2030. More information on the
by warmer temperatures and higher humidity. This alert service is environmental impact of our direct operations is available on page 114.
complemented by the provision of affordable insurance plans for the
markets in which dengue is prevalent – see Inclusive offerings within During 2021 we will continue to scale up our engagement strategy
Making health and financial security accessible for more information. with key policy and political stakeholders around the COP26
conference in November with a focus on financial sector issues
to support the just transition and sustainable finance priorities
in particular for emerging markets.
Case study
Helping Asia exit from coal:

The Energy Transition Mechanism
Writing for the World Economic Forum as part of the Great Reset
series in May 2020, Don Kanak, then chairman of Eastspring,
outlined a proposal for a ‘Coal Retirement Mechanism’, which
would accelerate the transition to renewables in developing
countries where coal use is high and poised to grow – see
www.weforum.org/agenda/2020/05/how-to-replace-coal-and-
accelerate-the-energy-transition-in-developing-countries/. An
investment fund would be established in collaboration with national
authorities consistent with climate commitments to purchase and
retire coal fired power plants over 10 to 15 years, cutting short their
expected lifetimes of 30 to 40 years or more. Investors in the fund
would include developed country governments and multilateral
banks with access to low-cost capital. The proposal is an example of
how we are seeking to support the markets and communities in
which we operate to manage the challenge of the energy transition.
Since then, the proposal has been updated and renamed as the
Energy Transition Mechanism (ETM) and was published on the
World Economic Forum as part of the 2021 Davos Agenda series.
The ETM would accelerate the retirement of carbon-intensive
power assets, dramatically expand demand for renewables,
and provide time and resources for a just transition.
www.weforum.org/agenda/2021/01/how-to-accelerate-the-
energy-transition-in-developing-economies.
90 Prudential plc
TCFD: Disclosure Alignment
Group overview
Pillar Recommended Response reference Additional comments
disclosure
Governance a) Describe the Oversight of ESG Board oversight of climate change risk significantly strengthened:
Disclose the Board’s oversight of (page 74); —— In 2020 ESG was overseen by the Board through the Group
organisation’s climate-related risks Response to Nomination & Governance Committee.
governance around and opportunities. climate-related —— In early 2021, the Board established a Responsibility & Sustainability
Strategic report
climate-related risks risks (page 88) Working Group until May 2022 in order to ensure an appropriate
and opportunities. level of Board engagement in, and oversight of, ESG matters
(including climate change).
—— Board Risk Committee workshop held to evaluate the climate change
risks facing the Group, discuss transition and physical risk concepts
and review potential Key Risk Indicators (KRI).
b) Describe Oversight of ESG; Management oversight enhanced:
Governance
management’s role Governance (within —— Group ESG Committee established to oversee ESG (including
in assessing and the Responsible climate-related risks), chaired by the Group Chief Financial Officer
managing climate- Investment section) and Chief Operating Officer, supported by senior functional leaders
related risks and (page 101) and representatives from the Group’s business units.
opportunities. —— Work is under way to bring climate risk into the scope of other
relevant governance structures, such as the Group Responsible
Investment Advisory Committee (GRIAC) that provides overall

review and recommendations for policies on responsible investment
activities including climate related investment strategies.
—— The Technical Actuarial Committee (TAC) is responsible for setting
the methodology for Prudential’s assets, liabilities and capital
requirements, which includes the consideration of climate change.
Strategy a) Describe the Approach to Risk identification work completed:
Disclose the actual climate-related risks climate-related —— The risk identification and scenario process has identified six major
and potential and opportunities risks (page 87); risk categories.
impacts of climate- the organisation Capturing
related risks and has identified over opportunities Opportunities identified to support climate change mitigation
opportunities on the short, medium, (page 90) and adaptation:
the organisation’s and long term. —— The Pulse digital health platform supports the surveillance and
businesses, strategy diagnosis of diseases that are becoming more prevalent due to
and financial climate change.
planning where —— Investment products include the Asia Sustainable Bond Fund
such information launched by Eastspring
is material.
b) Describe the Our ESG strategy New ESG Strategic Framework being rolled out:
impact of climate- (page 71); —— A new framework includes stewarding human impacts of climate
related risks and Response to change as a key pillar via decarbonising the investment portfolio

opportunities on climate-related and pursuing an inclusive transition. The strategy will drive and
the organisation’s risks (page 88); shape the Group’s overall response to climate change in future years.
businesses, strategy, Supporting an
and financial inclusive transition Capacity building efforts continuing:
planning. (page 89); Next —— This includes membership of climate risk bodies, such as Climate
steps (page 90) Action 100+, and investor initiatives (eg, the PRI in an asset manager
capacity).
c) Describe the Next steps Adoption of further targets under review:
potential impact of (page 90); —— Process underway to assess suitable targets in respect of the carbon
different scenarios, Capturing emissions from our investment portfolio.
including a 2°C opportunities —— Potential to explore further environmental/climate risk opportunities
scenario, on the (page 90) (such as the development of investment, insurance and digital
organisation’s products to support climate risk).
businesses, strategy,
and financial
planning.

Prudential plc
Pillar Recommended Response reference Additional comments

disclosure
Risk management a) Describe the Approach to Material climate change risks facing the Group have been identified
Disclose how organisation’s climate-related and assessed:
the organisation processes for risks (page 87) —— Relevant climate risks identified through the emerging risk,
identifies, assesses identifying and Group Principal Risk and Risk Identification processes.
and manages assessing climate- —— This output has been supplemented with an in-house analysis of
climate-related risks. related risks. transition risk across specimen insurance portfolios and a materiality
assessment undertaken in collaboration with an external consultant.
—— Initial stress test of the Group balance sheet carried out to establish
the broad quantum of financial exposure to transition and physical
and liability risk.
Policy surveillance and engagement/Peer benchmarking:

—— Regular monitoring of regulatory and policy initiatives globally
has been initiated.
b) Describe the Response to Climate-related risk is integrated into risk management
organisation’s climate-related considerations:
processes for risks (page 88); —— Developing metrics appropriate for the business, to support
managing climate- Next steps an enhanced management and reporting process of climate risk
related risks. (page 90); (eg WACI).
Responsible —— Analysis of the impact of climate change on capital modelling
Investment has been undertaken by Group Actuarial and submitted for
(Engagement) consideration by TAC.
(page 103) —— Regulatory change teams proactively adapting and complying with
regulatory developments.
—— Operational resilience relating to climate risks captured by the Group
Business Continuity Management programme.
—— Active engagement with carbon intensive companies
(including through industry collaborations).
c) Describe how Response to Further work to integrate climate-related risks in risk management
processes for climate-related processes under way:
identifying, risks (page 88); —— Climate risk treated as a cross-cutting risk that has significant
assessing, and Next steps interdependencies with, and impacts on, other risk types.
managing climate- (page 90) —— Engagement with insurance industry forums and data providers
related risks are to remain apprised of developments in this area.
integrated into the
organisation’s overall
risk management.
Metrics and targets a) Disclose the Response to Identification of potential metrics for measuring and reporting
Disclose the metrics metrics used by climate-related climate risk exposures completed:
and targets used the organisation risks (page 88); —— ‘Proof of concept’ identified a set of potential metrics that could be
to assess and to assess climate- Next steps used to assess and manage climate risk, including Weighted Average
manage relevant related risks and (page 90) Carbon Intensity (WACI).
climate-related risks opportunities in line
and opportunities, with its strategy and Work underway to report additional climate-related metrics:
where such risk management —— Appropriate metrics under consideration for each major asset class.
information process.
is material.
b) Disclose Scope 1, Environment Disclosures provided:
Scope 2, and, if (within Good —— Scope 1 and 2 emissions (market basis) declined by 13.4 per cent
appropriate, Scope 3 governance to 48,840 tCO2e.
greenhouse gas and responsible —— Intention to review our Scope 3 reporting boundaries and broaden
(GHG) emissions, business practices) these over time.
and the related risks. (page 114)
c) Describe the Next steps New environmental targets set:
targets used by (page 90) —— Target includes an aim to be carbon-neutral across Scope 1 and
the organisation Scope 2 emissions (on a full-time employee basis) by the end of 2030.
to manage climate- —— Process under way to assess suitable targets in respect of the carbon
related risks and emissions from our investment portfolio.
opportunities
and performance
against targets.
92 Prudential plc
B D E
Diversity, inclusion and belonging
Group overview
We are committed to building our human capital, seeking to empower
our people and unlock their potential. We do this by striving for
diversity in representation and thought, and fostering a culture of
inclusion and belonging within our organisation. During 2020, we
launched a new inclusive purpose statement: We help people get the
most out of life.
3. Strategic Pillar:
Strategic report
Diversity and inclusion strategy
In 2020, we established a Global Diversity & Inclusion (D&I) Council,
Building social capital co-chaired by our Group Chief Financial Officer and Chief Operating
Officer and Group HR Director, with representation from colleagues
We are committed to building both our own human capital and our across the Group. The Council replaces regional advisory committees
social capital with our broader stakeholders. We do this by promoting and groups. During 2020, we also appointed our first Group Diversity
diversity in representation and thought, and fostering a culture of & Inclusion Director to help support our ambition in this area. The D&I
inclusion and a sense of belonging within our organisation. As an Council is responsible for defining our global D&I strategy and
Governance
organisation, we depend not only on the trust of our people, but also supporting programmes, promoting and championing D&I initiatives
the trust of the external world. As we develop our digital capabilities, in respective business units and challenging the organisation when
we prioritise digital responsibility throughout our organisation. progress is limited. The Council reports to the Nomination &
Our focus on the needs and interests of our users is central to our Governance Committee twice a year.
investment in new technologies, shaping how we interact with them
and handle their personal data as our capabilities progress.

Case study
Defining inclusive leadership

behaviours
During 2020, as part of its commitment to establish
inclusive leadership at all levels, the Global D&I Council
held a workshop with representatives from across our
businesses in order to define our inclusive leadership
behaviours. The workshop concluded with a panel session
with external speakers, entitled, ‘Leaders make change
happen’. Our inclusive leadership behaviours are to:
—— Nurture inclusion – seek out and embrace diverse

perspectives;
—— Cultivate transparency – provide visibility and display
authenticity and vulnerability;
—— Actively sponsor – recognise, develop and support
talent;

—— Drive accountability – take personal responsibility for
behaviours and outcomes; and
—— Demonstrate care – demonstrate genuine care and
interest in others.
These behaviours have been embedded into our

leadership development frameworks and senior
leadership recruitment processes, as well as into our new
values. During 2021 we will continue to reinforce inclusive
leadership and behaviours in development and training
interventions to help our leaders and people to understand
and embed the behaviours we wish to promote. We will
also focus on embedding inclusive leadership traits into
performance management objectives to reward the
behaviours that strengthen belonging and enhance
inclusion. Inclusive leadership behaviours will also form a
part of our assessment of candidates during the

recruitment process.

Prudential plc
Our previous Group-wide D&I focus placed emphasis on attributes In line with our new D&I Charter, a number of initiatives have taken
of diversity such as gender, ethnicity, nationality and experience. place during 2020 to improve inclusivity at Prudential. We have
During 2020, the Group has also focused on inclusion, which conducted a review of recruitment processes, with a new Group
represents the extent to which employees feel valued, respected, Recruitment Policy embedding D&I measures to be introduced in
encouraged to fully participate, and able to be their authentic selves. 2021. We are working to mitigate bias in recruitment practices by
reviewing the language used in job descriptions and by using more
The Council has established a global D&I Charter with the goal to objective selection tools. During 2020, Jackson doubled the period
empower employees and create a sense of belonging by respecting of paid parental leave available to all new parents and quadrupled the
and appreciating differences. The Charter is aligned to our purpose benefit to cover adoption expenses. Parental leave arrangements in
and states that the Council will deliver our purpose by creating Asia were also reviewed, with changes including an increase in the
a culture in which diversity is celebrated and inclusion assured, period of paid leave by a third and the introduction of paid leave
for our colleagues, customers and partners. when an employee becomes a parent through adoption or surrogacy.
Our HR function has formed a working group with our Risk function
The Charter makes the following commitments: to more visibly encourage ‘speaking up’ and to find constructive
—— D&I approach to be clear and public; ways to call out non-inclusive behaviour. This complements our new
—— Establish inclusive leadership at all levels, role modelled Consensual Relationship Policy and Discrimination and Harassment
from the top; Policy, both of which apply from January 2021. These policies
—— Illustrate how inclusive leadership drives innovation reflect our continuing commitment to a professional and supportive
and supports greater connectivity; working environment, where everybody is treated fairly, has equal
—— Inclusion to be integral in the Prudential values which guide opportunities, and is respected and valued for their contributions
behaviours; to our Company.
—— Reshape our recruitment, reward and recognition programmes
to eliminate bias; D&I performance
—— Engage suppliers and corporate partners committed As a signatory to the HM Treasury Women in Finance Charter since
to inclusive practices; and 2016, we have a target of 30 per cent women in senior management
—— Product offerings which address the diversity of our by the end of 2021. At 31 December 2020 this figure was 32 per cent.
customer needs. The Hampton-Alexander Review set recommendations in 2016 for
FTSE 350 companies to achieve a minimum 33 per cent target for
women on boards and in the two layers of leadership below the board
by the end of 2020. At the end of 2020, 29 per cent of our Board was
The D&I Charter also outlines our Group D&I Policy, which aims to made up of women.
actively promote employee diversity and provide equal opportunities
to all who apply for and those who perform work within our While we did not meet recommendations of the Hampton-Alexander
organisation, including our Directors. The policy applies to all of Review as at 31 December 2020, Shriti Vadera replaced Paul Manduca
our business units and promotes diversity irrespective of sex, race, as Chair on 1 January 2021 and Chua Sock Koong and Ming Lu will
age, ethnic origin, social and cultural background, marital or civil be joining the Board in May 2021. With these changes, following the
partnership status, pregnancy, maternity and paternity, any gender retirement of Kai Nargolwala at the AGM, the representation of
reassignment, religion or belief, sexual orientation, disability, or women on the Board will increase to 36 per cent. We have met the
part-time/fixed-term working arrangements. The policy also promotes recommendation of the Parker Review to have at least one director
diversity of experience, skill sets and professional backgrounds and from an ethnic group background on the Board. While our diversity
is reviewed annually by our Group HR Director. We give full and fair figures have improved year-on-year, we recognise that we have more
consideration to applications for employment made by disabled to do in this area. As such, during 2021 we will establish new diversity
persons and make appropriate arrangements for continuing the targets and our local business units will define their own targets and
employment of, and arranging training for, employees who have plans to meet these objectives.
become disabled. We seek to promote the training, career
development and progression of disabled persons, making appropriate During 2020 we again submitted responses to the ShareAction
adaptations where required. Chief Human Resource Officers across Workforce Disclosure Initiative and the Bloomberg Gender Equality
our business units are responsible for the implementation, monitoring Index, being listed on the 2021 index for the first time.
and review of the policy locally and, as part of the management of the
Group Governance Manual, each business unit confirms to Group HR
that it has complied with all of our HR policies, including the D&I Policy.
94 Prudential plc
Due to Covid-19, activities of the affinity networks at Prudential in
Group overview
Prudential headcount as at 31 December 2020 2020 were limited, although some key events did take place. Across
various locations, Prudential Corporation Asia’s PruPride network
Gender diversity: senior management once again hosted a Pink Day in October, with active participation in
Hong Kong, Vietnam, Taiwan, Cambodia and Thailand. A women’s
Male Female
network event with a virtual panel session in September, attended
68% 2020 32% by 185 colleagues on the topic ‘Leaders make change happen’,
was hosted by Group Human Resources Director Jolene Chen
Strategic report
and Non-executive Director Alice Schroeder. Our new Board Chair,
72% 2019 28% Shriti Vadera, hosted an in-person networking event in November
with Eastspring colleagues in Singapore. Jackson’s business resource
71% 2018 29% and affinity groups (BRAGs), each supported by one or more executive
sponsors, continued their activities through the year: Pride (LGBT+);
75% 2017 25% VIBE (Vision in Black Excellence); Jackson Young Professionals;
Empower (women’s network); Enable (for disabled people); and
Associates-in-motion (for pre-retirees). A focus for 2021 is to enhance
Governance
83% 2012 17% our governance procedures and structures for affinity networks to
support them through a global engagement programme to enhance
employee engagement globally, regionally and locally.
Racial justice – Jackson’s response to the killing of George Floyd

Gender diversity: all employees In the aftermath of the killing of George Floyd in late May, the US
Non- Undis- Unspeci-
experienced protests that raised awareness and heightened

Headcount Total Male Female binary closed5 fied4 discussion of issues related to racial bias, structural racism and social
Chair1 and justice. The ramifications of these events have broadly impacted
Independent society, including the business community and Jackson directly.
Non-executive Jackson’s leadership has actively engaged with associates on these
Directors 11 7 4 0 0 0 issues and continues to engage on this issue.
In the week following the killing of George Floyd, Jackson’s D&I

Advisory Council held meetings with the Visions in Black Excellence
Executive
(VIBE) affinity group and senior leaders to discuss the impact on
Directors 3 3 0 0 0 0
associates and Jackson’s response. Jackson-wide communications
from Jackson’s CEO reinforced the message of ‘One Jackson’ and
Group Executive encouraged associates to support each other. Jackson hosted a series
Committee (GEC) of all-associate panels and training opportunities, including a
Includes Executive ‘Listening to our Peers’ panel to hear associates’ experiences with
racism. Jackson and VIBE also held a celebration for Juneteenth and
Directors 7 6 1 0 0 0
the PRIDE affinity network hosted a discussion with Liliana Reyes,
a Latinx, transgender woman and civil rights activist.
Senior Managers 2
Jackson also introduced two training courses that were mandatory
Excludes the Chair1, for all associates. The first addressed the stereotype threat that
all Directors and exists when actions, conscious or not, contribute to persistent racial
GEC members 114 77 37 0 0 0

segregation. The second addressed the impact of affinity biases
that influence workplace choices, based on perceived similarities
and differences.
Whole Company 3
Full Time Jackson also made charitable contributions of $250,000 to NAACP
Equivalent Lansing Chapter, $100,000 to Urban League of Middle Tennessee, and
Includes Chair1, $100,000 to Facing History and Ourselves in Chicago. This investment
all Directors, GEC signals Jackson’s commitment to local philanthropy, which presents
members, Senior an opportunity to further engage Jackson’s affinity groups as partners
Managers 18,687 8,182 10,326 5 28 146 in equitable community involvement.
Employee engagement
Engagement with our people is a key priority for Prudential and
the Board. Two of our Non-executive Directors, Kai Nargolwala
Notes for Asia and Africa and Tom Watjen for the US and the UK, were
1 Chair has since been replaced with a female starting 1 January 2021. appointed to represent the interests of our people, a duty which they
2 The definition of Senior Managers in 2020 has changed and the number of
discharged through a range of interactions with staff during 2020. While
Senior Managers has doubled compared to 2019 after the recategorisation.

The 2020 Senior Managers definition includes the local business unit CEOs, the Covid-19 pandemic limited opportunities for our Non‑executive
Chief Officers and other business critical staff. Directors to interact with our people, a number of face-to-face meetings
3 Excludes Prudential Corporation Asia Joint Ventures. in small groups took place. Non-executive Director engagement was
4 No specification or information is captured on gender for an immaterial number
of our employees. These employees are recorded as ‘unspecified’. supplemented with virtual events and our Non-executive Directors also
5 In some of our businesses, we provide our employees with the option to not met colleagues through an array of remote events, including the Asia
disclose their gender. For these employees, gender is recorded as ‘undisclosed’. Virtual Regional Conference, staff town halls and meetings of the
Jackson Diversity & Inclusion Council and the Global D&I Council.

Prudential plc
B E

Case study
Collaboration Jam
Our global employee survey highlighted employee
communication and collaboration as an area for
improvement. To further engage our people in defining our
values as well as to signal our intent to foster open, honest
and two-way dialogue across the Company, we hosted a
Collaboration Jam in September 2020. A three-day inclusive
online conversation, the Collaboration Jam provided a
platform for colleagues to connect and co-create solutions for
the issues that matter most to employees. More than 5,400
colleagues participated, resulting in nearly 30,000 comments
and posts. The most popular discussion threads were ‘Open
Conversations’, ‘Listening to Others’ and ‘Change and
Agility’. Building on this activity and the progress made to
date, we will commence a three-year journey to embed the
desired culture and position Prudential as a place where
people can connect, grow and succeed. Another global employee survey was undertaken in January 2021
to help assess the effectiveness of actions taken during the year and
to highlight our focus areas for 2021. We have made notable progress
in many areas, including learning, feedback and recognition, and
diversity and inclusion. Collaboration and communication was our
most improved factor, up by 7 percentage points.
Following Kai Nargolwala’s retirement as a Non-executive Director at
the conclusion of the 2021 Annual General Meeting and the planned Leadership and talent development
separation of the Jackson business, the Board intends to transfer To ensure appropriately targeted leadership and talent development
responsibility for workforce engagement activities to its newly initiatives, we define various leadership and talent segments across
established Responsibility & Sustainability Working Group, which is our Group. Our senior leaders continue to play a critical role in driving
expected to operate until the 2022 Annual General Meeting. As part strategic initiatives, which advance the Group’s strategy and culture
of this, it will also consider the best method for employee engagement across our markets, business units and functions. To future-proof our
in the longer term, to ensure this is tailored to the culture and strategic success in an increasingly digital environment, we have redefined the
priorities of the refocused Group following the planned separation leadership capabilities that we need to drive the business, focusing
of the Jackson business, and make a recommendation to the Board on inspiring followership when teams work both remotely and from
for implementation following the 2022 Annual General Meeting. an office; fostering innovation by enabling disruption while ensuring
psychological safety; delivering at pace and scale through digital and
Global employee survey agile practices; and developing sustainable commercial strategies to
We are committed to building a culture that is purpose-led, deliver aggressive business growth with social responsibility.
customer‑focused, and digitally-savvy. In May 2020, we conducted
an engagement survey to establish a baseline of cultural health and Within the leadership community, we focus on the Executive Council
validate our proposed purpose and values in a bottom-up manner. and the Senior Management Teams (SMTs). The Executive Council
is a small group of individuals holding pivotal Group roles and with
The survey was conducted using an industry-leading employee key capabilities for our future success. During 2020, we held
engagement platform that provides a range of surveys and broad virtual workshops with this group on positive resilience, creating
global benchmarks across industries. More than 11,400 employees psychological safety and sustaining team engagement in a remote
from Asia, Africa and the UK participated in the survey, producing setting. For the SMTs, we held culture workshops to mobilise teams
a 95 per cent response rate. In the US, Jackson carries out its own around our shared purpose and to deepen trust and collaboration.
employee survey and was therefore not included in this survey. We also provided a new performance coaching programme for 120
of these leaders to specifically develop their coaching skills for remote
The engagement survey covered topics including leadership, settings, to help them better engage and empower their teams.
communication, innovation, career and work-life balance. The survey
design was based on academic research and good practice among We have focused on capability building within our key talent pools.
organisational psychologists. The survey found that 85 per cent of We conduct an annual talent review and identify successors for
colleagues are proud to work for Prudential. Areas for improvement executive and senior leadership roles. To support this, during 2020
include communication, collaboration, feedback and work-life balance. we defined critical success profiles for senior leader roles. These were
used to design our new Executive Development Centre, which will
Following the survey, briefings were conducted for the Group specifically target the business unit CEO pipeline. The critical success
Executive Committee as well as the two Non-executive Directors profiles have also been used to adapt our existing assessment centres
responsible for workforce engagement. The Board received an across our talent pipeline.
update on the survey results in July 2020 and summary briefings
were provided to stakeholder groups across the Company. Each local For those identified as our most strategic talent pool, typically those
business unit has now undertaken detailed action planning in response who are currently SMT and have potential to grow to larger roles and
to its results. Group-wide actions include the launch of a science- be successors to our Group Executive Committee roles within five
based mental health and wellbeing app, the Collaboration Jam years, we have focused on ensuring they have exposure to Group
(see case study) and the strengthening of Speak Out, our Group-wide strategic projects and expanded role responsibilities, and are provided
whistleblowing programme. with specific, tailored development interventions, where appropriate.
96 Prudential plc
In January 2021, we launched a three-year Sponsorship Programme In 2021, we will focus on continuing to broaden our talent pipeline
Group overview
matching our most senior leaders to protégés, identified through our and on building an environment where talent can most easily access
talent review process, enabling a more diverse talent pipeline to gain the opportunities that match their aspirations. With increasing
visibility and be considered for stretch opportunities and roles. digitalisation and the need for digital skillsets and capabilities, we
During 2021, we also plan to provide an experiential culture leadership are providing our people with comprehensive training and learning
journey to around 200 of our senior leaders, with the aim of developing opportunities to help them upskill, cross skill, and even reskill
the behaviours needed to help build an inclusive culture and to create themselves to maximise their potential.
a space where our values can be actively demonstrated by everyone.
Strategic report
Performance and reward
We have also taken steps to deepen our functional talent pipeline and We structure our reward arrangements to attract, motivate and retain
to accelerate the development of potential successors. Actions taken high-calibre people. Our people contribute to the success of the
include the creation of a CFO development programme to accelerate Group and are rewarded accordingly. We recognise and reward
identified business unit CFO successors and the provision of role high performance and are committed to a fair and transparent system
expansion and enrichment opportunities for senior leaders in Group of reward. Among our benefits, we offer employees competitive
Digital. Jackson has focused on ongoing leadership capability pension arrangements.
assessments for its identified successors and high-potential population.
Governance
Our UK business, Prudential Services Limited, has recently reported
Where internal successors are not apparent, we aim to attract and its 2020 UK Gender Pay Gap data and details can be found on the
retain the best talent across industries, irrespective of generation, Group’s website (www.prudentialplc.com/esg). Three of the four
culture or gender. We have further adapted our hiring practices to gender pay gap figures have increased in 2020, largely driven by the
minimise unintentional systematic bias. Practices such as artificial demerger of M&G plc, which saw a number of women in senior roles
intelligence-assisted job description/advertisements, use of transfer to M&G. The pay gap remains volatile year-on-year due to the
psychometrics to evaluate fit to purpose and values, criterion-based small number of colleagues employed by Prudential Services Limited,
interview methods with diverse panels, and a diverse candidate slate which makes the calculation sensitive to any changes in roles. While

have all been introduced in key markets with wider roll-out through female representation in our leadership roles has increased from
the introduction of our Recruitment Policy in early 2021. 25 per cent in 2017 to 33 per cent in 2020 in our London Head Office,
the continuing pay gap reflects the fact that we have more men than
We have continued to support and encourage mobility in our women in leadership roles.
organisation to facilitate the sharing of knowledge and experience.
Notwithstanding challenges from Covid-19, more than 100 people Remuneration is linked to the delivery of business goals, our values
moved between our businesses in 2020. Specifically in our insurance and expected behaviours. We ensure that our rewards for our people
growth markets, where this is a strategic priority, we held a virtual do not incentivise inappropriate risk-taking by assessing employees
talent expo to introduce each business and its job opportunities. on ‘what’ they have achieved, and on ‘how’ they have done so.
Case study
Supporting our people through

Covid-19
While the Covid-19 pandemic unfolded at different times

and with varying levels of impact across our markets, all parts of
the business were devoted to ensuring the physical, emotional
and social health and safety of our people, taking into account
employee preferences during this time. Almost all employees
spent at least part of 2020 working remotely, in line with local
restrictions and guidance. Asia has established a mental health
strategy, emphasising virtual connections, as well as community
engagement as part of our commitment to diversity and inclusion.
Jackson and our London office have offered regular sessions on
different aspects of wellbeing and stress management. To
coincide with World Mental Health day, we held our first global
wellbeing day in October. This consisted of a series of online
sessions across all time zones, including a session in which our
leaders shared their own stories about mental health challenges
they have faced. The Board has received regular updates from
management on how our people have been supported. Beyond
this, it is essential that the Group reacts to the trends in workforce

expectations that have been intensified and accelerated by the
pandemic, particularly around new and more flexible ways of
working. Each business is exploring how we can meet the
expectations of existing and future staff about flexibility
around schedules and location.

Prudential plc
The Jackson High Five Recognition Program enables individuals Digital responsibility
to recognise their colleagues in areas of creativity, empowerment, Digital innovation is central to our aim of helping our customers
execution, impact, investment in relationships and respect. In our to be healthier and wealthier. We are ambitious and we act with
London office, Angel Court, the Prudential Stars awards enable integrity with regards to digital responsibility. We are resolute in
individuals to nominate colleagues, recognising examples of our commitment to fairness, safety and transparency in the design,
exceptional contributions, specifically in the areas of delivering governance and operation of our digital ecosystem.
synergy, adding value, fostering innovation, demonstrating
stakeholder focus and maintaining risk awareness. Digital responsibility and Pulse
We are committed to providing robust security protection over both
We are committed to paying the London Living Wage to permanent our Pulse app and customer data. Using the Monetary Authority of
and temporary employees, and to contractors who regularly work at Singapore’s regulations as a leading standard, we have developed a
our premises in the UK. We also believe in the importance of giving master set of security controls, from which the core security features
employees the opportunity to benefit from the Group’s success have been integrated into our Pulse app. These include multi-factor
through share ownership, and operate share plans for employees in authentication as part of the device registration process, mandating
the UK and Asia. This includes the award-winning PruSharePlus plan, minimum mobile device operating systems versions, prevention
which enables employees in Asia to share in the longer-term success of jailbroken and rooted devices from using Pulse, and the secure
of the business and actively encourages share ownership and transmission and storage of data.
engagement. Similar all-employee share plans operate in the UK.
Our Pulse ecosystem relies on partnerships with a range of third
Executive remuneration parties. All business partners we engage go through a detailed due
The Group’s executive remuneration arrangements reward the diligence process to ensure that they meet our high standards on
achievement of Group, business, functional and personal targets, data security and protection requirements. We conduct information
provided that performance is aligned to the Group’s risk framework security and privacy impact assessments as part of the third-party
and appetite and that our conduct expectations, as well as those of our management process to ensure that robust security and privacy
regulators and other stakeholders, are met. Extensive information on controls are in place for all of our ecosystem partnership engagements.
executive remuneration is provided into the Directors’ remuneration
report within the Annual Report. To align the range of regulatory expectations and requirements
across our businesses relating to customer privacy, we have
In light of the Covid-19 pandemic, the Executive Directors agreed developed the OnePulse Privacy Framework (OPF) to standardise
to voluntarily forgo their 2020 salary increases. On 1 April 2020, the implementation of privacy controls. Referencing the General Data
Executive Directors’ salaries were reduced to their December 2019 Protection Regulation (GDPR) requirements, the OPF outlines the
level. In May 2020, Executive Directors’ pension benefits were mandatory and configurable controls to be built into our Pulse app,
reduced from 25 per cent of salary to 13 per cent of salary, aligning covering data subject rights, customer consent and privacy notices.
Executive Directors with the employer pension contribution available More information about our approach to privacy is available below.
to the UK-based workforce.
Data within our digital ecosystem is treated the same as all data in our
As part of the three-year cycle, we presented an updated Directors’ organisation and is governed by the Group-wide Information Security
Remuneration Policy at the 2020 Annual General Meeting and Policy and Group-wide Privacy Policy. Pulse collects information about
received the support of 95.8 per cent of shareholders in a binding vote. users in order to provide relevant services to them, which includes
contact details, facial recognition information for log-in and fitness
In order to strengthen the community of interest between executives information from the user’s wearable devices. Health-related
and other shareholders, remuneration is linked to sustained information is collected by our health partners (such as Babylon)
performance over the longer term. For example, 40 per cent of directly and Prudential will only receive a user’s health information from
Executive Directors’ bonus is deferred in shares for three years. our health partners with the user’s explicit consent. All information
Executive Directors are required to meet shareholding guidelines collected is transparent to the user through the Privacy Notice
and a two-year holding period applies to long-term incentive awards provided to them before user registration.
in addition to the three-year performance period. The 2020 Directors’
Remuneration Policy requires departing Executive Directors to retain Information security
a substantial interest in the Company’s shares for two years after they Information security is rated as a principal risk in our business,
leave the Board. demonstrating our continued commitment to securely managing
the information our customers entrust to us.
To further increase transparency of executive remuneration and its
alignment with the pay of other employees, we published our CEO pay During 2020 we embedded a single Group-wide information
ratio one year in advance of the disclosure becoming a requirement security team leveraging skills, experience and resource globally
under the UK Companies (Miscellaneous Reporting) Regulations 2018 via a ‘centres of excellence’ model. This new model supported
in the 2018 Directors’ remuneration report. Further information on our increased collaboration and sharing of skills across the whole Group.
CEO pay ratio is detailed in the Directors’ remuneration report within
the Annual Report. The global model has allowed us to consolidate and rationalise
information security technologies and processes across the Group,
enabling security services to become more consistent and effective.
This is critical to our business as it ensures the appropriate assessment,
management and assurance of all third parties with the potential to
manage or impact Prudential Group data or systems.
98 Prudential plc
Group overview
Case study
Response to challenges posed

by Covid-19
The Covid-19 pandemic has resulted in a large-scale move
to remote working, significantly changing the working culture
Strategic report
for staff and agents, as well as the way we engage with customers.
In response to these new ways of working, we scaled up secure
remote access, including VPN services, in the early stages of
the pandemic. Additionally, Prudential has leveraged existing
collaboration toolsets and capabilities, which have been
integrated with security services to enable more secure and
efficient team working.
Governance
As part of the change to remote working practices, Prudential
undertook a reassessment of all employee laptops to ensure that
secure remote working software had been correctly deployed and
configured. In addition, the assessment reviewed and ensured that
all laptops are protected against known vulnerabilities, and a more
stringent approach for remote access has been adopted. During
2020, phishing campaign frequency was increased to monthly.

A refreshed Global Information Security Policy came into effect in Simulated phishing emails are tailored within regions and the
2020 and was applied to all Group business units to ensure consistency sophistication of the techniques varies to ensure that staff
in processes. The policy is mapped to numerous international and are continually challenged to learn. The results of these campaigns
local standards including: and training completion rates are tracked across the Group to
ensure that this remains an area of focus.
—— ISO27002;
—— NIST Cyber Security Framework;
—— The New York Department of Financial Services Cybersecurity
Regulation;
—— The Monetary Authority of Singapore Guidelines on Technology
1. Automation
Risk Management;
—— The Hong Kong Insurance Authority Guideline on Cybersecurity; Automation allows us to increase the speed and scale of our defences
and and reduce the need for human interaction in a number of incident
—— The Bank Negara Malaysia Risk Management in Technology Standard. types. This frees our team to focus on more challenging initiatives
and on continuously maturing our security and privacy disciplines.
This supports our global approach to security and our commitment
to protecting the data entrusted to us by customers across our global Throughout 2020 we have continued to focus on automating security
footprint. The policy is also supported by a suite of technical standards. services to increase effectiveness and consistency and create
Our Security function retains its overarching commitment to protect efficiencies. As part of our approach to continuously integrate and
the business, comply with all applicable laws and regulations, and deploy new tools into our Pulse ecosystem, we have introduced
automated security testing toolsets. These help to ensure that security

support the growth of the Group securely.
is integrated into the development life cycle from the beginning of
Oversight and governance of information security the process, providing early feedback about any vulnerabilities.
The Group-wide Information Security and Privacy Committee defines
and provides governance and the risk management framework for 2. Global Security Operations Centre (SOC)
information security risks across the Group. This Committee meets A global SOC is in place to provide 24-hour threat and incident
at least quarterly and is a sub-committee of the Group Executive management and provides consistent, appropriate 24-hour support
Risk Committee (GERC), chaired by the Group Chief Risk and to our global businesses in the case of any suspicious event.
Compliance Officer. We retain membership of various intelligence-sharing networks,
As a standing member of the GERC, the Group Chief Information such as the Financial Services Information Sharing and
Security Officer (CISO) provides regular updates to the GERC and the Analysis Centre, and maintain industry relationships to support
Group Risk Committee on the cyber threats facing Prudential and the intelligence-sharing through our network of connections.
progress of Prudential’s security programme. On a half-yearly basis, The function of the Cyber Threat Intelligence team is to assist our
the Group CISO also holds a dedicated session with the Group Risk teams and businesses in understanding the cyber threats we face
Committee to enable a more in-depth discussion on the cyber risk and to focus on providing actionable intelligence. The ultimate goal
facing Prudential.
of the intelligence provided is to guide our decisions to ensure the

Our Group-wide framework for information security most relevant and impactful risks for our business are addressed.
The Group-wide framework for information security rests on four 3. Accelerate development of people skills
key tenets to defend and protect the Group, our information and Our staff are critical to protecting the information entrusted to us by
our customers’ data. These are 1) automation, 2) Global Security our customers. Consequently, information security awareness training
Operations Centre, 3) accelerate development of people skills and is an integral component in ensuring that our information and systems
4) continuous improvement.

Prudential plc
remain safe. All members of staff, including temporary staff, across all Our Group Privacy Office continues to maintain oversight of privacy
our businesses are mandated to complete this training at least annually. compliance. The office works with our businesses across Asia, Africa
Training is provided locally to support local languages and reflect any and the US to support and advise on ongoing privacy compliance as
local regulatory and legal requirements, and completion is tracked well as to provide a point of escalation for resolving data privacy issues.
within each business. The artificial intelligence skills of our digital Privacy is integrated within the Group-wide Information Security &
security team are assessed and further development opportunities Privacy team, which reports to the Group CISO, giving coverage of
are provided to them. each region and the different countries in which Prudential operates.
We have rolled out a programme across the Group to support AI ethics and governance
information security staff through Certified Information Systems While the use of artificial intelligence (AI) could bring tremendous
Security Professional (CISSP) training and accreditation. The CISSP benefits, we are aware of the potential risks in deploying AI. Our Global
is one of the most highly regarded professional accreditations for AI Council, chaired by the Group Chief Digital Officer, is responsible
information security worldwide and covers a broad scope of security for oversight of AI tools and their implementation in our business. The
domains. The programme began in Jackson and has now been Global AI Council meets quarterly and includes a number of working
extended across the Group-wide Information Security team, with over groups, which review all projects incorporating AI and machine
40 members of the full-time security team across the Group holding learning across our business units before they receive approval.
the CISSP certification.
During 2020, we developed a set of AI Ethics Principles, reviewed
Throughout the year our Non-executive Directors have access to by the Global AI Council. The principles were approved by the
one-to-one training, often delivered by the Group CISO, on topics Group Risk Committee, on behalf of the Board, which retains ultimate
including cyber threats and privacy. This ensures that they can not only responsibility for setting the Group’s ethical standards. These
protect themselves and the information they handle on a daily basis, principles sit alongside our Group Code of Business Conduct and
but also engage in Board-level oversight of information security risks set out the standards expected of our colleagues responsible for
from a more informed and confident position, something we consider designing, developing and operating complex applications.
to be essential to the oversight of our strategy and risk management.
The principles are:
4. Continuous improvement Given the rapid evolution of threats, the
security and privacy disciplines need to be in a state of continuous —— Effectiveness and value – we design tools with a clearly defined
improvement across the three dimensions of people, process and purpose to deliver value for our stakeholders;
technology. The model to measure the maturity of our security and —— Explainability and transparency – we are transparent that AI tools
privacy programme has been completed, with progress being made on are used as part of our products and services and explain this
rationalisation and optimisation of technology solutions. simply;
—— Bias and fairness – we ensure that AI treats people fairly to avoid
The success of our information security programme is measured from bias and unfair discrimination;
both an internal and external perspective. Externally, benchmarking is —— Robustness – we design AI tools that are highly reliable and robust;
conducted regularly to ensure that Prudential’s cyber security maturity —— Compliance – we comply and respect relevant regulations,
level is above the industry, and internally we assess the organisation’s including human rights laws;
compliance level against the defined security controls as per our —— Accountability and responsibility – we accept accountability
Group Information Security Policy and Group Privacy Policy and and responsibility for the outcome of the use of AI tools;
relevant standards. Security metrics, which measure the level of —— Privacy and security – we respect user privacy and security; and
robustness of our security controls, are generated on a monthly basis —— Assurance – we continuously review and monitor our AI
to enable the organisation to respond and adapt to any potential deployment and outcomes to ensure that these principles are met.
adverse changes in our security position.
The Global AI Council is supported by six working groups:
Incident response and resilience
While our aim at Prudential is always to prevent incidents wherever 1. Products and pricing – to drive the automation of actuarial work;
possible, we must ensure that we are prepared to respond to any 2. People – to upskill and certify the AI capabilities of all Prudential
incident in a timely and effective manner. Incident response plans employees;
are developed, maintained and tested regularly, and the Group
Information Security & Privacy team maintains a close working 3. Data – to align with Prudential’s data governance and management;
relationship with the business continuity and disaster recovery teams 4. Technology and platform – to review and approve AI technology
to ensure alignment of plans and support in the event of an incident. and supplier choices;
Regular scenario-based testing of these processes serves both to
5. IP – to safeguard Prudential’s AI intellectual property; and
confirm the effectiveness of the plans and provide assurance that staff,
including senior executives, are prepared for such an event. 6. Ethics – to approve AI prototypes for compliance with Prudential’s
AI Ethics Principles.
Privacy
In 2020, a key focus was on driving consistency of approach to the As we invest in AI, big data and other technologies to deliver on our
management of data privacy issues in order to embed high standards purpose, we are providing everyone in the organisation, regardless of
across the Group and ensure compliance with the Group Privacy their roles, with opportunities to learn more about these technologies,
Policy. This was supported by the roll-out of a global privacy so that they can participate and contribute to helping our customers.
management platform across the Group to assist with management For those who want to advance further, we have created an AI
of privacy activities and to automate privacy control assessments Bootcamp, consisting of a five-level certification process, which covers
where possible. Activities also took place to enhance and embed advanced AI, machine learning, data analytics, as well as AI use in
processes to ensure compliance with regional and local privacy healthcare and finance. An overarching theme of the bootcamp is
requirements, including the California Consumer Privacy Act, AI for good and helping families and communities in need.
which took effect on 1 January 2020.
100 Prudential plc

A D

Group overview
As a significant allocator of
capital in financial markets,
4. Strategic Enabler: our commitment to responsible
Responsible investment investment encompasses our
Strategic report
As a significant allocator of capital in financial markets, our commitment role as both asset owner and
to responsible investment encompasses our role as both asset owner
and asset manager. In that capacity, we play a vital role in the transition asset manager. In that capacity,
to a lower carbon economy. We seek to apply ESG considerations
more broadly in our investment decisions and our fiduciary and we play a vital role in the
transition to a lower
Governance
stewardship duties, including ensuring that our investment decisions
are aligned with our values around diversity and support our primary
focus on healthy lives.
carbon economy.
Governance
As with other ESG matters, responsible investment activity is overseen
by the Group ESG Committee. More information on the Group ESG
Committee is provided in the report introduction.

Asset owner/asset manager relationship
Operational responsibility for responsible investment activity is
Historically, Prudential has adopted a principles-based approach
delegated to the Group Responsible Investment Advisory Committee
to coordinate responsible investment activity across the Group.
(GRIAC). The GRIAC is constituted as a sub-committee of the Group
These principles have been codified into standards, which are set out
ESG Committee and provides a forum for Group and business units to
in the Group Responsible Investment Standards (GRIS) and govern
consider responsible investment approaches. The GRIAC is co-chaired
the conduct of responsible investment activity across the Group.
by Prudential Corporation Asia’s Chief Investment Officer, Insurance
Investment and Co-CIO, Eastspring, respectively senior executives These principles set the tone and parameters under which the Group’s
within our main asset owner and asset management businesses. Other asset owner and asset manager businesses develop responsible
permanent members include the CIOs of the major life businesses and investment policies appropriate to the markets in which they operate.
the President, CEO and CIO of PPM, as well as representatives from
the Group Finance and Group Risk functions. During 2021, we will seek further to develop our asset owner
Responsible Investment Policy and align expectations across our
asset manager mandates, including how ESG considerations will
be monitored and measured over time.
Our approach to responsible investment reflects our belief that the

quality of corporate governance practices, and how companies
manage the environmental and social aspects of their operations,
are material to reducing risk and delivering superior financial returns
and, ultimately, longer-term shareholder value. It also recognises

that responsible investment requires a patient approach and an
understanding that changes in corporate behaviour should support
shareholder value over time.
Asset owner level Asset manager level

Direction Direction
Apply principles, standards and decision-useful framework Apply investor-specific policies and processes to meet requirements
to implement Group ESG strategy. of principles-based framework.
Activity/implementation Activity/implementation
Interpret Group ESG strategy with respect to responsible investment Asset manager to clearly articulate RI policies and approaches
principles. to Group-level approaches.
Identify and consider alignment to global standards and frameworks Asset manager demonstrates process consistency.
to inform the Group-level approach.
Define how frameworks will apply Group-wide.

Prudential plc
Case study
ESG integration case study:

Multinational car company
challenged to meet new
regulations
ESG consideration
During the review of a multinational automotive corporation
headquartered in Europe, PPM’s research analyst noted
concerns about the company’s ability to meet European
carbon dioxide emission standards, which could lead to
meaningful regulatory fines and negative consumer views
given the increasingly environmentally conscious consumer.
Despite what PPM believed was a solid company balance
sheet (strong net industrial cash position and significant gross
liquidity), its analyst viewed the company as behind other
automotive corporations in its investment in and development
of electric vehicles.
PPM analysis
Electric vehicle penetration gained momentum in early 2020
at the onset of Europe’s tougher emissions rules. Effective
1 January 2020, the rules imposed more stringent targets for
passenger cars and vans – based upon average fleet-wide
carbon dioxide emissions (g/km).
PPM’s research team discussed the issue in detail during an

investment grade review of the automotive industry that
assessed the company’s positioning among its peers. The
research revealed that the company had one of the largest
percentage gaps in reducing its year-on-year average
fleet-wide carbon dioxide emissions versus its peers and was
at the most risk of not meeting standards. While the potential ESG integration
monetary fines were viewed as manageable, the company We seek to integrate ESG factors into our investment decisions,
would be required to undertake significant investment in alongside traditional financial analysis, to better manage risk and
research and development to catch up with the leaders in the generate sustainable, long-term returns for our customers.
industry, or risk losing meaningful market share.
Within Eastspring, the Singapore-based equity team focuses on
Outcome exploiting opportunities where risk perceptions and expectations have
Considering all factors related to the risk and return of the become misaligned. ESG issues are incorporated into the fundamental
company, the changes to regulations, and the company’s analysis and decision-making process to the extent that the team
progress in developing electric vehicles and increasing its mix believe they could have a material impact on a company’s valuation
to meet emissions standards, PPM downgraded its internal and financial performance. Similarly, for the fixed income team, only
rating. Its analysts will continue to monitor the company’s ESG issues that are material to the issuer’s credit fundamentals and the
improvements toward emissions goals alongside company valuation of the bond are factored into the analysis. For both equity
fundamentals. and fixed income, companies are not excluded solely on perceived
ESG issues.
This approach to integrate only material ESG factors into investment

decision making does not preclude investment in sustainable
investment opportunities. For example, in August 2020 Eastspring
invested THB 1 billion ($30 million) in the Thai government’s inaugural
THB 30 billion sustainability bond. The bond carries a 15-year
maturity, with proceeds divided between a project to expand the
Mass Rail Transit System and to support various expenditures under
the government’s Covid-19 Rehabilitation Package.
PPM follows a broadly similar approach to Eastspring. ESG factors are

incorporated into the investment process where it is believed they may
have a material impact on the financial performance of the investment.
Investments are not automatically excluded at strategy or fund level on
ESG grounds. Rather, the manager works with clients, who will specify
exclusion lists unique to their ESG values and requirements.
102 Prudential plc

D
Stewardship and engagement Proxy voting
Group overview
As custodians of our customers’ assets, it is important that we act Alongside engagement, voting is considered part of the investment
in ways consistent with our stewardship responsibilities. This means process and the pathway to value realisation. It is therefore integral to
seeking to maximise the long-term capital growth of the assets our stewardship responsibilities. By exercising our votes, we seek both
entrusted to us, while remaining accountable to our customers for to add value and to protect our interests as shareholders. We consider
our actions and being aware of our duty to uphold their best interests the issues, meet company management if necessary and vote
when carrying out investment activities. We aim to meet these accordingly. Where possible, we seek to discuss any contentious
requirements in several ways, including: resolutions with investee companies before casting our votes in order
Strategic report
to ensure that our objectives are understood, and our votes will be cast
—— Pursuing an active investment policy that aligns engagement in the best interests of our investors and clients.
activity with the long-term investment thesis to hold the asset
in the portfolio; Where appropriate, we use third-party investment advisers to aid the
—— Treating shareholder voting rights as a valuable asset and seeking process of making proxy voting decisions. Both Eastspring and PPM
to vote all holdings; engage Institutional Shareholder Services (ISS), a fellow signatory to
—— Developing and adhering to principles of conduct governing our the United Nations-supported Principles for Responsible Investment
stewardship activities, including the fiduciary relationship with (PRI), to provide administrative assistance in connection with
Governance
customers; and voting proxies.
—— Ensuring that our approach to stewardship is aligned to best
practice. Notably, Eastspring is a member of International Corporate The policies and guidelines of the proxy advisers are periodically
Governance Network (ICGN) and its stewardship approach is reviewed to understand the nature of their recommendations and test
aligned with the ICGN Global Stewardship Principles and ICGN their compatibility with our requirements. However, specific policies
Global Governance Principles. It is also a member of the Asian and advice from the proxy adviser are not applied mechanically. We
Corporate Governance Network, which seeks to promote high always apply our judgement and decide how to vote on each resolution
on its merits in the context of the principles of our proxy policy.

standards of corporate governance across the Asia-Pacific region.
Engagement In Asian and emerging markets, proxy voting activity is commonly

Engagement is a core part of providing effective stewardship and an focused on governance matters, with fewer shareholder resolutions
important means of generating long-term value. We seek to encourage focused on environmental or social matters. However, our equity team
business and management practices that support sustainable financial actively vote and take any material ESG issues that have been identified
performance through constructive interaction, based on our in-depth into consideration.
knowledge of the companies and their business environment.
While our equity teams are typically supportive of company
Our approaches to engagement vary across our asset owner and management, where applicable we use proxy voting actively to signal
asset manager businesses, reflecting differences in local investment to management our expectations for improvement in behaviours.
practices and norms, and consistent with the Group’s principles-based
framework to coordinate its responsible investment activities. In 2020, Eastspring voted on 99.63 per cent of the total number of
However, within this broad framework, some common principles proxy votes in which it was eligible to vote. Eastspring voted with
and practices apply. These include: that engagement is an important management recommendations 90.33 per cent of the time and voted
way to identify material risks and opportunities to investment; that against management recommendations 9.67 per cent of the time.
maintaining a continuing and open dialogue with management is key Please refer to Eastspring‘s website for more information on its proxy
to building relationships, and thus effective influence; and, that voting record www.eastspring.com/about-us/responsible-investment.
collaboration with other investors (through bodies such as Climate
Action 100+ or the Asia Investor Group on Climate Change (AIGCC))
is a helpful way to amplify the effectiveness of our engagement activity

on ESG issues. The use of voting rights is also an important means
to signal investor preferences to company management and it is the
Group’s policy to vote on their holdings (see Proxy voting below).
The level of conviction to hold a particular investment can be impacted

by the results of engagement. Where conviction levels fall below an
appropriate level, the position may be divested. This was the case,
for example, with a recent engagement by Eastspring with a company
providing education services. During our engagements, the company
did respond with some improvement to their initial proposed corporate
governance. However we did not have a sufficient level of confidence
in the standard of governance or controls in place to avoid future
contentious proposals. Given the lower level of conviction around the
range of potential outcomes we felt there was insufficient valuation
support to compensate for observed risks and Eastspring exited
the position.
Both Eastspring and PPM undertake company engagements focused

on both financial and non-financial matters on an annual basis.
With respect to specific engagements related to material ESG issues,
Eastspring’s equity and fixed income teams have conducted over
300 unique engagements in 2020, in addition to engagement on
financial issues with companies.

Prudential plc
Engagement activity through 2020: Notable examples

In order to highlight the breadth of topics and engagements that have taken place, we provide a selection of recent engagement case studies
under the ‘Environmental’, ‘Social’ and ‘Governance’ headers. Often, the engagements span more than one ESG dimension, and where this
is the situation, the case study is allocated to the ESG category on the basis of a judgement as to which dimension is more material.
Environmental Social (labour rights, health and safety)

Case studies Case study
Global Emerging Markets Equity Team, Singapore: Malaysian Equity Team, Malaysia
Environmental engagement Company C is a large global glove manufacturer.
Company A, a Korean power company, is a valuation outlier and
has been a long-term holding, with which we have maintained Objective: To determine whether the company was putting
ongoing engagement. processes in place to improve labour practices.
Objective: Our engagement is aimed at understanding its Process: In June, we engaged with Company C following
long-term strategy around transition to a low-carbon economy, allegations of forced labour practices from a UK Channel 4 report.
to enable us to perform our fiduciary duties and decisions around We noted that these allegations, which were brought up in
proxy voting from a well-informed position. December 2018, had resurfaced and that the company had made
progress in rectifying these claims.
Scope: In 2020, we engaged with Company A in a discussion
about the company’s long-term strategy for dealing with carbon In July, we sought further clarification from management when
emissions. It shared that it has a long-term plan to increase the US Customs and Border Protection (CBP) placed a detention
renewable energy and to reduce dependence on coal-fired power order on disposable gloves manufactured by some of the
generation. We discussed the future of the power company’s company’s subsidiaries. Management shared that they had
overseas coal power projects and its commitment in October 2020 remedied some of the key issues, such as retention of identification
to not build any overseas coal plants going forward, but only documents, and were looking into the reimbursement of
energy-efficient, renewable-type plants. This is aligned with its recruitment fees.
commitments to grow renewable energy domestically, add no new We engaged again in November, following an accident that
coal power plants, start to close coal-fired capacity, and to invest resulted in the amputation of a worker’s arm. The purpose of this
in technology to reduce carbon emissions. Notably, the company’s engagement was to remind the company to take remedial actions
overseas coal project plants in South Africa and the Philippines are to keep workers safe and close gaps that may contribute to
being converted to liquefied natural gas (LNG) or terminated. accidents. Subsequently, it was uncovered that the worker had
Subsequently, we engaged with the company on its anti-corruption not followed the company’s standard operating procedure, which
policies. In response to corruption issues, it has responded by the company will investigate remedying with extensive education.
putting in place governance structures that include enhanced It has continued to improve its training programmes by adding
processes, training and monitoring. training in native languages, revamping on-site training to include
accident-prone areas, and increasing training hours.
Outcomes: Demonstrating a response through restructuring and
capital allocation towards renewable energy, and improvement Outcome: While we recognised that the company had made
to governance structures. significant improvement in labour market practices, we continue
to stress to management that, as one of the largest glove
manufacturers in the world, it needs to set better standards
Japan Equity Team, Singapore and be vigilant about ESG issues, and we will continue to engage
Company B is one of the world’s largest steel producers. with it on labour issues into 2021.
Objective: Our ongoing engagement since 2017 is aimed at
understanding the company’s position on three key issues:
carbon emissions and energy usage (including disclosure policies),
board governance and structure, and workplace safety.
Process: In 2020, our three engagement meetings focused on
potential structural change in the industry and the need to reduce
capacity, and progress in implementing new (hydrogen-based)
steel-making technologies. The team also discussed the potential
impact of recent regulation by the Japanese government aimed at
reducing coal-fired power generation capacity. The engagement
was also undertaken in fulfilment of our obligations as a member
of the Climate Action 100+.
Outcome: We observed that management was making good
progress towards finalising specific medium and long-term
climate change targets, as part of the ultimate target of becoming
carbon-neutral by 2050. In terms of board governance and
structure, the company sought and received approval from
shareholders in June 2020 to transition its governance model.
The dialogue has supported the case for continued investment
in the company.
104 Prudential plc

D
Capacity building, collaboration and industry
Group overview
Governance (Board composition and diversity) and regulatory engagement
We continue to seek opportunities to build capacity and enhance
Case studies
capabilities within our responsible investment practices. In August
2020, Eastspring participated in a sustainability benchmarking process
Japan Equity Team, Singapore and capacity-building exercise with the World Wide Fund for Nature
Company D is a Japanese international chemical manufacturing (WWF), one of the world’s largest independent environmental
company. organisations. WWF works with industry associations, regulators,
Strategic report
Objective: Gain a better understanding of the corporate stock exchanges and investors in Asia to support ESG risk analysis and
governance structure and practices to perform our fiduciary duties opportunity identification. The benchmarking process is being used
and decisions around proxy voting from a well-informed position. as an enabler to further embed sustainability into the business and is
aligned with the Group’s strategic focus areas. As part of an ongoing
Process: In January, we conducted a discussion with the company
focus on continuous improvement to meet our sustainability ambitions,
on its broad ESG approach and its specific positioning for meeting
Eastspring has incorporated actions from the benchmarking exercise
environmental product demands (eg bioplastics). We also
into four sustainability work streams focused around purpose,
highlighted the need for improvements in board structure and
governance, climate strategy and responsible investment. Eastspring
Governance
function and the nominations and succession process.
also participated in the Asia Investor Group on Climate Change
We continued our engagement in July, when we conducted a (AIGCC) Climate Change Training Project Advisory Committee,
discussion of the ongoing evolution of its governance structure the region’s first accredited climate change training.
and approach and its oversight and management ownership of
ESG-related matters. In our ongoing engagements, we have noted Collaboration
that the company’s board and broader governance structures We continue to view collaboration with investors through collective
have shown a significant step forward (eg improving board initiatives and industry bodies as another way to build capacity and to

independence, voluntary committee structure). amplify the effectiveness of our engagement activity. Two examples of
collective bodies in which we participate are Climate Action 100+ and
The company has noted that these changes are, partially,
the AIGCC. Climate Action 100+ is an investor-led initiative to engage
in response to our ongoing engagement. It also detailed its
systemically important greenhouse gas emitters across the global
increased focus on ESG with a new ESG committee that reports
economy. The AIGCC aims to raise awareness and encourage action
directly to the board. We were satisfied that ESG governance and
among Asia’s asset owners and financial institutions about the risks
management ownership appear to be improving.
and opportunities associated with climate change and low-carbon
Beyond this progress, however, we have also discussed that we investing. Where appropriate, some of our engagements are
would like to see continued progress in terms of board independence, coordinated through these bodies.
diversity, and change to an independent committee system.
We have aligned our responsible investment approach to industry
Outcome: Gained clarity on timeline for implementing PRI best practice through our support for the United Nations Principles
framework and the company’s efforts on ESG. of Responsible Investment. Ninety-nine per cent of Prudential Hong
Kong’s investment portfolio is managed by asset managers that are PRI
Japan Equity Team, Singapore signatories. Prudential supports PPM’s and Eastspring’s membership
Company E is a credit card issuer and transaction processing company. as PRI signatories. Eastspring has been a PRI signatory since February
2018. In 2020, it submitted its first official PRI Report and achieved A+
Proxy Voting Objective: Proxy vote signals the accountability scores across two categories and A scores across four categories, well
of chairman and CEO for the delivery of poor longer-term returns. above the median scores for the PRI’s asset management signatories.
Process: The current chairman has been both chairman and CEO An A+ score was achieved for Strategy and Governance and ESG
since 2000. Over this period return on equity (ROE) has been weak Integration in Listed Equities modules; and an A rating was awarded

and has further deteriorated over the past three years. Although for Listed Equities – Active Ownership, Fixed Income – SSA, Fixed
the company’s management did seek to buy back some shares, Income – Corporate (Financial), and Fixed Income – Corporate
we did not feel this was sufficient to address the issue. We felt a (Non-Financial).
clear strategy needed to be articulated to grow the business,
amid fierce competition from other traditional credit card players PPM became a signatory in October 2018 and received an A score for
and new cashless players. its approach to Strategy and Governance, placing it among the top tier
of asset managers in this category.
A vote was due to be held at the company AGM to re-elect
the chairman (and other directors). While our proxy adviser
recommendation, and company management vote was ’For’
the re-election of the Chairman, we decided to vote ‘Against’
re-election on the basis of his accountability for the poor historic
performance of the company.
Outcome: In addition to acknowledging the company’s historic
delivery of poor trend returns, our analysis suggests the company
has a good platform and there is sufficient valuation upside to
support our level of conviction around the overall governance of

the company. However, our vote ‘Against’ the re-election of the
chairman signals our position in relation to accountability for historic
performance and the need for a change in leadership to support
a clear strategy for growth.

Prudential plc
Regulatory and industry engagement

It is important that our strategic approach to responsible investment develops in line with broader thinking around the issue. Therefore, we seek
to engage with policy bodies and regulators in the markets in which we operate to both shape the debate and to align our approach to evolving
best practice on the topic. Some examples of notable industry engagements and collaboration undertaken during 2020 are:
BU Theme Regulatory/industry initiative
Group (Prudential plc) Global/regional initiatives At a Group level, our compliance and government relations functions
provide input to regulatory consultations and engage with
international bodies, such as the Sustainable Development Investment
Partnership (SDIP) – an initiative of the World Economic Forum (WEF)
– and the Institute of International Finance (IIF) that are active in setting
standards for responsible investment. Notable examples of Group
engagement activity through 2020 include the monitoring of the work
of the Network for Greening the Financial System (NGFS) and input
into the International Association of Insurance Supervisors (IAIS)
paper on the Supervision of Climate-related Risks in the Insurance
Sector, jointly with the Sustainable Insurance Forum (SIF).
Prudential Hong Kong Ltd Sustainable insurance PHKL participates in the Green Insurance task force established in
(PHKL) 2020 by the Hong Kong Federation of Insurers. This supports the
Green and Sustainable Finance Cross-Agency Steering Group, of
which the Hong Kong Insurance Authority is a member. Discussions
are at an early stage, but the focus of the taskforce will be on
generating industry-wide actions to promote sustainable and
environmental business practices, as well as to develop regulatory,
green product and investment frameworks.
Prudential Assurance Company Sustainable insurance PACS is a member of the Sustainable Insurance Taskforce. It is working
Singapore (PACS) with the MAS (Monetary Authority of Singapore), LIA (Life Insurance
Association), GIA (General Insurance Association) and SRA
(Singapore Reinsurance Association) to develop a set of sustainable
insurance guidelines.
PCA Life Assurance Taiwan Stewardship PCALT is a signatory to the Taiwan Stock Exchange’s ‘Stewardship
(PCALT) Principles for Institutional Investors’.
Eastspring Risk management Eastspring contributed to a consultation paper by the Investment
Manager Association of Singapore which consolidated industry
feedback to MAS on proposed guidelines for environmental
risk management.
Responsible investment Eastspring participated in an online seminar hosted by the UNPRI
and Korea Financial Investment Association (KOFIA).
The event aimed to help educate Korean institutional investors on

socially responsible investment/responsible investment concepts,
both ensuring a basic level of understanding of responsible investment
and providing the opportunity to learn how investor peers have been
undertaking responsible investment.
ESG funds Eastspring participated in a group meeting with The Securities
and Futures Commission of Hong Kong (SFC) on key proposed
enhancements for ESG funds, which sets out the expectations
on how the existing Code on Unit Trusts and Mutual Funds and
disclosure guidance would apply to ESG funds.
Responsible investing Eastspring Singapore co-hosted a virtual roundtable with Asian
(fixed income) Investor discussing key opportunities and challenges in incorporating
ESG within Asian fixed income portfolios.
106 Prudential plc

Product development and client engagement Outlook for 2021 and next steps
Group overview
We are continuing to expand our ESG offering to clients to meet the Prudential recognises that strengthening our approach to responsible
growing demand for responsible investment products in our markets. investment is an ongoing and long-term process that we expect will
In December 2019, Eastspring launched the Asia Sustainable Bond evolve over time.
Fund, which supports sustainable objectives, as well as meeting client
needs for an ESG-themed investment product. Our Singapore and For 2021, as an asset owner, we expect to take further steps to expand
Hong Kong-based life businesses are anchor investors into the fund. and make more explicit our expectations of asset managers in the
While the fund’s AUM remains modest at $73 million, during 2020 areas of ESG integration and engagement. The recent establishment
Strategic report
Eastspring continued to engage with interested gatekeepers from of Eastspring Portfolio Advisers (EPA) will help to facilitate and
both retail and institutional investors on the Asia Sustainable Bond implement our asset owner requirements with asset managers.
Fund strategy, as it builds its performance track record with a view EPA is our investment centre of excellence for tactical asset allocation,
to increasing third-party investment. The fund follows an absolute- model portfolio construction, manager selection, liability-driven
return targeting strategy and does not target a specific benchmark. investments and solutions and derivative expertise. From an asset
Notwithstanding this, recent performance compares well with broadly owner perspective, EPA will integrate ESG in all relevant processes
similar indices, such as the JPMorgan Asia Credit – ESG Index. within its remit. EPA’s complete view of the asset owner portfolio
will contribute to a holistic and coherent approach on ESG.
Governance
In November 2020, Prudential Hong Kong, through its participating life The establishment of EPA has also created a platform where the
fund, provided the cornerstone funding for a new ESG ETF provided asset owner and the asset manager can discuss, monitor and advance
by BlackRock through its iShares unit. The fund tracks the MSCI USA the ESG initiatives.
Minimum Volatility ESG Reduced Carbon Target Index, which reduces
greenhouse gas emission intensity by 63 per cent and exposure to As well as these steps to improve the alignment of asset owner and
fossil fuel reserves by 95 per cent, relative to the parent benchmark. asset manager objectives, we will continue to develop our overall
approach by identifying and aligning with selected global standards
Other significant ESG-themed asset owner initiatives through 2020 and initiatives that help to frame and inform our principles-based

include the adoption by Prudential Assurance Malaysia Berhad of approach to the impacts and opportunities of ESG. In this context,
sustainable investing strategies for local equity investment within its our Asian business is investigating becoming a PRI signatory as an
PRULink Strategic Fund, and the initiation of a project by PT Prudential asset owner in 2021.
Life Assurance (PLAI) to publish ESG scores for all its investment-
linked product (ILP) funds. PLAI is also in the process of changing By taking ESG issues into account, we can meet our clients’ financial
the benchmark for one of its existing ILP funds to a new ESG index expectations, serve their other long-term interests and meet the
(the IDX ESG Leaders) developed by the Indonesia Stock Exchange. expectations of society.

Prudential plc
A D
for our local communities. Our primary focus areas for community
investment in 2020 were health, social and welfare issues, which
together accounted for 46 per cent of investment in 2020; followed
by education (20 per cent), environment (15 per cent) and emergency
relief (7 per cent). In 2020, 63 per cent of our community investment
activity was in Asia and Africa, and 35 per cent in the US. The
remaining 2 per cent, attributed to London head office, includes both
UK and global activity.
5. Strategic Enabler: Community Our 2020 community investment reporting is assured by Deloitte LLP.
engagement and investment Further information and Deloitte’s assurance statement can be found
at www.prudentialplc.com/esg.
Our approach to community investment Covid-19 Relief Fund
Our community investment strategy is closely aligned with our Prudential’s flagship international volunteering programme, the
business purpose and with our stakeholders’ concerns and interests. Chairman’s Challenge, has been bringing people together across the
Our strategy is focused around health and resilience issues relevant to Group to help their communities since 2006. In 2020, the Chairman’s
the communities in which we operate, education (particularly financial Challenge joined forces with Prudential Corporation Asia to create
education) and building resilience across communities. This is a $2.5 million Group-wide Covid-19 Relief Fund. The fund was
underscored by a desire for strong employee engagement in the work administered by Prudence Foundation, Prudential’s community
we do. Our strong contribution continues to improve lives and build investment arm in Asia and Africa, and distributed to Prudential’s
communities, wherever we work. Our relationships with our charity markets around the world, allowing them flexibility to allocate funding
partners are long term, involving support through both funding and based on local knowledge of community needs. Funds were used to
skills-based employee volunteering. support approved charitable and community projects tackling the
immediate impact of the pandemic, and its social and economic
Governance of community investment consequences. Local businesses’ programmes included supporting
Our businesses are guided by the framework for investing in the vulnerable communities with Covid-19 messaging, hygiene and
community, as laid out in our Group-wide Community Investment sanitation, nutrition and educational programmes. For example:
Policy and the Group’s ESG strategy. Within that framework they
have the autonomy to manage their own community investment —— Prudential Thailand and Eastspring Thailand donated
programmes. For business units in Asia and Africa, Prudence THB4.9 million (US$150,000) to four hospitals in November.
Foundation, a unified charitable organisation governed by a statutory The donation will contribute to the construction of airborne
board of directors, provides regular review of strategy and spending infectious isolation rooms and acute respiratory infection clinics
for community investment, which maximises the impact in these in the four hospitals. Prudential Thailand also donated 2,500 face
regions. In the US, a governance committee of Jackson and the shields made by its employees to help protect medical professionals
Jackson Charitable Foundation board of directors regularly reviews and frontline health workers.
community investment activity, strategy and spend. Going forward, —— In the Philippines, the Covid-19 Relief Fund donated PhP5 million
the Responsibility & Sustainability Working Group will oversee our (US$100,000) to the Philippine General Hospital (PGH) Medical
community engagement and investment activities on behalf of Foundation Inc to support the University of the Philippines
the Board. (UP)-PGH Covid-19 programme. PGH serves as one of the primary
Covid-19 referral hospitals in the Philippines and its Covid-19
Our Group-wide Community Investment Policy sets minimum programme seeks to equip its healthcare workers with personal
standards, as well as prohibiting political funding and contributions protective equipment, including N95 masks, goggles, face shields,
to religious organisations that have a clear aim to propagate a set faith. and cover-all suits. It also provides medical equipment for cardiac
It is the Group’s policy neither to make donations to political parties nor and respiratory care to Covid-19 patients.
to incur political expenditure, within the meaning of those expressions —— Our Covid-19 Relief Fund was used in Côte d’Ivoire to provide food
as defined in the UK Political Parties, Elections and Referendums Act to vulnerable communities and to deliver a three-month awareness
2000. The Group did not make any such donations or incur any such and training programme with AGIS, an NGO, to at-risk areas.
expenditure in 2020. In Ghana the fund supported three programmes, including School
Monitoring and measuring community investment for Languages, to provide Covid-19 materials and guidance in local
Our community investment performance metrics are aligned to the Ghanaian languages, as much of the information on Covid-19 is
Business for Societal Impact (B4SI) Framework (formerly known as provided in English. In Nigeria the Covid-19 Relief Fund supported
London Benchmarking Group), which is used to monitor progress and a project with Slum2School, to engage 3,000 nursery, primary and
guide the valuation of both cash and in-kind contributions, employee secondary school learners between May and December across
volunteering and management costs. 20 vulnerable communities.
—— Jackson used the fund to support immediate community needs
In 2020, the Group spent $33.2 million (2019: $29.1 million) supporting resulting from Covid-19. Jackson awarded $150,000 to non-profits
community activities. Direct cash donations to charitable organisations across Chicago, Lansing and Nashville, providing direct financial
amounted to $25 million (2019: $20.6 million). The balance includes assistance in tandem with long-term financial coaching and
in-kind donations, as set out on the Group website, calculated in education to individuals and families impacted by the pandemic.
accordance with Business for Societal Impact (B4SI) framework. This strategic approach provided immediate support for the most
The in-kind total includes 112,000 hours of colleague volunteer service vulnerable while working toward a more secure financial future,
core to both Jackson’s philanthropic and business purposes.
108 Prudential plc

In addition to the Covid-19 Relief fund, Prudential supported Building on the success of Safe Steps, in 2019 Prudence Foundation
Group overview
communities through other initiatives: launched Safe Steps Kids, a partnership with the IFRC and
Cartoon Network. This initiative uses popular cartoon characters
—— With elderly people facing a higher risk from Covid-19 than the to equip millions of children with actionable information to protect
general population, Prudence Foundation partnered with HelpAge themselves and others in the event of emergencies or disaster
International. Prudence Foundation supported the production of situations. The programme has been leveraged by local national
two Safe Steps Elderly Care videos, which provided simple and Red Cross societies in Malaysia, Singapore, Indonesia and the
clear guidelines to care-givers on how to protect older people in Philippines through school activities, reaching more than 2,500
Strategic report
care homes, prevent infection and ensure appropriate measures for students directly. In 2020, in view of the pandemic, Safe Steps Kids
care-givers’ health and safety. HelpAge is working with its network online activities have been organised by the Malaysia Red Crescent
members in Asia alongside the care homes and local governments Society and Indonesian Red Cross Society.
to disseminate these guidelines to over 1,200 recipients directly.
The videos have been translated into five languages and a Safe Steps continues to have significant reach. For example:
dedicated website was created to host the information and videos.
The videos were available on YouTube, Facebook and Twitter —— Safe Steps programmes continue to reach over 250 million people
during August 2020, reaching over 42,000 people. a day in Asia and 80 million people a month in Africa via media
Governance
—— Jackson has also provided a total of $1.34 million in community partnerships;
grants to support non-profits, which are facing reduced —— Safe Steps Kids has a TV reach of 31 million households every day;
fundraising revenue. and
—— Since April, Jackson wholesalers have conducted webinars where, —— On social media, Safe Steps Kids has reached over 11 million
for each adviser in attendance, a donation is made to the Feeding viewers, and its videos have been viewed 3.1 million times across
America Food Bank in the adviser’s local community. Donations all digital platforms.
totalling $350,100 have been made to more than 100 different
Safe Steps Road Safety Africa was launched in Côte d’Ivoire at the

food banks across the country, meaning Jackson has helped to
provide over 3.5 million meals. Jackson has also partnered with end of 2019 and continues to be promoted across the continent via
the Nashville Food Project, preparing 6,075 meals for at-risk youth multimedia distribution on both regional and national TV networks.
in the underused corporate dining centre. In December 2020, the campaign was launched in Zambia in
partnership with the Road Traffic Safety Agency, the Red Cross
Financial education and several media partners.
Developed by Prudential to address the gap in financial literacy for
children, Cha-Ching is a global financial education and responsibility Safe Steps D-Tech Awards
programme catering for children aged seven to 12 years old. Now in In addition to providing life-saving information, Prudence Foundation
its 10th year, the programme continues to grow and expand across all launched the Disaster Tech (D-Tech) Innovation Programme in 2019.
our markets and is well received by educators, parents, children and The objective of the programme is to find, fund and support innovative
disaster tech solutions that could save lives in natural disaster events,
government stakeholders. For more information on our approach to
promoting financial literacy and how it supports making health and and to catalyse innovation and increase investment and non-financial
financial security more accessible, please see page 84. support through partnerships. The programme has been unified with
the Safe Steps programme and relaunched as the Safe Steps D-Tech
Safety Awards. Efforts in 2020 have focused on preparing for the next
Safe Steps competition to be held in 2021. The second edition of the awards
Safe Steps is a campaign designed to provide key messaging and raise launched in December 2020, inviting applicants across both profit
awareness on life-saving issues across our markets. It now covers and non-profit sectors. Finalists will be announced in June 2021 and
disasters, road safety, first aid and Covid-19. Developed in partnership will have the opportunity to receive grants from a pool of $200,000,
with the International Federation of Red Cross and Red Crescent as well as mentorship, technology support and access to investor

Societies (IFRC) and NatGeo, it continues to reach millions of people networks. Our network of partners supporting the D-Tech Awards
in Asia and Africa via numerous media and government partnerships. has grown to include humanitarian partner IFRC, technology partner
The Safe Steps programmes have also been made available and shared Lenovo and strategic partners Antler, AVPN, National Geographic,
on Prudential’s Pulse super-app in Hong Kong and the Philippines, e27, Give2Asia, Hatcher+, Jubilee Capital Management and Tech for
and through local television and media partnerships and government Impact among others.
partnerships in Cambodia, Myanmar, Malaysia, the Philippines and
Vietnam over the years. Disaster risk reduction in schools
The Comprehensive Safe Schools Framework (CSSF) is a globally
A new Safe Steps Covid-19 campaign was also developed in recognised framework to ensure that all children are educated in a safe
partnership with the IFRC and NatGeo and launched in March 2020, environment. At its core, the framework focuses on three key pillars
providing key educational messages and awareness on Covid-19. – school infrastructure, school disaster management and disaster
The campaign has been distributed throughout the year across Asia risk education, with an emphasis on disasters to which schools and
and Africa, leveraging the Safe Steps network. communities may be exposed. Since 2013, Prudence Foundation has
been supporting the implementation of Safe Schools in partnership
with Save the Children and Plan International, which aims to address
the objectives of the CSSF, as well as the objectives of the Sendai
Framework for Disaster Risk Reduction.

Prudential plc
To date, Safe Schools has been implemented in Indonesia, Vietnam, Jackson’s community investment approach
Thailand, Cambodia and the Philippines, with 90,000 students Jackson engages its colleagues and strengthens its links with local
directly trained in capacity building, training and planning, together communities by providing grants, community sponsorships, donation
with 42,000 adults across five countries. In 2019 Prudence Foundation matching and volunteering hours across Lansing, Chicago and
renewed its partnership with Plan International to roll out the Nashville, and nationally through the Jackson Charitable Foundation
programme across Thailand, Cambodia and the Philippines between to increase financial education across the country.
2019 and 2022, aiming to reach a further 20,000 children and adults
by the end of 2022. —— Lansing: In June, Jackson announced a $750,000 partnership
with the Greater Lansing Food Bank to expand the food bank’s
In the Philippines, Prudence Foundation has partnered with Save the warehouse. This campaign engaged more than 430 colleagues
Children and the Philippines’ Department of Education on a strategic who personally donated to the project. The new warehouse
initiative to develop a management information system for schools doubled the square footage, allowing the campaign to increase
designed to reduce disaster risk, together with training and capacity overall distribution of food from 9 million meals annually to
building for teachers and local government officials. As of 2020, 18 million meals by 2025 and increase daily volunteers by
the project has successfully completed the build of a comprehensive 100 per cent.
Disaster Risk Reduction Management Information System (DRRMIS). —— Nashville: On 3 March 2020, tornadoes caused devastation in
The system is now being piloted in selected regions, with the eventual communities across Greater Nashville, leaving 25 people dead and
aim for a nationwide roll-out once the pilot is completed at the end of 309 injured, and destroying many homes and businesses. Jackson
2021, potentially benefiting over 20 million students and almost 47,000 colleagues supported tornado relief efforts with supply collections,
schools nationwide. External consultants have also been engaged to volunteer opportunities and matched funding donations to the
conduct an independent evaluation of the programme, with the intent Community Foundation of Middle Tennessee’s (CFMT) Emergency
to share evidence-based impacts and build a case study for other Response Fund. Colleagues contributed $19,620 and volunteered
governments to reduce disaster risk and replicate this approach across 181 hours towards relief efforts.
other countries. —— Volunteering: In 2020, 848 Jackson associates volunteered, with
the company contributing over 29,000 volunteer hours nationally.
Health For the sixth time, Jackson was awarded the US President’s
A key area of focus for Prudence Foundation has been early childhood Volunteer Service Award. This year, the recognition was elevated
care and development. In 2020, Prudence Foundation entered a new to the Gold level in recognition of completing 15,000 hours of
partnership with UNICEF to implement a regional Early Childhood volunteering with Junior Achievement during the 2018-2019
Development (ECD) programme. The programme focuses on school year teaching financial education and work readiness.
developing a regional strategy to advance ECD aligned with the
Nurturing Care Framework, and implementing an effective London community investment activity
communication strategy to raise awareness around holistic nurturing Prudential RideLondon first took place in 2013, and has become the
care for children aged up to three years old. The communication world’s greatest festival of cycling, inspiring tens of thousands of
strategy seeks to raise awareness and to provide essential knowledge people to take up the sport and raising over £77 million for charity
and skills to parents and care-givers around holistic nurturing care from 2013 to 2019. In 2020, the final year of Prudential’s sponsorship,
for children aged from birth to three years old, which is of particular the event was replaced with a virtual event, My Prudential
importance during the Covid-19 pandemic, which has adversely RideLondon, due to the Covid-19 pandemic. More than 10,000 people
impacted young children. The programme will be piloted in Indonesia signed up to take on a range of challenges both in the UK and across
to reach 90,000 children and their parents or care-givers by the end the world, with participants riding as far afield as the US, Brazil, Kenya,
of 2021. Japan and Australia, and £3 million was raised for charity.
Prudence Foundation has become a founding member of The China In 2020, Prudential’s London Head Office agreed new three-year
Children Development Fund, which aims to promote healthy and partnerships with four local charities supporting projects tackling
comprehensive child development in poor areas in China by homelessness, isolation and loneliness, mental health and social
supporting cross-disciplinary empirical research and translating the inclusion. Partnerships were established with The Connection at
results into policies and practices. We also support two three-year St Martin’s; The Cares Family; Mind in the City, Hackney and Waltham
ECD programmes in rural China under the China Development Forest; and The Amos Bursary. The four charities were chosen by a
Research Foundation. REACH (Rural Education and Child Health) panel of colleague volunteers and the projects are all closely aligned
is a programme aimed at enhancing parental capabilities and with our overall ESG strategy in helping to make health and financial
behaviours as well as improving children’s health with nutritional security available to underserved communities.
support. Under this programme over 1,500 children will be impacted.
The second programme is a nutrition improvement programme,
which focuses on improving the quality and standards of school
nutrition in poverty-stricken areas.
110 Prudential plc

A D

In addition, our tax strategy document includes a number of additional
Group overview
disclosures, including a country-by-country disclosure of revenues,
profits, average employee numbers and taxes for countries where
more than $5 million tax was paid. Furthermore, we provide a
breakdown of the types and amount of taxes we pay globally. This
includes taxes borne and collected on employee income, such as social
6. Strategic Enabler: security. Our tax strategy document also provides more detail on what
drives our tax payments and demonstrates that our tax footprint
Good governance and responsible
Strategic report
(ie where we pay taxes) remains consistent with our business and
employee footprint.
business practices
We actively monitor developments in the tax transparency agenda
Strong governance processes are the foundation of our business and and look to further develop the disclosure of meaningful tax
critical to maintaining trust with stakeholders, particularly in the highly information to help our various stakeholders’ understanding of our tax
regulated financial markets within which we operate. Our governance footprint. We will be publishing our updated tax strategy, which will
framework is clear about our standards of behaviour and those include more information on the tax we paid in 2020, how we manage
Governance
standards flow into every part of what we do, including our financial our tax affairs and the governance and management of tax risk,
performance and tax practices, as well as operating to mitigate by 31 May 2021.
financial crime and informing how we deal with our customers and
suppliers. We also recognise the importance of reducing the direct Fighting financial crime
impact of our own operations on the environment and see this as a We take the fight against money laundering, terrorist financing,
non-negotiable responsible business practice. bribery, corruption and fraud seriously and are committed to
implementing and maintaining industry-leading policies and standards.
Standards of conduct

Our Group Code of Business Conduct sits at the heart of the Group Our Group-wide financial crime policies were updated in 2020 to
Governance Manual, our internal governance framework that sets out integrate Group and business unit policy requirements, reflecting a
the principles by which we conduct our business and ourselves. The streamlined governance structure across the Group following the
Code highlights the ethical standards that the Board expects of itself, demerger of M&G plc.
our employees, our agents and others working on behalf of the Group,
and is supported by a set of Group-wide principles and values that All our Group-level financial crime policies are cascaded down to
define how the Group expects business to be conducted in order local business units through regional compliance teams, which ensure
to achieve its strategic objectives. Our Group Governance Manual adherence to the Group requirements and applicable local laws
presents our Group-wide approach to governance, risk management and regulations. These policies form part of the Group Governance
and internal control, and is subject to regular review to ensure that Framework, with business units attesting their compliance to the
requirements each year. During the year, the Group and business
we meet the expectations of our stakeholders. In 2020 the Group
Governance Manual was updated to align with our post-demerger units undertake a range of monitoring activities to ensure that business
structure and revised operating model, and now serves as the single units are complying with Group policies and the legal and regulatory
governance data source for all colleagues across the Group. Each framework by which we are governed. This includes quarterly
business must certify annual compliance with the requirements set reporting, annual risk assessments, compliance monitoring reviews
out in the Manual, including the Code, Delegated Authorities and and reporting to Board-level committees, as set out below. Specifically,
Group-wide policies. our Anti-Money Laundering and Sanctions and Anti-Bribery and
Corruption policies provide clear standards and guidance to our diverse
Tax strategy and reporting businesses and highlight the importance of effective due diligence
The responsible and sustainable management of our tax affairs helps when dealing with customers, vendors and other third parties.

us to maintain constructive relations with our stakeholders and play
a positive role in the economy and the wider communities in which We complete annual risk assessments across all our businesses to
we operate. In 2020 we made a total tax contribution of $2,114 million. assess and monitor their risk profile. The residual financial crime risk
This significant contribution plays an important part in helping the is managed through the continuous enhancement of the control
communities in which we operate to provide valuable public services environment and is implemented at local level. In recent years we have
and build infrastructure for the benefit of the wider community and implemented an automated transaction monitoring system in Hong
the economy. Kong, Singapore, Indonesia, the Philippines and Vietnam to profile
transactions and identify suspicious activities for reporting to law
We understand the importance of paying the right amount of tax enforcement agencies.
on time. We manage our tax affairs transparently and seek to build
constructive relationships with tax authorities in all the countries We are committed to complying with international sanctions
in which we operate. Our Tax Risk Policy outlines our processes requirements and continue to monitor international sanctions closely,
to identify, measure, control and report on tax risk, and is regularly integrating updated lists into our regular customer and vendor
reviewed and refreshed. screening processes. During the course of 2020, we have focused in
particular on the US-China sanctions that have been issued in order to
Our tax strategy is published annually and complies with the assess their impact on our business activities. We have upgraded our
mandatory requirements under the UK 2016 Finance Act, focusing on: screening capabilities across all of our Asian businesses, ensuring
compliance with regulatory requirements and improving operational

—— Acting responsibly and taking an objective view in all our efficiency.
tax matters;
—— Managing tax in line with our Group governance and risk
management procedures; and
—— Ensuring transparency and engagement with all our stakeholders.

Prudential plc
The Group Risk Committee continues to review the effectiveness Supply chain
of the financial crime programme and the Group Compliance team Our Group Code of Business Conduct outlines the values and
regularly updates the Committee on risks, issues, the effectiveness standards that are required of each of our suppliers. Our Group
of controls and the improvements made to processes in the financial Third Party Supply Policy is core to our supply chain governance and
crime framework. The Group Risk Committee regularly reviews a specifies our position on supply chain management, setting out our
number of risk indicators in relation to financial crime, including the approach to due diligence, selection criteria, contractual requirements
numbers and percentages of high-risk customers and politically and ongoing monitoring of relationships.
exposed persons, and seeks investigation of movements. It also
reviews trends in automated transaction activity alerts and Business units conduct due diligence before engaging with, and
employee‑generated suspicious transaction reports. The Committee ultimately selecting, a new supplier. We perform regular due diligence,
also reviews gifts and hospitality received and offered to ensure that including daily anti-money laundering checks on our supplier
they comply with our policy. All material matters on financial crime payments, supplier review meetings and audits where required,
are reported to the Committee. and our policies and procedures are supported by regular employee
training exercises.
The financial crime teams remain committed to professional
development and regularly participate in conferences and seminars Our due diligence requires our suppliers to pass financial stability tests
in the UK, the US, Hong Kong and Singapore to build colleagues’ and demonstrate a track record of high performance. We also review
skills and knowledge in specialist areas. Best practices are cascaded the controls the supplier has in place to prevent data leakage and look
through training and communications, as well as the implementation for any personal data protection issues. Additional due diligence is
of enhancements to operational systems. These ensure that our enacted for any problem categories where we are exposed to potential
colleagues are fully prepared to recognise any form of economic crime labour malpractice issues. Our Speak Out whistleblowing service
and take adequate steps to combat it. We provide training to our staff enables employees to raise any concerns they may have in relation
to ensure that they are familiar with international standards and best to our third-party relationships, and our contractors and third-party
practice, as well as being well equipped to implement our policies in suppliers are also able to use this service.
their respective markets. Training completion levels are monitored
throughout the year. In Asia, we have continued to progress our roll-out of the Coupa
procurement management platform across our business units.
E By improving visibility across all third party spend, the system will
facilitate cost savings, procurement and expense controls and process
Whistleblowing efficiencies. The system has now been implemented across our
Our Group-wide whistleblowing procedures apply to all our businesses in Hong Kong, Malaysia, Singapore, Thailand, Indonesia
colleagues and are supported by Speak Out, our Group-wide and the Philippines. Our business units in Vietnam and Taiwan and
whistleblowing programme. Speak Out is available both internally and our asset management business, Eastspring, are expected to roll-out
externally to staff, contractors, vendors, agents, customers and the Coupa over the course of 2021, ensuring that more than 80 per cent
public, enabling reporters to raise concerns in a choice of languages of our third-party expenditure in Asia is processed and approved on
through web and hotline channels. Reporters are able to log concerns one common platform.
covering a range of issues, including but not limited to anti-bribery
and corruption, compliance breaches, discrimination and harassment We are also rolling out a dedicated third-party risk management
and health and safety. Concerns are recorded by an independent third system module and accompanying processes that will digitise and
party and investigated by internal appropriately trained and skilled automate our vendor governance procedures, enabling us to complete
investigators that are independent of the businesses they investigate. all necessary risk assessments as part of our vendor and contract
On an annual basis, all colleagues are required to complete a onboarding processes. This system module, Coupa Risk Assess,
Speak Out computer-based training module. The programme integrates into our Coupa procurement management platform and
is also supported by communications and awareness materials. will provide us with detailed visibility of third-party risks across all our
key risk domains, in particular information and technology security,
Whistleblowing reporting is overseen by the Group Audit Committee data privacy, anti-bribery and corruption and business continuity
and business unit audit committees through quarterly reporting and resiliency risks. This will improve our ability to mitigate risks and
and through frequent discussion with the Group Resilience Director, strengthen preventative risk management controls, thereby improving
with any material issues reported to the Board. On an annual basis, the resilience of our supply chain collaboratively with our vendors,
emerging trends and an assessment of the effectiveness of our providing greater assurance on our operating business environment.
whistleblowing approach are reported to the Group Audit Committee. Coupa Risk Assess will also enable us to generate detailed insights into
the level of commitment to ESG issues across our supplier footprint.
The Speak Out programme is widely used throughout the Group, and The implementation is expected to be completed across all our
during 2020 cases were reported across 24 jurisdictions, including the markets in Asia during 2021.
US, the UK, Hong Kong, Singapore and the Philippines. The number
of cases reported across our Asian business units represented
87 per cent of Speak Out cases, which is a reflection of our business
footprint. During 2020, the top three issues reported through our
whistleblowing channels related to discrimination, harassment or
unfair treatment, compliance breaches and misconduct. HR-related
cases accounted for 43 per cent of the total cases reported. This figure
is in line with the external benchmarks that we use to monitor our
Speak Out programme. The percentage of cases being reported
openly, rather than anonymously, increased by 3 per cent year-on-year
from 2019, which is considered an indicator of growing trust and
confidence in the programme. Our Group Security Policy outlines
our zero-tolerance approach to retaliation against reporters of any
concerns raised via Speak Out.
112 Prudential plc

Group overview
Case study
Strategic report
Supporting smaller suppliers
during Covid-19
In our commitment to supporting our supply chain through
the difficult trading circumstances triggered by the global
Governance
pandemic, we provided payment assistance from March
2020. We immediately switched to 10-day payment terms for
all our London head office small suppliers with under 100
employees. This has so far benefited 136 suppliers with a
total of £6 million of accelerated payments made to assist
their cash flow.

To ensure that ESG is embedded in our end-to-end procurement Across Asia, we apply the Third Party Risk Management policy,
processes, we have developed a specific ESG question set and scoring which ensures compliance to the Group’s Third Party Supply policy.
matrix. This is now incorporated in all our Global RFPs (request for All third-party agreements across all countries in Asia are required
pricing) issued to suppliers during the tender stage and requires a to undergo due diligence activities, which include human trafficking,
formal response by the potential supplier in respect of the following: anti-money laundering and anti-bribery and corruption checks on
the third parties that we deal with.
—— Their commitment to ESG globally;
—— Governance of ESG within their organisation; As in 2019, we reviewed our UK supplier spend to examine and
—— The leadership structure they have within their own organisation reconfirm that, against the Walk Free Foundation’s Global Slavery
on ESG matters; Index, we are not exposed to modern slavery issues in our supply
—— ESG transparency on reporting and how that is executed; chain. Our repeat review of this exercise has identified that, across
—— The responsible sourcing practices they use for their own supply the top 100 countries in the index, 2.5 per cent of UK procurement
chain buying; spend is exposed to these territories. This compares to 2.8 per cent
—— The use of management systems to track their own ESG in 2019. Our spend in these countries is in categories that are typically
compliance; considered to be low-risk, such as property rental and professional
—— Ethics and policy documents with their organisation to formally services. Full supplier due diligence is maintained in these areas to
mandate ESG topics; avoid any potential issues and an expert panel meets each week to
—— Labour practice documents (to confirm ethical behaviour/modern review both new contracts and renewals to ensure that we remain
slavery controls); vigilant on potential modern slavery exposure and ESG topics. In the

—— Health and Safety best practices are confirmed as embedded UK, we require our suppliers to pay their employees the London or
for employee wellbeing; and UK Living Wage, as set by the Greater London Authority and Centre
—— Initiatives the supplier is launching to enhance their own for Research in Social Policy respectively.
ESG agenda.
E
Upholding our commitments to human rights
Being a responsible business requires organisations to ensure that Responsible working practices and health and safety procedures
they meet and strive to surpass commitments to the UN’s Declaration Prudential recognises the importance of health, safety and wellbeing
of Human Rights. We are committed to ensuring that modern slavery, to help staff get the most out of life and meet our business objectives.
human trafficking, child labour or any other issue that subjugates By providing a safe and healthy workplace and preventing work-
human rights is eradicated from our supply chain. For more related injury and ill-health through the implementation of appropriate
information around how we are identifying and managing our risks policy and standards, we are able to provide an environment that helps
in relation to modern slavery, human trafficking, and child and employees to connect, grow and succeed in their work. In 2020 the
forced labour, please read our Modern Slavery Statement on the Group-level policy and standards were revised and aligned with ISO
Prudential plc website. 45001:2018, the international standard for Occupational Health and
Safety. The policy and standards apply to all our companies, locations
and activities.
For the year ending 31 December 2020, no work-related fatalities

were recorded (2019: zero). There were 30 health and safety
incidents, resulting in 422 days of lost time (2019: 74 incidents
resulting in 203 days of lost time). The increase in lost time is accounted
for by two incidents in the United States: a road traffic accident
(164 lost days), and a manual handling case (198 lost days).

Prudential plc
Health and safety programmes across the Group have this year We are also expanding from mortality and morbidity protection,
primarily focused on the response to Covid-19, ensuring that to helping people prevent and postpone adverse health events.
appropriate precautions are implemented in the workplace. We have Accessible to everyone, Pulse combines healthcare and technology
also focused on providing training and awareness on prevention to help and incentivise people to prevent and postpone disease and
measures and health and safety best practices for the home. protect customers by empowering them to take control of their health
Communications are regularly sent to staff reminding them of the and wellbeing. We are also working with our distribution partners to
behaviours and protocols needed to protect themselves and the wider increasingly design protection products with diversity and inclusion
community from Covid-19. Our communications have focused on local in mind, such as creating products for gender-specific needs.
regulatory changes, maintaining high standards of hygiene, protocols
around health monitoring and attendance at the office, and sensible We strive to ensure our claims process is simple, fair and transparent,
social distancing. Where staff have returned to the office, masks are and our staff and agents are professionally trained to support customers
encouraged to be worn by staff in common areas of the office and in in their time of need. Each of our businesses closely monitors customer
some jurisdictions this is mandated due to local regulations. The Group satisfaction using surveys at touchpoints throughout the customer
has also provided intranet resource centres where staff can seek journey, and also through the monitoring of complaints.
information concerning Covid-19 precautions and best practices,
travel restrictions and Covid-related news. Our businesses are required to comply with their local regulatory
requirements and meet our Group-wide policies and standards,
Health and safety teams across the Group have provided online including our Group Code of Business Conduct and our Customer
seminars for staff and are available to staff should they have any Conduct Risk Policy, which covers the fair treatment of customers.
questions or concerns. We have also implemented PRUThrive, Compliance is achieved through the regular training of intermediaries
a holistic wellbeing programme to support the mental, physical, to ensure that the salesforce has a clear understanding of our products,
financial, family and social wellbeing of employees. We also provide the target customers for each product, and the customer risks inherent
a 24-hour Employee Assistance Programme, offering support in each product; and through the embedding of controls, including
and advice through an external provider, and in 2020 launched customer financial needs analysis and risk appetite profiling, to ensure
a science‑based mental health and wellbeing app. the suitability of product sales. We are increasingly using technology,
particularly electronic point-of-sale tools and e-submissions, to control
D the sales process and provide sufficient consumer safeguards. During
2020, our compliance controls evolved as we introduced virtual
Treating customers fairly and responsible product design face-to-face selling and remote selling options during the Covid-19
The value that products are likely to bring to our customers and the pandemic. Compliance monitoring is performed across the customer
quality of product materials and ongoing communications are given the and product life cycle, and disciplinary frameworks reinforce
utmost consideration in our businesses. Although many of the financial compliance through actions up to and including termination.
needs and objectives of our customers are simple, the products we design
may seem complex from a customer’s perspective. This complexity Management of direct operational environmental impacts
may make it difficult for a customer to understand the costs and value We seek to actively reduce our direct impact on the environment
of the product, and how best to utilise the product to meet their needs. in line with our purpose of improving the lives of our customers
and their communities. To understand our impact, we measure
Prudential’s products are designed in accordance with customer our environmental performance and take action to improve
conduct standards of treating customers fairly and of providing our performance.
products and services that meet customer needs, are easy to
understand and deliver real value. We design products with a deep Our Group Environment Policy forms part of our Group Governance
understanding of the target customers’ protection and savings needs Manual and applies to our operational properties worldwide, guiding
across their life stages. Our development process includes the our approach to the management of the direct impacts of our business
assessment of policyholders’ reasonable expectations created units. This includes compliance with environmental laws and
by the product and determines how those expectations are met regulations with respect to emissions, energy consumption, water use,
and managed throughout the product lifecycle. waste disposal, environmental supply chain management and the
adoption of risk management principles for all property-related
We aim to simplify our insurance products and how they are explained matters. As with all policies, business unit performance is monitored
in product documentation and by salespersons, so that customers can against the Group Environment Policy and updates are provided to
easily understand the features, benefits and associated terms and the Board. More information on our broader strategic approach to
conditions and are able to clearly assess how products fit with their the management of climate change risks and opportunities is provided
needs. To protect vulnerable customers, our product development in the stewarding of the human impacts of climate change section on
process identifies customer segments for whom the product is not page 87 of this report.
suitable and/or where assistance and further protection might be
needed during the sales journey (eg additional point of sales controls, The highlights of our 2020 environmental performance are available
welcome calls). Identifying and treating vulnerable customers with below. Our 2020 reporting covers the period 1 October 2019 to
extra care is a core component of training for our sales force. 30 September 2020, and selected indicators are assured by Deloitte LLP.
Where relevant, comparatives have been restated to remove M&G data.
New products are approved by business unit product committees that
comprise of participants from relevant business functions to ensure We have set a target to become net carbon neutral across our Scope 1
there is a complete understanding of product risks, including financial, and Scope 2 emissions by the end of 2030, through a combination of
capital and regulatory considerations, as well as a focus on the a 25 per cent reduction per full time employee (FTE) in our operational
potential customer experience. emissions, and the implementation of carbon offsetting initiatives.
The expression of the target in terms of an intensity ratio, rather than
Through Pulse, our health and wealth super-app, we are increasingly as a gross emissions figure, allows for the future growth in the size of
focused on making insurance more inclusive to underserved our business, while driving improvements in the overall efficiency of
populations of society, through bite-sized digital products and services our operations. These targets will take effect from 2021. Further details
at little or no cost, and minimal or no underwriting criteria or barriers. are provided later in this section.
114 Prudential plc

Energy and emissions data electricity, heating and cooling. We have stated our Scope 2 emissions
Group overview
Greenhouse gas (GHG) emissions are broken down into three scopes. using both the location and market-based methods in line with the
We have included full reporting for Scope 1 and 2 and selected GHG Protocol Scope 2 Guidance. Our Scope 3 footprint includes
Scope 3 reporting. Scope 1 emissions are our direct emissions from the UK-booked business travel, water consumption from the UK, US and
combustion of fuel, fugitive emissions and company-owned vehicles. Asia, and waste generated from the UK and US. Aligned with our past
Scope 2 emissions cover our indirect emissions from the purchase of commitments, we chose to offset our UK-procured air travel emissions.
Strategic report
SECR Report
We are required to report our global GHG emissions for 2020 in accordance with the Streamlined Energy and Carbon Reporting (SECR) format
of the Companies Act 2006 (Strategic and Directors’ Reports). This statement is shown below.
2020
Global
(excluding
UK and UK and
offshore offshore)
Governance
Emissions from activities for which the company own and control, including combustion of fuel
and operation facilities (Scope 1) tCO2e 147 5,490
Emissions from purchase of electricity, heat, steam and cooling purchased for own use
(Scope 2, location based) tCO2e 125 42,995
Emissions from purchase of electricity, heat, steam and cooling purchased for own use
(Scope 2, market based) tCO2e 208 42,995

Total gross Scope 1 and Scope 2 emissions (location-based) tCO2e 272 48,485
Intensity ratio: tCO2e/m 2
0.0484 0.0972
Intensity ratio: tCO2e/fte 1.0146 2.6245
Energy consumption used to calculate above emissions: kWh (Scope 1) 764,344 23,903,383
Energy consumption used to calculate above emissions: kWh (Scope 2) 543,498 77,714,027
For the purposes of compliance with the requirements of SECR, we confirm that no energy reduction projects were undertaken in the UK portfolio
during 2020. Information on our Asian initiatives is included below under ‘Regional emissions trends’.
Group Position
A summary of our Scope 1, 2 and 3 emissions is provided below. The table also includes a total for Scope 3 data in relation to air travel, water
and waste.
Emissions Source (tCO2e) 2020 2019 Change
Gross emissions
Scope 1 5,637 7,332 -23.1%

Scope 2 – Market based 43,203 49,092 -12.0%
Scope 2 – Location based 43,120 48,900 -11.8%
Scope 3 2,164 6,248 -65.4%
Total: Scopes 1 & 2* 48,840 56,424 -13.4%

Total: Scopes 1, 2 & 3† 51,004 62,672 -18.6%
Carbon intensity
kg per m2 – Scopes 1 & 2 96.24 105.38 -8.7%

Tonnes per employee – Scopes 1 & 2 2.61 3.14 -16.9%
kg per m2 – Scopes 1, 2 & 3 100.51 117.05 -14.1%
* Market based emissions.

† Assured Scope 3 emissions.
Data notes:
Reporting period: 1 October 2019 to 30 September 2020.
Full details about scope of reported data included in our Basis of Reporting (https://www.prudentialplc.com/esg).
Deloitte LLP has provided limited assurance over selected environmental metrics in accordance with the International Auditing and Assurance Standards Board’s (ISAE3000 (Revised)) international
standard. Further information and Deloitte’s assurance statement can be found on the Prudential plc website at www.prudentialplc.com/esg.
Data restatements: 2019 Scope 1 emission data restated to reflect improved availability of fuel usage data.
To enable comparative reporting in terms of performance reductions (both absolute and by intensity) the reported data for 2019 and 2020 excludes M&G.

Prudential plc
Across our occupied estate, our global absolute Scope 1 and 2 Our occupied estate in Africa expanded by 68 per cent in 2020, with
(market-based) GHG emissions were 48,840 tCO2e, down a concurrent increase in headcount of 75 per cent, and we expect the
13.4 per cent on 2019. The main driver of the decline was the Africa footprint to continue to grow. The gathering of energy data in
widespread reduction in energy use within our office network Africa continues to become more reliable, leading to improvements in
associated with the Covid-19 pandemic. data quality and completeness.
When normalised against net lettable floor area, our Scope 1 and 2 The Jackson property portfolio represents 26 per cent of the occupied
emissions were 96.24 kg CO2e/m2. This represented an 8.7 per cent area of Prudential and accounts for 49 per cent of the Scope 1 and 2
reduction over 2019. emissions footprint. This is predominately due to the presence of data
and disaster recovery centres in the portfolio, which are very energy-
The magnitude of the decline across the total Scope 1 and 2 emissions intensive and against which it is more challenging to deliver energy
was relatively modest, given the scale of the operational disruption saving. However, there has been a 12.1 per cent intensity reduction in
caused by the pandemic. This reflects that most of the office estate Scope 1 and 2 emissions in 2020, reducing them to 179 kg CO2e/m2.
in Asia and Africa remained open through the period to support a These reductions can be attributed predominantly to lower occupancy
continued, albeit reduced, employee presence (through for example and shutdowns associated with the pandemic, as the occupied area
split team working). With social distancing measures in operation, and overall headcount have remained consistent with 2019. The
the increased floor space required for each employee did not result impact of the pandemic is also noted in the 35 per cent reduction in
in a proportionate reduction in energy use. It should also be noted that Scope 1 emissions.
the effect of the timing of the reporting period for Group emissions
(1 October 2019 to 30 September 2020) means that only nine months Waste and recycling
of pandemic-related impacts were captured in the 2020 reporting. The quality of our waste and recycling reporting continues to improve,
With more of our employees working from home (and, therefore, although some challenges remain. For example, where we are tenants
consuming electricity) there has been an increase in emissions from in multi-tenanted buildings, the data is only provided to us on a
this source, which has not been captured in our reporting. We have, consolidated basis and not broken down by individual tenant.
however, started work to model the potential impact in order to
understand the associated implications, noting that these would During 2020 we generated 749 tonnes of waste in the UK and US
technically be categorised as Scope 3 emissions. included in our Scope 3 reporting. The Scope 3 carbon emissions
associated with our total waste generation are calculated at 140 tCO2e,
Total Scope 3 reported emissions fell by nearly two-thirds to 2,164 a minor contribution to our overall corporate footprint in comparison
tCO2e. Air travel, which accounts for the majority of reported Scope 3 with the energy use of our buildings and air travel. Of the UK and the
emissions, and it fell by 67.7 per cent to 1,965 tCO2e reflecting the US total, 62 per cent was diverted from landfill through recycling,
impact of travel restrictions and other control measures related to the composting or incineration.
pandemic. We continue to work with our business units across all of
our regions to extend our Scope 3 emission reporting. The gathering of waste data in Asia has increased in 2020. We have
developed a set of Waste Management Guidelines to raise awareness
Across Scope 1, 2 and 3, emissions per square metre fell 14.1 per cent of the importance of accurate reporting of waste, as well as to practical
to 100.51 kg CO2e/m2. advice on waste reduction measures for employees engaged in waste
management activities.
In 2021, we intend to review our Scope 3 reporting boundaries
and broaden these over time. Our ultimate intention is to calculate Water consumption
and disclose emissions from our wider supply chain and investment In 2020, absolute use of water across our global occupied estate
portfolio in line with broader improvements in the quality of data (excluding Africa) was 170,648 m3, an intensity ratio of 0.35m3/m2,
and breadth of disclosures. a reduction of 26 per cent when compared with our like-for-like water
consumption in 2019.
Regional emission trends
The restructuring of the Group, resulting in the demerger of M&G, As part of our site assessment programme in Asia, the inspection
has substantially reduced the Group’s office footprint in the UK. team looked at our water usage to identify ways in which we could
The majority of the estate is now located in Asia and, to a lesser extent, reduce our water consumption. As we are predominately tenants in
in Africa. multi-tenanted buildings, where the landlords are responsible for the
maintenance and management of the air conditioning, toilets and
Asia’s Scope 2 emissions have been in decline since 2017, falling to other common facilities, only limited opportunities to reduce our
23,183 t CO2e for Scope 2 emissions from 26,627 tCO2e in 2019 and water consumption were identified.
were impacted by the pandemic, as noted above. During 2020, a total
of 34 energy efficiency and behavioural change projects were carried
out in Asia, with a combined estimated saving of 895 tCO2e per year.
Measures implemented included the installation of LED lighting,
installation of direct current motors in fan coil units and reducing
lighting operation hours. We also implemented eight waste reduction
initiatives in 2020, including initiatives such as donating excess
furniture to be used in an agency office rather than disposal in
Malaysia, and providing reusable lunch bags and reducing the
use of plastic single use water bottles in Indonesia.
116 Prudential plc

Our aim is to become net of a 25 per cent reduction (per FTE) in our operational emissions and
Group overview
implementing carbon offsetting initiatives. This commitment is aligned
carbon‑neutral across our to our purpose of helping people get the most out of life by enabling
a lower-carbon economy through good governance and responsible
Scope 1 and Scope 2 emissions business practices. The new target will apply across all our operations
and improve our ability to communicate a simple and clear
by the end of 2030, through environmental strategic direction to all our stakeholders.
a combination of a 25 per cent
Strategic report
During 2020, we engaged a global property services company in a
multi-year contract to provide specialist environmental consultancy
reduction (per FTE) in our services to support our aim of reducing the intensity ratios in our
Scope 1 and 2 carbon emissions.
operational emissions Our priority is to reduce our carbon emissions, on an intensity metric,
and implementing carbon and the site assessment programme has highlighted a number of
initiatives that we can implement across the property portfolio to
Governance
offsetting initiatives. achieve this aim, as well as practical measures that we can take to
deliver operational improvements. From these assessments, Scope 1
and 2 carbon reduction road maps are being developed to support the
delivery against our target.
We have gained a clear understanding of how we use energy within

Global environmental targets our property portfolio, and given that the majority of our office space
In 2016 we developed a global environmental targets framework is leased on relatively short-term commitments, we have opportunities

to drive improvements in environmental operational performance. to address operational improvements as leases come up for renewal
As reported in our 2019 report, this framework was based on the through implementing energy-saving measures or selecting more
operational footprint of the pre-demerger Prudential Group and, energy-efficient spaces.
as such, several targets are no longer relevant to the demerged Group.
In parallel to these initiatives in our existing property portfolio, we are
Our Asian operations have completed four of their five targets, rolling out a campaign in 2021 to drive behavioural change in terms of
and partially completed the fifth target. Through the programmes energy, water and waste reduction, and it is anticipated that this will be
implemented as part of this process, we have gained a greater insight into vital to the achievement of our targets.
how our sites currently consume energy and the opportunities to reduce
this consumption. Notably, we have completed an environmental We are implementing a range of tools and initiatives that will enable
further reductions in the Group’s energy consumption footprint over
emission review for the 20 largest energy-consuming locations; created
environmental guidelines for all new leasing and fit-out projects; and the longer term. Some examples include the development of green
reviewed our water efficiency and waste management with guidelines leasing and design guidelines to assist property management teams
adopted by our businesses. The energy management campaign was to select premises and design our workplaces that will help achieve
delayed to better leverage the data collected in the energy assessment, energy efficiencies; the embedding of sustainability considerations
and then further delayed by the Covid-19 pandemic, but will be launched being highlighted in our project approval process; and improved
in 2021 to support our new targets. performance tracking through the use of a web-based platform,
which will enable our businesses to track progress against targets
New targets for 2030 at an asset level.
During 2020, we reviewed our global environmental targets
Enforcement actions and other regulatory events

framework and have established new targets for the period 2021 to
2030. Our aim is to become net carbon-neutral across our Scope 1 No fines or regulatory actions occurred during the year
and Scope 2 emissions by the end of 2030, through a combination for environmental incidents (2019: zero).
Strategic report approval by the Board of Directors

The strategic report set out on pages 10 to 117 is approved
by the Board of Directors.
Signed on behalf of the Board of Directors

Mike Wells
2 March 2021

Prudential plc
Governance
Contents
120 Chair’s introduction
122 Board of Directors
127 Group Executive Committee
128 How we operate
139 Risk management and internal control
141 Committee reports
141 Nomination & Governance Committee report
150 Audit Committee report
161 Risk Committee report
168 Statutory and regulatory disclosures
169 Index to principal Directors’ report disclosures
118 Prudential plc

119
Annual Report 2020
Prudential plc

A F
Chair’s introduction
Shriti Vadera Strategy

Chair In its strategy discussions, the Board focused on developing and
repositioning the Group for Asian growth. The Board considers
that the Group is well positioned to meet the protection and savings
needs of the growing populations in Asia and Africa with top-three
positions in nine Asian life insurance markets, and significant upside
potential in the region’s two largest markets. The new growth strategy
has been set to align to markets where insurance penetration is
currently low and demand for savings solutions is rapidly developing.
In August, we announced the new dividend policy, which aligns to
this revised strategy.
Time and attention were given to executing the decision, announced

in 2020, to separate our US business, through detailed discussions
during regular Board meetings and dedicated, additional workshops.
This was to ensure that Jackson will have a governance framework
suitable for a listed group in the US at the point of the proposed
separation. This culminated in our announcement on 28 January 2021
of our plan to separate Jackson in the second quarter of 2021 through
a demerger, subject to shareholder and regulatory approval.
Dear shareholder
B
It is an honour to chair a 172-year-old company undergoing an exciting
transformation and reinventing itself as a digital business focused Our purpose, culture and values
on Asia and Africa. Good governance encourages decisions to be made in a way that
is most likely to promote the long-term, sustainable success of the
In response to the pandemic, the Board adjusted quickly to different Company, taking into account the views and interests of the Group’s
ways of working, including holding virtual meetings and hybrid wider stakeholders. We aim to achieve this through a governance
sessions, reflecting the resilience demonstrated by the business in framework that supports decision-making, facilitates challenge,
the face of challenges posed by Covid-19, with some Directors when is continuously updated to meet the Group’s business needs,
possible gathering physically in our London and Hong Kong head and encompasses a prudent system of internal controls and rigorous
offices and others connecting through video conference. Given the processes for identifying, managing and mitigating key risks.
severe curtailment on travel during 2020, we were unable to conduct
our usual programme of face-to-face meetings with management and After an extensive consultation over the course of nine months
employees, which typically would have included deep dive visits at involving 12,000 employees, we have refreshed and restated our
one or more of our business locations. Instead, we have found other shared purpose – to help people get the most out of life. We fulfil this
virtual ways to connect with people across the business. purpose by making healthcare accessible and affordable, protecting
wealth and growing assets, and empowering people to save for
2020 saw important changes to the Board. Paul Manduca, who stepped their education and retirement goals. The Board supported the
down as Chairman and Director at the end of 2020, left a legacy of a articulation and development of a framework to embed the desired
high-functioning Board of committed Directors. Sir Howard Davies culture, promoting the Group’s purpose consistently across the Group.
stepped down after 10 years on the Board and as Chair of our Risk A description of how Prudential views its purpose as inextricably
Committee, and Jeremy Anderson was appointed to the Board, linked with its business and delivers on it is set out in the ESG report
bringing with him substantial leadership experience of the financial on pages 70 to 117.
services sector across Asia and the US. Jeremy has extensive technical
knowledge on audit and risk management, particularly concerning 2020 was the first year of a three-year plan to promote and embed
international companies, and he succeeded Sir Howard as Chair of a diverse and inclusive culture across the Group with our purpose at
the Risk Committee in May 2020. On behalf of the Board I would like to its core, supporting our people to think about not only what they do
thank Paul and Howard for their significant contributions and leadership but how they do it, aligning our behaviours with performance and
of the Board and Risk Committee respectively during their tenures. managing risks. Embedding this cultural change will require systems
We will be losing more of our experienced Non-executive Directors and programmes that help shift behaviours and create new habits,
in the next couple of years as they are reaching the end of their both individually and organisationally. This has been a key focus during
nine-year tenures. Following nine years of service Kai Nargolwala will the year and the Board has discussed, reviewed and monitored the
not offer himself for re-election at the Annual General Meeting (AGM) frameworks being put into place to enable this progress.
this year. A D E
I would like to thank Kai, who will step down from the Board at the Looking after our stakeholders and wider community initiatives
conclusion of the 2021 AGM, for his significant contribution, both on At Prudential, we recognise that all our stakeholders are key to our
the Board and as a member of the Risk and Remuneration Committees. long-term success. We seek to engage proactively with them, to
More recently, Kai also took on the role of Employee Engagement understand their views and to take these views into account when
Director for the Group’s workforce in Asia and Africa. making decisions. Further information about how the Board has taken
into account the views of the Group’s key stakeholders, can be found
Below are some of the principal strategic and governance items on pages 78 to 81, while engagement with our customers is discussed
the Board considered during 2020. in more detail on page 79.
120 Prudential plc

E L
Throughout 2020, the Board was particularly concerned about the We are committed to continuing to develop the Group’s governance
Group overview
impact of the Covid-19 pandemic on the health and welfare of to ensure that it keeps pace with the rapid progress of the business
customers and employees. The CEO Report and ESG Report describe and the evolving external environment. We will draw on the conclusions
the various ways in which we responded to the needs of our customers of the externally facilitated Board effectiveness evaluation conducted
in this challenging period. Our two designated Non-executive in 2020 by Ffion Hague of Independent Board Evaluation, to ensure
Directors appointed to represent the workforce have been working continued strong oversight and challenge. The methodology and results
hard to find innovative ways to engage with the workforce during what of that evaluation are set out on page 133. This annual exercise helps
has been an incredibly difficult year in which to bring people together. inform how we approach governance, risk and culture, which is set out
Strategic report
They joined a number of events at the start of the year, including in the Group Chief Risk and Compliance Officer’s Report on pages 45
visiting our offices in the UK and Asia to meet with and address to 69. Our Group-wide Internal Audit function will continue to consider
colleagues. Once the pandemic started, both designated Directors the risk and control culture of the organisation throughout its activities,
received briefings from Group Security about steps being taken to with our Group Code of Business Conduct underpinning everything
support and protect employees during the Covid-19 outbreak. The we do, shaping our culture and linking culture explicitly to values and
results of our staff survey in 2020 have been considered carefully by behaviours. Good governance includes a commitment to continuous
the Board and the designated Directors are monitoring the improvement and to that end the Board has asked Jeremy Anderson to
implementation of the action plans, which will enable our employees to lead on considering any lessons for the Board to learn from the revision
Governance
see that their feedback has been taken seriously and acted upon. Both to Jackson’s hedge modelling, announced on 28 January, which
designated Directors participated in our follow-up Collaboration Jam, impacted Jackson’s statutory capital.
which is described more fully on pages 79 and 96. We will continue B
to keep our employee engagement mechanisms under review
to ensure we choose methods that best serve our employees Our clarity of strategy and purpose will be supported and enabled
and provide useful feedback to the Board. by our culture and the people who make them a reality. I am clear that
our strength – as people and in our performance – will come from

The Board considered Environmental, Social and Governance (ESG) continued investment in our diversity and inclusion. The Board has
matters and approved the ESG strategic framework for the Group, a vital role in setting the tone and demonstrating this in the diversity
on the recommendation of the Nomination & Governance Committee. of our thinking, and through our oversight, constructive challenge
A number of Directors and members of the Nomination & Governance and support for management and Prudential’s employees.
Committee, as well as other stakeholders, were consulted during the The Responsibility & Sustainability Working Group, established
year to shape this strategy. For more information, please see the by the Board and chaired by Alice Schroeder, will oversee the
Nomination & Governance Committee report on pages 142 and 148. embedding of Prudential’s ESG framework and progress on
You can read more about our corporate social responsibility actions in diversity and inclusion initiatives, and will take on employee
our 2020 ESG report (pages 70 to 117), which will also be published on engagement activities.
our website.
I hope this report and those of my fellow Committee Chairs
Focus for 2021 demonstrate the work we have undertaken and the tangible and
Since I joined Prudential, in light of the transformation of the business, positive impact this has had on our business and for our stakeholders,
the composition of the Board has been one of my key priorities, with oversight and challenge to promote the long-term success of
supported by the work of the Nomination & Governance Committee. Prudential and the long-term prosperity of our stakeholders. On
Reflecting our focus on growth in Asia and Africa, enabled by digital a personal level, I was disappointed not to be able to attend what
capabilities, I am pleased to welcome Chua Sock Koong and Ming Lu would have been my first Prudential AGM in May 2020 as a Non-
to the Board. Sock Koong has had a distinguished career with executive Director, and unfortunately it does not look possible to meet
operations experience in many of our key markets, while Ming has a shareholders in person at this year’s AGM under current restrictions.
long track record of investing in and growing businesses throughout We are working hard to ensure that shareholders will be able to
Asia. These appointments are part of an ongoing process to refresh the participate fully through digital means. The detailed arrangements

Board and make sure it has the right skills and experience to support will be communicated as part of our AGM Notice published in April.
the Group, in particular pan-Asian operating experience, and a high I look forward to updating you then and in future Annual Reports.
degree of digital familiarity. The next phase of appointments will focus
on experience and knowledge of specialist financial services.
As the Board changes, I am keen to ensure that we mitigate some of

the loss of experience, wisdom and institutional memory by enabling
new Non-executive Directors joining the Board to overlap with those
nearing retirement, to give new joiners sufficient time to benefit from Shriti Vadera
building relationships and sharing experience and insight to ensure a Chair
smooth transition period.

Prudential plc
A G K
Board of Directors
Shriti Vadera Michael Wells

Chair Group Chief Executive
N
Appointments: Appointments:
Board: May 2020 Board: January 2011
Chair of the Board: January 2021 Group Chief Executive: June 2015
Chair of the Nomination & Governance Committee: January 2021
Age: 58 Age: 60
Relevant skills and experience Relevant skills and experience

Shriti is the Chair of the Board. She joined Prudential as a Non-executive Mike continues to develop the operational management of the Group
Director and member of the Nomination & Governance Committee on on behalf of the Board, implementing Board decisions and leading the
1 May 2020 and became Chair of the Board with effect from 1 January Executive Directors and senior executives in the management of all aspects
2021. She became Chair of the Nomination & Governance Committee of the day-to-day business of the Group.
at the same time.
Mike has more than three decades’ experience in insurance and retirement
She contributes her senior boardroom experience at complex services, having started his career at the US brokerage house Dean Witter,
organisations, including extensive experience with international before going on to become a managing director at Smith Barney Shearson.
operations, strong strategic and financial services experience and
experience at the highest level of international negotiations between Mike joined the Prudential Group in 1995 and became Chief Operating
Governments and in multilateral organisations. Officer and Vice‑Chairman of Jackson in 2003. In 2011, he was appointed
President and Chief Executive Officer of Jackson, and joined the Board
Shriti was chair of Santander UK Group Holdings from 2015 until October of Prudential.
2020. She was a Director of BHP from 2011 and its Senior Independent
Director from 2015 until October 2020, and a Non-executive Director During his leadership of Jackson, Mike was responsible for the
of Astra Zeneca from 2011 until 2018. development of Jackson’s market-leading range of retirement solutions.
He was also part of the Jackson teams that purchased and successfully
Between 2009 and 2014, she undertook a wide range of assignments, integrated a savings institute and two life companies.
such as advising the South Korean Chair of the G20 in 2010, two European
countries on the Eurozone and banking crisis, the African Development Mike is Group Chief Executive, a position he has held since June 2015.
Bank on infrastructure financing, a number of global investors and Other appointments
sovereign wealth funds on strategy and economic and market —— International Advisory Panel of the Monetary Authority of Singapore
developments. —— San Diego University Advisory Board
Shriti was a Minister in the UK government from 2007 to 2009 in the
Cabinet Office, Business Department and International Development
Department and led on the UK government’s response to the global
financial crisis and its Presidency of the G20. She was a member of the
HM Treasury’s Council of Economic Advisers from 1999 to 2007, advising
on domestic and international issues including reforms to international
organisations following the Asian and financial crisis.
Shriti began her career in investment banking with SG Warburg/UBS
in 1984, where she had a strong focus on emerging markets.
Other appointments
—— Institute of International Finance, Board Member
—— National Institute of Economic and Social Research, Governor
122 Prudential plc

A G K
Executive Directors
Mark FitzPatrick CA James Turner FCA FCSI FRM
Group overview
Group Chief Financial Officer Group Chief Risk and
and Chief Operating Officer Compliance Officer
Strategic report
Board changes
Governance
Appointment: Appointment: Non-executive Directors
Board: July 2017 Board: March 2018 As announced on 10 December 2019, Jeremy
Anderson was appointed to the Board as a
Non-executive Director and member of the
Risk and Audit Committees with effect from
1 January 2020. He became the Chair of the
Risk Committee with effect from the conclusion
Age: 52 Age: 51

of the 2020 AGM held on 14 May 2020.
Relevant skills and experience Relevant skills and experience As announced on 30 January 2020, Shriti
Mark has a strong background across financial Having held senior positions at Prudential for Vadera joined the Board as a Non-executive
services, insurance and investment over a decade, James has a wide-ranging Director and member of the Nomination &
management, encompassing wide understanding of the business and draws on Governance Committee with effect from 1 May
geographical experience relevant to the previous experience across internal audit, 2020. She became Chair of the Board and of
Group’s key markets. finance and compliance, as well as technical the Nomination & Governance Committee with
knowledge, relevant to his role. effect from 1 January 2021.
Mark previously worked at Deloitte for
26 years, building his industry focus on James joined Prudential as the Director of As announced on 30 January 2020, Paul
insurance and investment management Group-wide Internal Audit and was appointed Manduca stepped down from the Board with
globally. During this time, Mark was managing Director of Group Finance in September 2015, effect from 31 December 2020.
partner for Clients and Markets, a member with responsibility for delivery of the Group’s
As announced on 11 March 2020, Sir Howard
of the executive committee and a member internal and external financial reporting,
Davies stepped down from the Board with
of the board of Deloitte UK. He was a vice business planning, performance monitoring
effect from the conclusion of the 2020 AGM
chairman of Deloitte for four years, leading and capital and liquidity planning.
held on 14 May 2020. As announced on
the CFO Programme and developing the
James joined the Board as an Executive Director 4 February 2021, Chua Sock Koong and Ming
CFO Transition labs.
and Group Chief Risk Officer in March 2018 and Lu will join the Board on 1 May 2021.
Mark previously led the Insurance & Investment in July 2019 assumed responsibility for Group
As announced on 3 March 2021, Kai
Management audit practice and the insurance Compliance. James relocated to Hong Kong in
Nargolwala will step down from the Board on
industry practice. August 2019 and has led the discussions with
13 May 2021.

the Hong Kong Insurance Authority on the
Mark is Group Chief Financial Officer and development of their Group Wide Supervisory Following the change of Group-wide supervisor
Chief Operating Officer, a position he has held Framework. in October 2019 to the Hong Kong Insurance
since July 2019. He joined the Board as Chief
Authority, the composition of the Prudential
Financial Officer in July 2017.
Corporation Asia Limited board of directors
Other appointment mirrors the Prudential Board.
—— British Heart Foundation
K
ey
A Member of the Audit Committee
N Member of the Nomination & Governance
Committee
Re Member of the Remuneration Committee
Ri Member of the Risk Committee
Denotes Committee Chair

Prudential plc
A G K
Board of Directors / continued

Non-executive Directors
The Hon. Philip Remnant CBE FCA Jeremy Anderson CBE David Law ACA
Senior Independent Director Non-executive Director Non-executive Director
A N Re Ri A A Ri Re
Appointments: Appointments: Appointments:

Board: January 2013 Board: January 2020 Board: September 2015
Audit Committee: January 2013 Chair of the Risk Committee: May 2020 Chair of the Audit Committee: May 2017
Nomination & Governance Committee: Audit Committee: January 2020 Risk Committee: May 2017
January 2013 Responsibility & Sustainability Working Remuneration Committee: February 2021
Remuneration Committee: January 2013 Group: February 2021
Age: 66 Age: 62 Age: 60
Relevant skills and experience Relevant skills and experience Relevant skills and experience
Philip contributes experience across a number Jeremy contributes substantial leadership David has experience across the Group’s key
of sectors and in particular listed company experience of the financial services sector international markets including North America
experience and the financial services industry, across Asia and the US. He has extensive and Asia, and across a number of industry
including asset management, in the UK technical knowledge on audit and risk sectors. He contributes extensive technical
and Europe. management, particularly concerning knowledge of audit, accounting and financial
international companies. reporting essential to his role as Chair of the
Philip was a senior adviser at Credit Suisse and Audit Committee.
a vice chairman of Credit Suisse First Boston Jeremy joined KPMG Consulting in 1985 and
(CSFB) Europe and head of the UK Investment held the role of Chief Executive Officer in 2001 David is an accountant and spent 33 years
Banking Department. He was twice seconded before being appointed as head of UK working with Price Waterhouse and
to the role of director general of the Takeover operations at Atos Origin and a member of the PricewaterhouseCoopers (PwC). During this
Panel. Philip served on the board of Northern Management Board of Atos Origin SA in 2002. time he was inter alia the global leader of PwC’s
Rock plc and as chairman of the Shareholder From 2006, following two years as head of insurance practice, a partner in the UK firm,
Executive. Until July 2018, he also served on financial services at KPMG UK, Jeremy held the and worked as the lead audit partner for
the board of UK Financial Investments Limited. role of KPMG’s Head of Financial Services for multinational insurance companies until his
In October 2020, Philip stepped down as Europe followed by head of clients & markets retirement in 2015. Other roles included
chairman and member of the board of The City in 2008. He served as KPMG’s Chairman of leadership of PwC’s insurance and investment
of London Investment Trust plc. Global Financial Services until 2017. Jeremy also management assurance practice in London and
served on the board of the UK Commission for the firm’s Scottish assurance division. He also
Philip joined the Board in January 2013 as a Employment and Skills, and now serves as a spent three months working in Hong Kong in
Non-executive Director, as Senior Independent non-executive director and chairman of the the early 1990s. After his retirement David
Director and as a member of each of the Audit audit committee of UBS Group AG. became a director and CEO of L&F Holdings
Committee, the Remuneration Committee and Limited and its subsidiaries (L&F). L&F is the
the Nomination & Governance Committee. Jeremy joined the Board in January 2020 as a professional indemnity captive insurance group
He also chaired the M&G Group Limited board Non-executive Director and member of the which serves the PwC network and its member
from April 2016 until October 2018. Audit and Risk Committees. He became Chair firms. David retired from this role in July 2019.
of the Risk Committee and a member of the
Other appointments Nomination & Governance Committee in May David joined the Board in September 2015 as
—— Severn Trent plc 2020. In February 2021, Jeremy stepped down a Non-executive Director and member of the
—— Takeover Panel (deputy chairman) from the Nomination & Governance Committee Audit Committee. He was appointed Chair
and became a member of the Responsibility & of the Audit Committee and a member of
Sustainability Working Group. the Risk Committee and of the Nomination
& Governance Committee in May 2017.
Other appointments In February 2021, David stepped down from
—— UBS Group AG / UBS AG (Audit Committee the Nomination & Governance Committee
Chair, Senior Independent Director, and was appointed a member of the
Vice-Chair) Remuneration Committee.
—— The Productivity Group
—— The Kingham Hill Trust Other appointment
—— University of Edinburgh (Member of the
Court and Policy and Resources committee)
124 Prudential plc

Kaikhushru Nargolwala FCA Anthony Nightingale CMG SBS JP Alice Schroeder
Group overview
Non-executive Director Non-executive Director Non-executive Director
Re Ri Re N A Ri
Strategic report
Governance
Board: January 2012 Board: June 2013 Board: June 2013
Remuneration Committee: January 2012 Chair of the Remuneration Committee: May 2015 Audit Committee: June 2013
Risk Committee: January 2012 Nomination & Governance Committee: Risk Committee: March 2018
Responsibility & Sustainability Working Group: May 2015 Chair of the Responsibility & Sustainability
February 2021 Working Group: February 2021
Employee Engagement Director: May 2019 Age: 73
Age: 70 Age: 64

Kai has experience across some of the Group’s Anthony has long executive experience of Alice has experience across the insurance,
key international markets, particularly Hong listed companies and, in particular, extensive asset management, technology and financial
Kong and the wider Asian market. In addition to knowledge of Asian markets. services industries in the US.
his experience with listed groups, he contributes
Anthony spent his career in Asia, where he Alice began her career as a qualified accountant
knowledge of the financial services sector.
joined the Jardine Matheson Group in 1969, at Ernst & Young. She joined the Financial
Kai spent 19 years at Bank of America and was holding a number of senior positions before Accounting Standards Board as a manager
based in Hong Kong in roles as group executive joining the board of Jardine Matheson Holdings in 1991, overseeing the issuance of several
vice president and head of the Asia Wholesale in 1994. He was managing director of the significant insurance accounting standards.
Banking Group from 1990 to 1995. He spent 10 Jardine Matheson Group from 2006 to 2012.
Anthony was on the Board of Schindler Holding From 1993, she led teams of analysts
years working for Standard Chartered PLC in
Limited until 19 March 2020. specialising in property-casualty insurance
Singapore as group executive director responsible
as a managing director at CIBC Oppenheimer,
for Asia governance and risk from 1998 to 2007.
He was a past chairman of the Hong Kong PaineWebber (now UBS) and Morgan Stanley.
Kai was chief executive officer of the Asia Pacific
General Chamber of Commerce and was Alice was also an independent board member
Region of Credit Suisse AG from 2008 to 2010
appointed as an ABAC Representative of of the Cetera Financial Group and held the office
and now serves as director and chairman of their
Hong Kong, China from 2005 to 2017 and of CEO and chair of WebTuner (now Showfer
remuneration committee. Kai also served as
the Hong Kong representative to the APEC Media LLC), until its sale in 2017. She was also
chairman of Clifford Capital Pte. Ltd from April
Vision Group from 2018 to 2019. a director of Bank of America Merrill Lynch
2012 until December 2020 and Clifford Capital
International until December 2018.
Holdings from April 2020 until December 2020.

He is the Chairperson of the Sailors Home
and Missions to Seafarers in Hong Kong. Alice joined the Board in June 2013 as a
Kai has served on a number of other boards,
including Singapore Telecommunications and Anthony joined the Board in June 2013 as a Audit Committee. She became a member of
Tate & Lyle plc and was appointed deputy Non-executive Director and member of the the Risk Committee in March 2018 and was
chairman of Singapore Pools (Private) Limited Remuneration Committee. He became Chair appointed Chair of the Responsibility &
with effect from January 2021. of the Remuneration Committee and a member Sustainability Working Group in February 2021.
Kai joined the Board in January 2012 as a of the Nomination & Governance Committee
in May 2015. Other appointments
—— Quorum Health Corporation
Remuneration and Risk Committees. Other appointments —— Natus Medical Incorporated
In February 2021, he was appointed a member —— Jardine Matheson Holdings (and other —— Westland Insurance Group Ltd
of the Responsibility & Sustainability Working Jardine Matheson group companies)
Group. Kai acts as a designated Non-executive —— Shui On Land Limited
Director for employee engagement matters —— Vitasoy International Holdings Limited
as set out in the UK Code, for the Group’s —— The Innovation and Strategic Development
workforce in Asia and Africa. Council in Hong Kong
Other appointments
—— Credit Suisse Group AG

—— PSA International Pte Ltd
—— Co-Chair of Sustainable Finance Steering
Committee formed by Temasek
—— Singapore Pools (Private) Limited

Prudential plc
A G K
Board of Directors / continued

Thomas Watjen Fields Wicker-Miurin OBE Amy Yip

Non-executive Director Non-executive Director Non-executive Director
Re Ri N Re A

Board: July 2017 Board: September 2018 Board: September 2019
Remuneration Committee: July 2017 Remuneration Committee: September 2018 Audit Committee: March 2021
Risk Committee: November 2018 Responsibility & Sustainability Working Group:
Nomination & Governance Committee: February 2021
February 2021
Employee Engagement Director: May 2019
Age: 66 Age: 62 Age: 69
Tom has experience across the insurance, asset Fields has extensive international boardroom Amy has extensive experience of China and
management and financial services industries experience, combining knowledge of the Group’s South- east Asia following a 40-year career
as well as experience with listed companies in key geographic markets in Asia and Africa with in banking, insurance, asset management
the UK and the US. experience across the global financial services and government.
industry, including more than 10 years as a
Tom started his career at Aetna Life and Amy started her career in 1978 and has held a
non-executive director and committee chair
Casualty before joining Conning & Company, number of senior positions in financial services
of life insurance and reinsurance companies.
an investment and asset management provider, in Asia. She was formerly head of wealth
where he became a partner in the consulting Fields has held a number of senior positions, management of DBS Bank, chair of DBS Asset
and private capital areas. He joined Morgan including senior partner at Strategic Planning Management and chief executive officer of DBS
Stanley in 1987, and became a managing Associates, chief financial officer and director Bank Hong Kong. Since 2011 she has been an
director in its insurance practice. of strategy at the London Stock Exchange, and adviser to Vita Green, a health supplements
leader of the global markets practice at AT provider based in Hong Kong.
In 1994 he was appointed executive vice
Kearney. She was appointed to Nasdaq’s
president and chief financial officer of Provident Amy became a non-executive director of AIG
Technology Advisory Council and as an expert
Companies Inc. Insurance Hong Kong Limited in 2011 and chairs
on the Panel advising the European Parliament on
its audit committee. She became a non-executive
He was a key member of the team associated financial markets harmonisation. She previously
director and member of the Technology
with Provident’s merger with Unum in 1999 and chaired the investment committee of the Royal
Committee of Deutsche Börse AG in 2015 and
was appointed president and chief executive London Group and has chaired the audit
became chair of the Asia Pacific advisory board
officer of the renamed Unum Group in 2003, committee of Savills plc. From 2004-2014, Fields
of EFG Bank International in 2019. Amy served
a role he held until May 2017. Tom also served focused on sub-Saharan Africa, India and China
as a member of the compensation and nomination
on the board of Sun Trust Banks from 2010 until in her role as chair of the investment impact
committees of Temenos Group AG from 2014
April 2019. In 2019, Tom joined the boards of committee of CDC, the UK government’s
until May 2020, and as a non-executive director
LocatorX, Inc and in 2020 he joined the board development finance institution.
of Fidelity Funds from 2017 until October 2020.
of Arch Capital Group Limited.
Fields has served on the boards of three UK
Amy joined the Board in September 2019 as
Tom joined the Board in July 2017 as a Government departments, including the
a Non-executive Director and member of the
Non-executive Director and member of the Department of Business, where she chaired the
Remuneration Committee. With effect from
Remuneration Committee. He became a strategic investment committee and was a
3 March 2021, Amy stepped down from the
member of the Risk Committee in November member of the technology strategy board, and
Remuneration Committee and joined the
2018 and a member of the Nomination & the Department for Digital, Culture, Media and
Audit Committee.
Governance Committee in February 2021. Sport (2016-2020), where she chaired the audit
Tom acts as a designated Non-executive and risk committee. Other appointments
Director for employee engagement matters —— AIG Insurance Hong Kong Limited
Fields joined the Board in September 2018 as a
as set out in the UK Code, for the Group’s —— Deutsche Böerse AG
workforce in the US and UK. —— EFG Bank and EFG Bank International
Remuneration Committee and was appointed a
(Chairman, Asia Pacific Advisory Board)
Other appointments member of the Responsibility & Sustainability
—— Arch Capital Group Limited Working Group in February 2021.
—— LocatorX, Inc
Other appointments
—— BNP Paribas
—— SCOR SE
—— Leaders’ Quest (Partner)
126 Prudential plc

A B C D E F G H I
Group Executive Committee J K L M N O P Q R
The Group Executive Committee (GEC) comprises the Executive Directors, the UK Corporate Governance Code Principles
Group overview
Chief Executive of each of Prudential Corporation Asia and Jackson Holdings
LLC, the Group Human Resources Director and the Group Chief Digital Officer. The UK Corporate Governance Code requires that we demonstrate how
The GEC is a management committee constituted to support the Group Chief we have applied the Principles of the Code (listed below). Throughout the
Executive, who also chairs the GEC. For the purposes of the Hong Kong Listing Annual Report we have inserted red-circled letters to indicate which
Rules, Senior Management is defined as the members of the GEC. section, page or paragraph demonstrates our compliance.
Jolene Chen Board leadership and company purpose
Strategic report
Group Human Resources Director A A successful company is led by an effective and entrepreneurial board, whose
role is to promote the long-term sustainable success of the company, generating
Appointment to the GEC: June 2019 value for shareholders and contributing to wider society.
Age: 61 B The board should establish the company’s purpose, values and strategy, and
satisfy itself that these and its culture are aligned. All directors must act with
Relevant skills and experience integrity, lead by example and promote the desired culture.
Jolene is the Group Human Resources Director and Chief Human Resources C The board should ensure that the necessary resources are in place for the
Officer for Prudential Corporation Asia. She is also a member of the Prudential company to meet its objectives and measure performance against them. The
Corporation Asia Executive Board and a Councillor of Prudence Foundation, board should also establish a framework of prudent and effective controls, which
the community investment arm of Prudential in Asia. enable risk to be assessed and managed.
Governance
D In order for the company to meet its responsibilities to shareholders and
Jolene has more than 30 years’ experience, including eight as Chief Human stakeholders, the board should ensure effective engagement with, and
Resources Officer for Prudential Corporation Asia. Prior to joining us she spent encourage participation from, these parties.
over 21 years with multinational companies in a variety of resourcing, E The board should ensure that workforce policies and practices are consistent with
organisational design, talent management, learning and development and the company’s values and support its long-term sustainable success. The
workforce should be able to raise any matters of concern.
human resources roles.
Division of responsibilities
Nicolaos Nicandrou F The chair leads the board and is responsible for its overall effectiveness in

Chief Executive, Prudential Corporation Asia directing the company. They should demonstrate objective judgement
throughout their tenure and promote a culture of openness and debate. In
Appointment to the GEC: October 2009 addition, the chair facilitates constructive board relations and the effective
Age: 55 contribution of all non-executive directors, and ensures that directors receive
Relevant skills and experience accurate, timely and clear information.
G The board should include an appropriate combination of executive and
Nic became Chief Executive of Prudential Corporation Asia in July 2017 non-executive (and, in particular, independent non-executive) directors, such
and is responsible for Prudential Corporation Asia’s life insurance and asset that no one individual or small group of individuals dominates the board’s
management business across 14 markets in Asia. Nic is also the chairman decision-making. There should be a clear division of responsibilities between the
of CITIC-Prudential Life Insurance Limited. leadership of the board and the executive leadership of the company’s business.
H Non-executive directors should have sufficient time to meet their board
Nic started his career at PricewaterhouseCoopers (PwC). Before joining responsibilities. They should provide constructive challenge, strategic guidance,
Prudential as an Executive Director and Chief Financial Officer in 2009, he offer specialist advice and hold management to account.
worked at Aviva, where he held a number of senior finance roles, including I The board, supported by the company secretary, should ensure that it has the
as Norwich Union Life’s finance director and board member, Aviva group policies, processes, information, time and resources it needs in order to function
financial control director, Aviva group financial management and reporting effectively and efficiently.
director and CGNU group financial reporting director.
Composition, succession and evaluation
J Appointments to the board should be subject to a formal, rigorous and
Laura Prieskorn transparent procedure, and an effective succession plan should be maintained for
Chief Executive Officer, Jackson Holdings LLC board and senior management. Both appointments and succession plans should
be based on merit and objective criteria and, within this context, should promote
Appointment to the GEC: February 2021 diversity of gender, social and ethnic backgrounds, cognitive and personal
Age: 53 strengths.
Relevant skills and experience K The board and its committees should have a combination of skills, experience and
knowledge. Consideration should be given to the length of service of the board

Laura is Chief Executive Officer of Jackson Holdings LLC, which includes as a whole and membership regularly refreshed.
Jackson’s US subsidiaries and affiliates. Prior to this, as Executive Vice L Annual evaluation of the board should consider its composition, diversity and
President and Chief Operating Officer, Laura was responsible for leading how effectively members work together to achieve objectives. Individual
Jackson’s operations and technology teams as well as the business integration evaluation should demonstrate whether each director continues to contribute
efforts directed at continuously supporting and improving the client, adviser effectively.
and distribution partner experience. Laura joined Jackson in August of 1989,
Audit, risk and internal control
and during her career at the company has held a variety of senior roles, M The board should establish formal and transparent policies and procedures to
including membership of the Executive, Investment and Product Committees. ensure the independence and effectiveness of internal and external audit
She earned a bachelor’s degree from Central Michigan University functions and satisfy itself on the integrity of financial and narrative statements.
N The board should present a fair, balanced and understandable assessment of the
in business administration.
company’s position and prospects.
O The board should establish procedures to manage risk, oversee the internal
Al-Noor Ramji control framework, and determine the nature and extent of the principal risks the
Group Chief Digital Officer company is willing to take in order to achieve its long-term strategic objectives.
Appointment to the GEC: January 2016 Remuneration
Age: 66 P Remuneration policies and practices should be designed to support strategy and
Relevant skills and experience promote long-term sustainable success. Executive remuneration should be
aligned to company purpose and values, and be clearly linked to the successful
Al-Noor, who joined Prudential in 2016 in the newly-created role of Group Chief

delivery of the company’s long-term strategy.
Digital Officer, is responsible for developing and executing an integrated, Q A formal and transparent procedure for developing policy on executive
long-term digital strategy for the Group. remuneration and determining director and senior management remuneration
Before joining Prudential, he worked at Northgate Capital, a venture capital firm should be established. No director should be involved in deciding their own
remuneration outcome.
in Silicon Valley, where he ran the technology-focused funds. Prior to R Directors should exercise independent judgement and discretion when
that, Al-Noor was at Misys, the financial services software group, and he has authorising remuneration outcomes, taking account of company and individual
previously held leading technology and innovation roles at BT Group, Qwest performance, and wider circumstances.
Communications, Dresdner Kleinwort Benson and Swiss Bank Corporation.

Prudential plc
How we operate
This section tells you more about

the Group’s governance, operation
of the Board and Board roles.
Group governance Group Governance Manual

Corporate governance codes – statement of compliance The Group Governance Manual (the Manual) sets out the policies
The Company has dual primary listings in London (premium listing) and procedures under which the Group operates, taking into account
and Hong Kong (Main board listing) and has therefore adopted a statutory, regulatory and other relevant matters. The Manual includes
governance structure based on the UK and Hong Kong Corporate the Group Code of Business Conduct which is regularly reviewed by
Governance Codes (the UK and HK Codes). This report explains the Board. The Risk Committee approves the Group Risk Framework,
how the principles set out in the UK and HK Codes have been applied. an integral part of the Manual, and the Audit Committee monitors
Group-wide compliance with the Manual throughout the year.
The Board confirms that, for the year under review, the Company has
complied with the principles and provisions of the UK Code. Please Business units manage and report compliance with the Group-wide
see page 127 where we set out how we have applied the principles. mandatory requirements set out in the Manual through annual
attestations. This includes compliance with our risk management
The Company has also complied with the provisions of the HK Code framework, details of which are set out on pages 139 to 140
other than as follows: Provision B.1.2(d) of the HK Code requires of this report.
companies, on a comply or explain basis, to have a remuneration
committee which makes recommendations to a main board on the The content of the Manual is reviewed regularly, reflecting the
remuneration of non-executive directors. This provision is not developing nature of both the Group and the markets in which it
compatible with principle Q of the UK Code which states that no operates, with significant changes on key policies reported to the
director should be involved in deciding their own remuneration relevant Board Committee.
outcome, and provision 34 of the UK Code which recommends that
the board determines the remuneration of non-executive directors. Subsidiary governance
Prudential has chosen to adopt a practice in line with the Since the demerger of M&G plc in October 2019, the Group has made
recommendations of the UK Code. changes to its subsidiary audit and governance arrangements to reflect
the changing shape of the Group, in particular with respect to the Asia
Following the introduction by the UK government of measures to limit business. The Group Audit and Risk Committees have established
the spread of Covid-19 by prohibiting non-essential travel and public direct links to the audit and risk committees of the four major Asia
gatherings of more than two people, and following the issuance of insurance businesses, Hong Kong, Indonesia, Malaysia and Singapore.
the Company’s 2020 Annual General Meeting (AGM) Notice, the Arrangements include regular reports and calls between the Chairs
Company provided an update to shareholders in late April 2020 on its of the Group committees and the local committee chairs, with an open
revised arrangements for the 2020 AGM. In light of those restrictions invitation to the Group Committee Chairs to attend the committee
and to protect the health of Prudential’s shareholders and employees, meetings of the major Asia business.
the Board decided, with regret, that shareholders, external advisers
(including the auditor) and Directors (other than the Chairman) would In addition, an internal legal restructuring has been undertaken to
not be able to attend the AGM in person (and thus provisions A.6.7 form a holding company for Eastspring managed entities, Eastspring
and E.1.2 of the HK Code could not be complied with). Investments Group Pte. Ltd. This has created a regional board as well
as audit and risk committees with consolidated oversight across the
The UK Code is available from: Eastspring business unit and a direct link to the Group-level Audit
www.frc.org.uk and Risk Committees.
The HK Code is available from: Other Prudential Corporation Asia businesses also operate local
www.hkex.com.hk audit and risk committees, with standard terms of reference. Those
C
committees report to the Group-level committees through written
I O updates provided by the attendees from Group functions.
Our governance framework
The Group has established a governance framework for the business, The Nomination & Governance Committee is responsible for oversight
which is approved by the Board, and is designed to promote of governance arrangements for the significant subsidiaries. A report
appropriate behaviours across the Group. The Nomination & on the activities of the Nomination & Governance Committee during
Governance Committee keeps material changes to the governance 2020 can be found on pages 141 to 149.
arrangements under review.
Regulatory environment
The governance framework includes the key mechanisms through Following the demerger of M&G plc on 21 October 2019, the
which the Group sets strategy, plans its objectives, monitors Group-wide supervisor of Prudential changed to the Hong Kong
performance, considers risk management, holds business units to Insurance Authority (the Hong Kong IA). On 24 July 2020 the
account for delivering on business plans and arranges governance. Insurance (Amendment) (No. 2) Ordinance, being the enabling
primary legislation providing for the GWS Framework, was enacted.
This primary legislation is supported by subsidiary legislation and
guidance material from the Hong Kong IA. The relevant subsidiary
legislation, including the Insurance (Group Capital) Rules, was tabled
before the Legislative Council on 6 January 2021 and will come into
operation on 29 March 2021.
128 Prudential plc

The GWS Framework includes requirements for Hong Kong Due to the UK government restrictions to limit the spread of Covid-19,
Group overview
insurance groups to have in place appropriate corporate governance the AGM on 14 May 2020 chaired by Paul Manduca was held as a
arrangements and to maintain appropriate internal controls for the ‘closed meeting’ with just two shareholders to provide the requisite
oversight of their business. quorum to enable the formal business of passing resolutions to be
conducted. In recognising the continuing importance of the AGM as
Individual regulated entities within the Group continue to be subject an opportunity to engage with shareholders, the Board encouraged
to entity-level regulatory requirements in the relevant jurisdictions participation from shareholders. The revised meeting arrangements
in which they carry on business. included an option for shareholders to submit questions to the Board
Strategic report
in advance of the meeting, the answers to which were posted on the
Interactions with regulators shape the Group’s governance framework Company’s website, and shareholders were also asked to vote their
and the Chair, Group Chief Executive, Group Chief Risk Officer and shares by proxy ahead of the meeting. Prudential kept shareholders
Compliance Officer, and the Chief Executive of Prudential Corporation informed through its website and released a number of updates during
Asia play a leading role in representing the Group to regulators and the period of the Covid-19 pandemic, including a Q1 business update
ensuring our dialogue with them is constructive. and other presentations.
Terms of reference for each of the Board’s principal Committees have Notwithstanding the pandemic and related unprecedented measures
Governance
been updated to align their duties with the changes expected under and circumstances, the Board continues to receive regular updates
the GWS Framework. on shareholder engagement activities.
B
D E A
B C D H I
Stakeholder engagement Operation of the Board
Information on the Board’s engagement with, and discussion of, How the Board leads the Group
stakeholder views as part of the Board decision-making process can The Group is headed by a Board led by the Chair.
be found on pages 78 to 81. Additional information can be found

on our website at www.prudentialplc.com/about-us/esg/our-approach The Board currently consists of 13 Directors, of which a majority,
excluding the Chair are independent Non-executive Directors.
Employee voice Biographical details of each of the Directors can be found on pages 122
The Board has designated two Non-executive Directors to represent to 126 and further details of the roles of the Chair, Group Chief
the workforce; Kai Nargolwala with responsibility for Asia and Africa, Executive, Senior Independent Director, Committee Chairs and the
and Tom Watjen with responsibility for the US and the UK. Non-executive Directors can be found on pages 134 to 136.
The Board received an update on activities undertaken and themes The Board is collectively responsible to shareholders for the long-term
arising for consideration on a six-monthly basis. Kai Nargolwala and sustainable success of the business through:
Tom Watjen offer their insight to Board discussions and decisions as
part of the Board’s consideration of the workforce as key stakeholders. —— Establishing the Company’s purpose, values and strategy and
Kai Nargolwala will be retiring at the AGM in May and post the satisfying itself that these are aligned with the Group’s culture;
proposed separation of Jackson the work he and Tom Watjen —— Approving the Group’s long-term strategy, strategic objectives,
undertook will be continued by the Responsibility & Sustainability capital allocation, annual budgets and business plans,
Working Group. As part of this, the Working Group will consider the recommended by the Group Chief Executive, and any material
best method for employee engagement in the longer term, to ensure changes to them;
this is tailored to the culture and strategic priorities of the refocused —— Monitoring the implementation of strategic objectives; and
Group following the proposed separation of the Jackson business, —— Assessing and monitoring culture, including alignment with policy,
and make a recommendation to the Board for implementation practices, behaviours and risk appetite.
following the 2022 Annual General Meeting.
Specific matters are reserved for decision by the Board, including:

Please see the Section 172 statement on pages 78 to 81 for an
overview of the activities undertaken during 2020. —— Approving dividend policy and determination of dividends or other
capital distributions;
Shareholders —— Approving of strategic projects;
The Board recognises the importance of maintaining an appropriate —— Approving of the three-year business and financial plan;
level of two-way communication with shareholders. The Group holds —— Appointing and removing of Directors and the Company Secretary;
an ongoing programme of regular contact with major shareholders, —— Approving of the Group’s full and half-yearly results
conducted by the Chair, to discuss their views on the Group’s announcements and any other periodic financial reporting;
governance. The Senior Independent Director and the Committee —— Ensuring an effective system of internal control and risk
Chairs are available at the request of shareholders. Engagement management is in place, maintained and reviewed at least annually;
with institutional investors on the Directors’ Remuneration Policy —— Approving the Group’s overall risk appetite and tolerance; and
and implementation is led by the Remuneration Committee Chair —— Ensuring effective engagement with, and encouraging participation
on an annual basis. from, key stakeholder groups.
During 2020, in addition to the governance meetings held with
investors by Paul Manduca, Shriti Vadera met with a large number
of our major investors as part of her introduction to the business.

The Chair of the Remuneration Committee also engaged with our
investors on the Directors’ Remuneration Policy. Please see our
Section 172 Statement on pages 78 to 81 for more information
on interactions with shareholders and other key stakeholders.

Prudential plc
How we operate / continued
Key areas of focus – how the Board spent its time

The Board held nine meetings during 2020. The table below gives an indication of the key topics considered at each meeting.
Feb Mar Apr May Jul Aug1 Sep Dec
Strategy and implementation

Approval and review of strategic priorities
Strategic priorities monitoring
Approval of three-year operating plan
Strategic projects2
Group Chief Executive’s report
Report from Committee Chairs
Audit
Nomination & Governance
Remuneration
Risk
Financial reporting and dividends
Group Chief Financial Officer’s performance report
Full-year and 2019 second interim dividend
Half-year and 2020 first interim dividend
Cash, capital and operations reports
Business unit Chief Executive updates
Prudential Corporation Asia
Jackson
Risk, regulatory and compliance
Regulatory and Government Relations updates
Group Chief Risk and Compliance Officer’s report
Governance and stakeholders
Key governance developments
Culture and employee engagement
Board evaluation and actions tracking
Succession planning
Corporate responsibility reporting and ESG
Diversity and inclusion
Non-executive Directors’ fees
Investor updates including feedback on investor meetings
Audit tender
Notes
1 Two meetings for the 2020 Half Year Accounts were held in August.
2 Strategic projects considered during the year included the bancassurance partnership with TMB and Thanachart, the proposed separation of Jackson and various aspects
of the strategic positioning of the Group, the Athene transaction, and the expansion of Pulse and associated commercial partnerships.
The Board held a separate workshop focusing on the proposed separation of Jackson in January and a three-day strategy event in June.
Between meetings, the Board is provided with monthly update reports from management.
130 Prudential plc

Board and Committee meeting attendance throughout 2020
Group overview
Individual Directors’ attendance at meetings throughout the year is set out in the table below.
Nomination Joint Audit
Audit & Governance Remuneration Risk and Risk General
Board Committee Committee Committee Committee Committee Meetings1
9 meetings 11 meetings 6 meetings 5 meetings 8 meetings 2 meetings 1 meeting
Chairman Paul Manduca ••••••••• •••••2 •
Strategic report
Executive Mike Wells •••••••••
Directors
Mark FitzPatrick •••••••••
James Turner •••••••••
Non-executive Philip Remnant ••••••••• ••••••••••• •••••• ••••• •
Directors
Jeremy Anderson ••••••••• ••••••••••• •••3 •••••••• ••
Governance
Howard Davies4 •••• •••• ••• ••• •
David Law ••••••••• ••••••••••• •••••• •••••••• ••
Kai Nargolwala ••••••••• ••••• ••• •••• ••
Anthony Nightingale ••••••••• •••••• •••••

Alice Schroeder ••••••••• ••••••••••• •••••••• ••
Tom Watjen ••••••••• ••••• •••••••• ••
Fields Wicker-Miurin ••••••••• •••••
Amy Yip ••••••••• •••••
Shriti Vadera 5 •••••• ••••
Notes
1 Due to the Covid-19 restrictions in the UK, only the Chairman attended the Annual General Meeting with the Company Secretary.
2 Paul Manduca recused himself from a meeting of the Nomination & Governance Committee which was convened to discuss his succession plans.
3 Jeremy Anderson was appointed a member of the Nomination & Governance Committee with effect from 14 May 2020.
4 Howard Davies stepped down from the Board with effect from the conclusion of the AGM held on 14 May 2020.
5 Shriti Vadera was appointed a member of the Board and of the Nomination & Governance Committee with effect from 1 May 2020.
Board and Committee papers are usually provided one week in advance of a meeting. Where a Director is unable to attend a meeting,
his or her views are canvassed in advance by the Chair of that meeting where possible.


Prudential plc
Board effectiveness
L
Actions during 2020 arising from the 2019 review

The performance evaluation of the Board and its principal Committees for 2019 was conducted internally at the end of 2019 through a
questionnaire. The findings were presented to the Board in February 2020 and an action plan was agreed to address areas of focus identified
by the evaluation.
The review confirmed that the Board continued to operate effectively during the year and no major areas requiring improvement
were highlighted.
Set out below are the themes, summary of actions and progress updates:
Theme Summary of actions Progress
Board composition —— Continue to use workshops, as appropriate, —— The workshop format has been used to enable
and process to support discussions. more Board time for discussion where appropriate.
—— Monitor Board meeting arrangements in the —— Meeting arrangements have been adapted in
post-demerger context and ensure strategic response to Covid-19 travel restrictions, including
focus areas, including culture and values, technology upgrades and meeting adjustments
continue to receive appropriate agenda time. to maximise time available and enable Directors
to continue to focus on key strategic areas.
Risk, Capital —— Keep Board training in this area under review —— The Board continued to receive relevant updates
and Audit and schedule additional sessions as appropriate. during the year. Due to Covid-19 related travel
restrictions, on-site sessions were not possible but
will resume once restrictions have eased. More
details on Board and Committee training is included
on page 138.
Stakeholders —— Continue to develop and embed reporting by the —— The roles of the two Designated Non-executive
designated Non-executive Directors on workforce Directors were embedded during 2020 and the
engagement. Board received reports on their activities.
—— The Responsibility & Sustainability Working Group
established in February 2021 (as described on page
137) will take over the role of workforce engagement
from the 2021 AGM until the 2022 AGM. It will also
consider and make a recommendation to the Board
on the most appropriate method for workforce
engagement thereafter.
People —— Continue to develop reporting on talent —— Talent management and D&I has been more firmly
management, succession pipeline and D&I, embedded within the processes across the business,
utilising the expanded role of the Nomination which was reinforced as part of the culture
& Governance Committee. framework developed during the year.
—— Reporting has been expanded and includes more
forward-looking assessments and metrics which
are being developed by the newly established
D&I Council as part of the Group’s D&I strategy.
132 Prudential plc

2020 review and actions for 2021
Group overview
The performance evaluation of the Board and its principal Committees for 2020 was conducted externally by Independent Board Evaluation,
an independent consultancy. The external nature of the review met the provisions of the UK Corporate Governance Code which requires
external evaluations on no less than three-yearly intervals.
The evaluation covered the Board, each of the principal committees, and an individual assessment of the Chair and each of the other
Non‑executive Directors. The Board evaluation focused on Board performance and focus, Board composition, succession planning and
induction, and support provided to Board members. The evaluation included seeking feedback from each Director, the Company Secretary
Strategic report
and senior management.
Interviews were held with all Board members and other stakeholders, and these were supplemented by attendance and observation at a number
of Board and Committee meetings. Supporting materials to enhance understanding of how the Board and its Committees operate were
provided.
The findings were presented to the Nomination & Governance Committee and the Board in December 2020 and collective Committee and Board
discussions to exchange ideas and agree priorities arising from the report took place.
Governance
The Board agreed an action plan to respond to the recommendations at its meeting in February.
I
The report identified a number of strengths of the Board, including a strong Board culture of engagement and collaboration, strong governance
and compliance, and clear, timely information being provided to support Board meetings. The evaluation concluded that the Board and its
principal committees were operating effectively. Some areas were identified for development in order to support the onboarding of new Board
members and to keep pace with the transformation of the Group.

Through the evaluation and subsequent additional discussion at the Board meeting in February 2021, the Board identified areas of particular
focus and related actions:
Theme Summary of actions
Maximising Board —— Enhance induction processes to leverage new Board members’ skills as quickly as possible.
inclusivity —— Recognising the challenge with current travel restrictions, create more opportunities for less formal discussion
among Board members.
Focusing on —— Consider how best to give additional Board time and focus to the ESG and people agenda.
the People and
ESG Agenda
Improvements to —— As the shape of the Group changes, build up Board members’ depth of knowledge of the Asia and Africa business
Board information and re-focus the Board agenda to maximise time considering business performance and strategy on a more
flows granular basis.
—— Review and strengthen links with subsidiary boards to leverage insight and support from those boards.
Improvements to —— Consider processes for briefings outside of meetings to support inclusivity and maximise ways in which Board
Board processes members benefit from each other’s experience and expertise.

Director evaluation
The performance of Directors during 2020 was evaluated by Independent Board Evaluation as part of the overall Board evaluation programme.
Feedback on individual performance of Non-executive Directors was provided to the then Chair designate, who held discussions with each
of them at the start of 2021 on becoming Chair. Feedback on the performance of the then Chair designate was separately provided to, and
discussed with her, by the Senior Independent Director. Feedback on the performance of the Executive Directors, in their capacity as Board
Directors, was also provided to the Chair designate, who discussed feedback with each of them separately.
The performance of Executive Directors, in their capacity as Executives, is subject to regular review; Paul Manduca assessed the performance
of the Group Chief Executive while Mike Wells individually appraised the performance of each of the Executive Directors as part of the annual
Group-wide performance evaluation of all employees. The Chair of the Risk Committee provided feedback to the Group Chief Executive on
the performance of the Group Chief Risk and Compliance Officer.
The outcome of each of these evaluation processes is reported to the Nomination & Governance Committee in February each year in order
to inform the Committee’s recommendation for Board members to be put forward for re-election by shareholders.
Executive Director performance is also reviewed by the Remuneration Committee as part of its deliberations on bonus payments.

Prudential plc
Directors
A
B C D E F G H
Board roles and governance
Chair – Shriti Vadera

The Chair is responsible for leadership of the Board and managing Board business. She ensures, in collaboration with the Group Chief
Executive and senior management, that the appropriate issues are brought to the Board, that there is a culture of openness and debate,
and that the Board is setting the right tone from the top.
Other aspects of the Chair role include: Relations with shareholders and other stakeholders
—— Ensuring effective communication with shareholders and that
Leadership and succession planning relevant governance and strategy issues are discussed with major
—— Responsible for the leadership and the governance of the Board shareholders and that their views are communicated to the Board
as a whole, demonstrating objective judgement, the highest as a whole
standards of integrity and probity, and ethical leadership —— Representing the Board externally at business, political
—— Responsible for developing, in conjunction with the Nomination and community level. Alongside the Group Chief Executive,
& Governance Committee and the Group Chief Executive, presenting the Group’s views and positions as determined
an effective Board as regards its composition, skills by the Board on key public policy and industry matters and
and competencies communicating them effectively to governments, other public
—— Leading the Board in discharging its responsibility in respect organisations and regulatory authorities
of the appointment and removal of Directors —— Balancing the interests of different categories of stakeholders,
—— Leading periodic evaluations, including externally facilitated preserving an independent view and ensuring effective
evaluations, of the Board, its Committees and individual Directors communication, ensuring that the Board listens to the views
—— Leading the Board in holding to account the performance of of key stakeholders
management and individual executive directors against agreed
performance objectives External positions
—— Working with the Nomination & Governance Committee, —— Approving Directors’ external positions prior to them being
ensuring that Directors receive a full formal and tailored induction accepted, taking into account the required time commitment
programme, that their development needs are identified and and escalating consideration of conflicts of interest to the
that they keep their skills and knowledge up to date Nomination & Governance Committee as required
Managing Board business

—— Setting the Board agenda and ensuring, in collaboration
with the Group Chief Executive, and the Company Secretary,
that appropriate issues are brought to the Board’s attention
—— Maintaining an effective and constructive liaison with the
Non-executive Directors, encouraging their engagement
so as to maximise their contribution to the work of the Board
and also ensuring constructive relations between Executive
and Non-executive Directors
—— Meeting with Non-executive Directors independently
of the Executive
—— Ensuring, in collaboration with management, that information
brought to the Board is accurate, clear, timely and contains
sufficient analysis appropriate to the scale and nature of the
decisions to be made
—— Ensuring the Board has effective decision-making processes
and applies sufficient challenge to major proposals
—— Promoting effective reporting of Board Committee business
at Board meetings through regular Committee Chair updates
134 Prudential plc

Group overview
Group Chief Executive – Mike Wells
The Group Chief Executive leads the Executive Directors and senior executives and is responsible for the operational management
of the Group on behalf of the Board on a day-to-day basis.
—— Responsible for the implementation of Board decisions —— Chairs the Chief Executive Committee meetings which
—— Establishes processes to ensure operations are compliant with are held weekly to review matters requiring approval under
Strategic report
regulatory requirements the Group’s framework of delegated authorities
—— Sets policies, provides day-to-day leadership and makes decisions —— Keeps in regular contact with the Chair and briefs her
on matters affecting the operation, performance and strategy on key issues
of the Group, seeking Board approval for matters reserved to —— Meets with key regulators worldwide
the Board —— Leads on day-to-day effective stakeholder engagement
—— Supported by the Group Executive Committee which he chairs
and which reports to him on performance and implementation
of strategy for each business unit and discusses major projects
Governance
and other activities related to the attainment of strategy
Committee Chairs
Each of the Committee Chairs is responsible for the effective operation of their respective Committee.

—— Responsible for the leadership and governance of their Committee —— Works with the Company Secretary to ensure the continued
—— Sets the agenda for Committee meetings good governance of each Committee
—— Reports to the Board on the activities of each Committee meeting
and the business considered, including, where appropriate, In addition to Committee duties, the Chairs of the Audit and Risk
seeking Board approval for actions in accordance with the Committees act as key contact points for the independent chairs
Committee’s terms of reference of the audit and risk committees of the significant subsidiaries
Senior Independent Director – Philip Remnant
The Senior Independent Director acts as an alternative conduit to the Board for shareholder concerns and leads the evaluation
of the Chair.
—— Acts as a sounding board for the Chair, providing support in —— Offers meetings to major shareholders to provide them with
the delivery of the Chair’s objectives, and acts as an intermediary an additional communication point on request and is generally
for the other Directors and shareholders available to any shareholder to address concerns not resolved
—— Leads the Non-executive Directors in conducting the Chair’s through normal channels

annual evaluation and leads the Chair’s succession planning —— During periods when significant issues are faced by the Company,
—— Holds meetings with Non-executive Directors without works closely with the Chair and the other Directors or
management being present, typically at least once a year shareholders, providing support during exceptional
to evaluate the performance of the Chair circumstances to resolve any issues.
All of the Non-executive Directors are currently deemed to be independent, which is assessed annually, and together have a wide
range of experience which can be applied to attain the strategic aims of the Group.
—— Constructive and effective challenge —— Serving on at least one of the Board’s principal Committees
—— Providing strategic guidance and offering specialist advice —— Engaging with Executive Directors and other senior management
—— Scrutinising and holding to account the performance of at Board and Committee meetings and on an informal basis
management in meeting agreed goals and objectives

Prudential plc
The Board has established four principal Committees. These Committees form a key element of the Group governance framework, providing
effective independent oversight of the Group’s activities by the Non-executive Directors. Each Committee Chair provides an update to the Board
on the matters covered at each Committee meeting, supported by a short written summary. The terms of reference for each Committee are
reviewed at least annually. The functions of the principal Committees are summarised below.
Nomination & Governance Remuneration Audit Risk

Committee Committee Committee Committee
Chair Chair Chair Chair
Shriti Vadera Anthony Nightingale David Law Jeremy Anderson
—— Facilitates the Board in —— Ensures there is a formal —— Responsible for the integrity —— Provides leadership and
meeting its responsibilities and transparent process for of the Group’s financial direction on and oversees
to plan and execute timely establishing the Directors’ reporting, including the Group’s overall risk
Group Chief Executive Remuneration Policy scrutinising accounting appetite, risk tolerance
succession and works with —— Approves individual policies, and reporting to the and strategy
the Group Chief Executive remuneration packages of Board on significant reporting —— Approves the Group’s risk
to plan and execute the Chair, Executive Directors, issues and judgements management framework
Executive Director other members of the Group —— Monitors the effectiveness and monitors its
succession Executive Committee and of internal control and risk effectiveness
—— Ensures suitable succession the Company Secretary management systems —— Responsibility for all aspects
plans are in place for the —— Approves the overall —— Monitors the effectiveness of compliance
Board and senior executives Remuneration Policy and objectivity of internal —— Supports the Board and
to achieve the Group’s for the Group and external auditors management in embedding
strategic objectives, —— Reviews the design and —— Approves the internal and maintaining a
ensuring plans are based development of share plans audit plan supportive culture in relation
on merit and against operated for Executive —— Recommends the to the management of risk,
objective criteria Directors and others requiring appointment of the compliance and treating
—— Recommends appointments shareholder approval, external auditor customers fairly
to the Board and its principal and approves and assesses —— Reviews the adequacy —— Provides advice to the
Committees performance targets where and security of the Group’s Remuneration Committee
—— Oversees development applicable whistleblowing procedures on risk management
of a diverse pipeline in the —— Reviews workforce (known as Speak Out) and considerations to inform
executive succession plan remuneration practices ensures that there is remuneration decisions
and talent management and policies when setting proportionate and
—— Assists the Board in the executive remuneration, independent investigation
development of a Group- as well as the alignment of matters raised with
wide approach to all forms of incentives and awards appropriate follow-up action
of diversity and inclusion with culture
—— Oversees the Group’s
overall governance
framework, including the
governance arrangements
of the Group’s significant
subsidiaries
See Nomination & Governance See Remuneration Committee report See Audit Committee report See Risk Committee report
Committee report on pages 141 to 149 on pages 172 to 202 on pages 150 to 160 on pages 161 to 167
Terms of reference for the principal Committees can be accessed at

www.prudentialplc.com/investors/governance-and-policies/board-and-committees-governance
136 Prudential plc

Standing Committee Building Directors’ knowledge
Group overview
The Board has established a Standing Committee which can meet Induction – new Directors
as required to assist with any business of the Board. It is typically Jeremy Anderson and Shriti Vadera received a comprehensive
used for ad hoc urgent matters which cannot be delayed until the induction, tailored to reflect their respective experience and positions
next scheduled Board meeting. All Directors are members of the on the Board.
Standing Committee and have the right to attend all meetings and
receive papers. A summary of the general induction programme for Non-executive
Directors is set out below:
Strategic report
Notice of a Standing Committee meeting is sent to all Directors
and if an individual is unable to attend, that individual can give General induction programme relevant
comments to the Chair or Company Secretary ahead of the meeting to new Non-executive Directors
for consideration by the Standing Committee. Before taking decisions Understanding our governance Understanding our business
on any matter, the Standing Committee must first determine that the
business it is intending to consider is appropriate for a Committee of —— Meetings with the Chair —— Introduction to the Group’s
the Board and does not properly need to be brought before the whole and Group Chief Executive strategy and business plan
Board. All Standing Committee meetings are reported in full to the separately —— Tailored briefings with
Governance
next scheduled Board meeting. —— Explanation of Prudential’s senior executives from each
corporate structure, Board business unit, including site
This governance structure allows for fast decision-making where and Executive Committee visits, to facilitate a
necessary, while ensuring that the full Board has oversight of all structure comprehensive
matters under consideration and all Non-executive Directors can —— Briefings on Group understanding of local
contribute. Over 2020, the Company held three meetings of the governance framework business models, product
Standing Committee. and key policies suites, pricing arrangements

—— Training as needed on the and governance structures
rules and governance —— Tailored meetings with all
Responsibility & Sustainability Working Group requirements of the London Group-wide functions
and Hong Kong Stock —— Comprehensive briefings on
Chair
Exchanges and on fulfilling the regulatory environment
Alice Schroeder
the statutory duties of in which the Group operates
Following the Board’s approval in December 2020 of a new
a Director —— Briefings on top risks and
Environmental, Social and Governance (ESG) Strategic Framework,
internal controls
the Board recognises that the next 18 months will be critical for
—— Induction briefings and
the embedding of the framework within the Group, as well as
updates during the year
for the progress of related matters such as the development and
provide Directors with
embedding of the Group’s Purpose and Values, progressing
an understanding of the
diversity & inclusion (D&I) priorities, and building upon employee
interests of the Group’s
engagement activities in 2020.
key stakeholders
To ensure an appropriate level of Board engagement in, and
oversight of, these matters, the Board has established for the period D
up to the 2022 AGM a Responsibility & Sustainability Working
Group, to be chaired by Alice Schroeder. As part of its remit, Role-specific induction for Jeremy Anderson focused on briefings from
the Working Group will consider and recommend to the Board senior management in Group Risk across the Group and briefings from
appropriate long-term governance arrangements for these matters. the outgoing Group Risk Committee Chair. Shriti Vadera worked with
the outgoing Chairman, Paul Manduca and met extensively with the

It will also take on employee engagement activities after the
2021 AGM. Group’s major shareholders to shape her understanding of their views
and concerns and share her vision as incoming Chair. Ms Vadera also
held multiple meetings with each of the Non-executive Directors,
members of management and country level teams from across the
Group, including on physical visits to Hong Kong and Singapore,
and with the Group’s key advisers, as part of her induction activities.

Prudential plc
Continuing development of knowledge and skills —— The Audit Committee received updates on relevant developments
B affecting financial reporting and the role of audit committees more
widely. The Committee receives a regular report on financial and
During 2020, the Board and its Committees received a number of tax reporting matters for discussion, including the local capital
technical and business updates as part of their scheduled meetings, summation method disclosures, the Group’s capital metric,
providing information on external developments relevant to the and its underlying methodology. Other topics discussed by the
Group and on particular products or operations. Below is an overview Audit Committee included the audit tender process, IFRS 17
of how Directors are kept up to date: developments and the Group-wide Supervision assurance
—— The Board virtually held an annual strategy session, and across approach by the Hong Kong Insurance Authority.
the year received updates on key business areas and deep dives —— The Remuneration Committee receives updates on regulatory and
on strategic direction and objectives for the Group. best practice developments affecting the Group’s remuneration
—— The Board receives updates on environment, culture, diversity arrangements. This included the Shareholders’ Rights Directive II
and inclusion and employee engagement activities. and updates on proxy advisory guidance impacting remuneration.
—— The Board receives updates on corporate governance, political All Directors have the opportunity to discuss their individual
and regulatory developments in the US, UK, Europe and Asia and development needs as part of their Director evaluations and are
the dynamics of equity and currency markets at every scheduled encouraged to request specific updates during the year. At the start
meeting. Governance topics included audit effectiveness of the year, suggested topics are shared with the Board for feedback.
(Brydon Report), Board-level diversity and inclusion, ESG matters, Directors are asked to provide information on any external training
developments in corporate reporting, executive remuneration, or development on an annual basis. All Directors have the right to
and proxy advisory guidance updates. obtain professional advice at Prudential’s expense. Board training
—— In May 2020, an information security and privacy update was materials are also made available, as relevant, to Group Executive
provided to members of the Risk and Audit Committees, to which Committee members.
all Non-executive Directors were invited.
—— The Nomination & Governance Committee received updates on
Climate Change and the Task Force on Climate-related Financial
Disclosures (TCFD) implementation, the ESG Strategic Framework,
health & safety and diversity & inclusion.
—— The Board and the Risk Committee receive regular updates on
market developments and key risks.
—— The Risk Committee reviews top risks on an annual basis and deep
dives into specific topics in response to the identification of key
risks. This review covers the financial, operational and strategic
risks, while also identifying and addressing business environment
and insurance risks within the Group.
—— The Risk Committee received updates on regulatory developments
and the discussions with the Hong Kong IA on the new regulatory
regime and regular updates on geo-political developments.
Other topics discussed by the Risk Committee included the Group
Culture Framework, ESG Strategy and climate change transition
risk, the impact of a sustained low interest rate environment,
operational resilience during Covid-19, the Group Internal
Economic Capital Assessment Model, and regular updates
on the Group’s capital and solvency positions as well as
geopolitical developments.
138 Prudential plc

C M
Risk management and internal control
The Board is responsible for ensuring that an appropriate and effective
Group overview
system of risk management and internal control is in place across Three lines of defence
the Group. The framework of risk management and internal control First line of defence (risk taking and management)
centres on clear delegated authorities to ensure Board oversight and —— Takes and manages risk exposures in accordance with the risk
control of important decisions. The framework is underpinned by the appetite, mandate and limits set by the Board;
Group Code of Business Conduct, which sets out the ethical standards —— Identifies and reports the risks that the Group is exposed to,
the Board requires of itself, employees, agents and others working and those that are emerging;
on behalf of the Group, and is supported by a set of Group-wide —— Promptly escalates any limit breaches or any violations of risk
management policies, mandates or instructions;
Strategic report
principles and values that define how the Group expects business
to be conducted in order to achieve its strategic objectives. The —— Identifies and promptly escalates significant emerging risk
framework is designed to monitor and manage, rather than eliminate, issues; and
the risk of failure to achieve business objectives, and can only provide —— Manages the business to ensure full compliance with the Group
reasonable and not absolute assurance against material misstatement risk management framework as set out in the Manual, which
or loss. among other requirements, includes the Group Risk Framework
and associated policies as well as approval requirements.
Internal control
Governance
The Group Governance Manual (the Manual) sets out the general Second line of defence (risk control and oversight)
principles by which we conduct our business and ourselves and —— Assists the Board to formulate the risk appetite and limit
defines our Group-wide approach to Governance, Risk Management framework, risk management plans, risk policies, risk reporting
and Internal Control. Further information on the Manual is included in and risk identification processes; and
the Governance Framework section on page 128. Group-wide —— Reviews and assesses the risk-taking activities of the first line
policies, internal controls and processes, based on the provisions of defence, providing risk opinions and where appropriate
established in the Manual, are in place across the Group. These include challenging the actions being taken to manage and control risks.

controls covering the preparation of financial reporting. The operation
of these controls and processes facilitates the preparation of reliable Third line of defence (independent assurance)
financial reporting and the preparation of local and consolidated —— Provides independent assurance on the design, effectiveness
financial statements in accordance with the applicable accounting and implementation of the overall system of internal control,
standards, and requirements of the Sarbanes-Oxley Act. These including risk management and compliance.
controls include certifications by the Chief Executive and Chief
Financial Officer of each business unit with respect to the accuracy Each business unit is required to implement a governance structure
of information provided for use in preparation of the Group’s based on the three lines of defence model, proportionate to its size,
consolidated financial reporting, and the assurance work carried nature and complexity, and to the risks that it manages.
out in respect of US reporting requirements.
The Board has delegated authority to the Audit Committee to review Formal review of controls
the framework and effectiveness of the Group’s system of internal A formal evaluation of the system of risk management and internal
control. The Audit Committee is supported in this responsibility by control is carried out at least annually. Prior to the Board reaching
the assurance work carried out by Group-wide Internal Audit and a conclusion on the effectiveness of the system in place, the report
the work of the audit committees of the Group’s major businesses, is considered by the Disclosure Committee and Audit Committee,
which oversee the effectiveness of controls in each respective with risk specific disclosures within the report also reviewed by the
business. Details of how the Audit Committee oversees the framework Risk Committee. This evaluation takes place prior to the publication
of controls and their effectiveness on an ongoing basis, is set out of the Annual Report.
more fully in the report on pages 150 to 160.
As part of the evaluation, the Chief Executive and Chief Financial

Risk management Officer of each business unit, including Head Office, certify compliance
A key component of the Manual is the Group Risk Framework, with the Group’s governance policies and associated risk management
which requires all business units to establish processes for identifying, and internal control requirements. The Governance function, under the
evaluating and managing the risks facing the business. responsibility of the Group Chief Financial Officer and Chief Operating
Officer, facilitates a review of the matters raised in this certification
The Board determines the nature and extent of the principal risks it process. This includes the assessment of any risk and control issues
is willing to take in achieving its strategic objectives. The Board has reported during the year, risk and control matters identified and
delegated authority to the Risk Committee to assist it in providing reported by the other Group oversight functions and the findings from
leadership, direction and oversight of the Group’s overall risk appetite, the reviews undertaken by Group-wide Internal Audit, which carries
risk tolerance and strategy; overseeing and advising on the current and out risk-based audit plans across the Group. Issues arising from any
potential future risk exposures of the Group, reviewing and approving external regulatory engagement are also taken into account.
the Group’s risk management framework, including changes to risk
limits within the overall Board approved risk appetite, monitoring the For the purposes of the effectiveness review, the Group has followed
effectiveness of the risk management framework and adherence to the FRC Guidance on Risk Management, Internal Control and
the various risk policies. Regular activities are detailed in the report Related Financial and Business Reporting. In line with this guidance,
on pages 45 to 69. the certification provided does not apply to certain material joint
ventures where the Group does not exercise full management control.
The Group’s risk governance arrangements, which support the In these cases, the Group satisfies itself that suitable governance and
Board, the Risk Committee and the Audit Committee, are based on risk management arrangements are in place to protect the Group’s
the principles of the ‘three lines of defence’ model: risk taking and interests. Additionally, the relevant Group company which is party
management, risk control and oversight, and independent assurance. to the joint venture must, in respect of any services it provides
in support of the joint venture, comply with the requirements
of the Group’s internal governance framework.

Prudential plc
Risk management and internal control / continued
Lines of defence
Board
Nomination & Governance Remuneration Risk Audit

Committee Committee Committee Committee
First line of defence Second line of defence Third line of defence

Executives
Chief Executive Group Chief
Committee Executive
Group Executive Group Chief Risk

Committee and Compliance
Officer
Group Asset and Group Executive

Liability Management Risk Committee
Committee (GERC)
Group ESG
Committee
Balance Sheet and Group Chief Financial

Capital Management Officer and Chief
Committee Operating Officer
Management
GERC
Sub-committees
Group Finance Chief Information Risk, Compliance Group-wide

Security Office and Security Internal Audit
Board-level committees Executive personnel Executive/Management committees Head office functions
Direct reporting line Regular communication and escalation
Effectiveness of controls
In accordance with provision 29 of the UK Corporate Governance within the hedge modelling for US statutory standards, and the
Code and provisions C.2.1, C.2.2 and C.2.3 of the HK Corporate necessary actions have been or are being taken. The Audit Committees
Governance Code, the Board reviewed the effectiveness and at Group and major business level collectively monitor outstanding
performance of the system of risk management and internal control actions regularly and ensure sufficient resource and focus is in place
during 2020. This review covered all material controls, including to resolve them within a reasonable time frame.
financial, operational and compliance controls, risk management
systems, budgets and the adequacy of the resources, qualifications, The Board confirms that there is an ongoing process for identifying,
experience of staff of the Group’s accounting, internal audit and evaluating and managing the significant risks faced by the Group,
financial reporting functions. The review identified a number of areas which has been in place throughout the period and up to the date
for improvement, particularly around the treatment of simplifications of this report, and confirms that the system remains effective.
140 Prudential plc

Committee reports
J K L
Shriti Vadera
Nomination
Group overview
Chair of the Nomination & Governance
Committee
& Governance
Committee report
Strategic report
Governance
Dear shareholder
I am pleased to provide you with my first report as Chair of the
Nomination & Governance Committee, having joined the Committee
in May 2020 and become Chair on 1 January 2021. Before I highlight
some of the key areas of focus during 2020, I would like to thank my
predecessor, Paul Manduca, for his chairmanship of the Committee
until the end of last year.

In 2020, the Committee held three meetings, in addition to our
three scheduled meetings, to focus on succession planning and the
significant progress by Prudential on articulating its ESG strategy
and framework.
Board succession planning

A key aspect of the Committee’s role is to ensure that the Board retains
an appropriate balance of skills to support the strategic objectives of
the Group. As part of this, the Committee helps to maintain a rigorous
and transparent approach to the identification of candidates for
appointment as Directors.
As explained in my introduction to the Governance Report,
in preparing to take on the role of Chair of the Board and of the
Nomination & Governance Committee, an important focus has
been on the composition of the Board. The Board has prioritised the
identification of individuals with the experience and skills to guide
Prudential’s transformation into a business focused exclusively on
Committee members Asia and Africa with strong digital capabilities. In February 2021,
following interviews in 2020, we announced that Chua Sock Koong
Shriti Vadera (Member from 1 May 2020

and Ming Lu will join the Board on 1 May 2021. Chua Sock Koong
and Chair from 1 January 2021) has had a distinguished career, with operations experience in many
Paul Manduca (Chair until 31 December 2020) of our key markets, while Ming Lu has a long track record of investing
Jeremy Anderson (from 14 May 2020 until and growing businesses throughout Asia. We will continue to work
4 February 2021) in 2021 to ensure that the Board reflects our strategic priorities.
Howard Davies (until 14 May 2020)
David Law (until 4 February 2021) During 2020, the Committee also confirmed the appointment
Anthony Nightingale of Jeremy Anderson as Chair of the Risk Committee, succeeding
Philip Remnant Sir Howard.
Tom Watjen (from 4 February 2021)
The Committee received a detailed update on the process and
succession plans in place for members of the Group Executive
Regular attendees Committee and was also briefed on the process and initiatives to
—— Group Chief Executive review and promote talent throughout the Group to develop senior
—— Group Human Resources Director leaders. In addition, the Committee supported Jackson in the creation
—— Company Secretary of a new board prior to the proposed separation of our US business and
oversaw the succession planning process at senior management level.
Number of meetings in 2020:

6

Prudential plc
Committee reports / Nomination & Governance Committee report / continued
Diversity and inclusion Governance

B L
When identifying candidates for Board-level succession, the In line with our recently expanded remit, which now includes
Committee considers primarily what diverse perspectives will oversight of the Board evaluation process, the Committee approved
contribute to a more robust strategy. Talent search agencies are briefed the appointment of Ffion Hague of Independent Board Evaluation
on the Group’s requirements in respect of diversity of thinking as well to conduct the evaluation of the Board, its Committees and individual
as ensuring the appropriate skills, knowledge and experience when Directors’ effectiveness in respect of 2020. Following the evaluation,
identifying candidates. Gender and race representation has improved the Committee discussed the outcome ahead of the results being
at Board level during 2020, and we continue to look for opportunities discussed with the whole Board, focusing in its discussions on findings
for progress in this important area as well as ensuring we have relevant to succession planning and diversity.
representation from individuals with insights to the geographical
markets and businesses linking to the strategic objectives of the The Committee continues to oversee the governance arrangements
Group following the demerger of M&G plc in 2019 and the proposed for the Group’s subsidiaries to ensure that they remain appropriate.
separation of the US business in 2021.
The newly established Responsibility & Sustainability Working Group

will bring increased focus to the area of diversity, but also inclusion
in 2021: driving a culture where everyone feels valued, treated fairly
and respected – enabling them to fully contribute their thoughts and
perspectives and to be their authentic selves. This Working Group will Shriti Vadera
assist the Committee and the Board to drive forward its diversity and Chair of the Nomination & Governance Committee
inclusion agenda, both at Board level, in the executive talent pipeline,
and more broadly across the organisation. The Group remains on
target to achieve 30 per cent representation of women in senior
leadership roles by the end of 2021, in accordance with our
commitment to the HM Treasury Women in Finance Charter.
Prudential appointed a Group D&I Director and established a global

Diversity & Inclusion Council in 2020, responsible for defining the
global D&I strategy, promoting, championing and embedding
D&I initiatives and challenging the organisation and leaders where
progress is limited. The Working Group will get regular updates
on the Diversity & Inclusion Council’s activities.
Environmental, social and governance (ESG) considerations

The Committee has focused on Prudential’s commitment to being
a responsible business. ESG matters have been discussed during all
Committee meetings held as part of the usual meeting cycle in 2020
and members have been significantly involved in shaping the ESG
Strategic Framework. Committee members have provided feedback
at specific points in the year and also met with management ahead of
an additional meeting held in October to discuss the framework before
it was recommended to the Board for approval.
The Committee oversaw implementation of the recommendations

of the TCFD, including the three work streams that have been
established to focus on the main aspects of the Group’s exposure
to climate-related risks. Prudential became a formal supporter of
the TCFD recommendations in December 2018, before the UK
government announced in November 2020 that it intends to make
it mandatory for large financial institutions to make disclosures in line
with the TCFD recommendations by 2025, with other jurisdictions –
including Hong Kong and Singapore – advancing approaches
through 2020.
In addition, the Committee received updates on primary ESG-related

reporting developments and climate-related risk, and received
regular reporting from the newly established executive Group
ESG Committee.
The Responsibility & Sustainability Working Group will also oversee

the embedding of Prudential’s new ESG Strategic Framework, and
will take on employee engagement activities after the 2021 AGM.
142 Prudential plc

Group overview
How the Committee spent its time during 2020
Jan Feb May Jul Oct Dec
Year-end matters, re-election and tenure

Review external positions, conflicts of interests and independence, time commitment,
tenure and terms of appointment
Review performance of Chair and Non-executive Directors
Strategic report
Review relevant disclosures in the Annual Report and Accounts
Recommend election of Directors by shareholders
Succession planning, diversity and appointments
Chair
Governance
Executive Directors
Group Executive Committee
Succession pipeline, diversity and inclusion governance

Governance and ESG
ESG, climate change and TCFD implementation update
Board evaluation
Membership review of principal Board Committees
Committee terms of reference
Group governance oversight
Subsidiary board, chair and director evaluations


Prudential plc
Key matters considered during the year

Matter considered How the Committee addressed the matter
Succession planning
Board composition K
The Committee plays an important role in ensuring that the Board retains an appropriate balance of skills to support
the strategic objectives of the Group and in ensuring that an effective framework of succession planning is maintained.
Board succession plans and composition, and length of service of Non-executive Directors are kept under review by the
Committee throughout the year. These plans are supported and informed by the results of the annual Board evaluation
and individual Director evaluations.
Succession planning includes both longer-term options and emergency cover.
The Committee takes account of the size, structure and composition of the Board and its Committees, including existing
knowledge, experience and diversity. In doing so, the Committee considers the Group’s strategic goals and anticipates
future requirements in respect of skills and experience.
Following the demerger of M&G in 2019, the Committee reviewed the size and composition of the Board to ensure that
it remains aligned with strategy. The Committee is now considering the balance of skills and diversity required to support
the strategic objectives of the Group following the proposed separation of the US business, in particular pan-Asian
operating experience, digital expertise and relevant specialist financial services knowledge.
In February 2020, the Committee concluded that each of the Directors in office at the time continued to perform
effectively and was able to devote appropriate time to fulfil their duties and that collectively, the Board had an
appropriate mix of skills and experience for the year under review. The Committee reached the same conclusion
in February 2021.
The Committee considered that the Non-executive Directors continued to demonstrate the desired attributes,
contributing effectively to decision-making and exercising sound independent judgement in holding management
to account. Accordingly, the Committee recommended to the Board those Directors standing for election at the
2021 Annual General Meeting. Kai Nargolwala will not stand for election as he has served nine years on the Board.
Succession Succession planning for Non-executive Directors and the Board’s principal Committees ensures the Board is regularly
planning for the refreshed and maintains appropriate levels of independent challenge to management.
Non‑executive
Directors and G
J K
principal The balance of Non-executive and Executive Directors required on the Board is considered on a regular basis,
Committees including the overall number, skills and experience. The Committee’s succession planning for Non-executive Directors
is supported by Egon Zehnder and Spencer Stuart.
The Committee regularly reviews the membership of all principal Board Committees and makes recommendations
to the Board as appropriate.
During 2020, the Committee confirmed the appointment of Jeremy Anderson as the Risk Committee Chair, succeeding
Sir Howard who retired at the 2020 Annual General Meeting. Jeremy joined the Board on 1 January and his biographical
details are set out on page 124. The Committee also confirmed its previous recommendation to appoint Shriti Vadera
as Chair of the Committee, succeeding Paul Manduca. Shriti Vadera joined the Committee on her appointment in
May 2020 which facilitated her transition to Chair of the Board and of the Committee on 1 January 2021.
When making recommendations, the Committee takes account of the current composition of each of the principal
Committees, the skills and experience of the members and the strategic objectives of the Group.
Since joining the Board in May 2020, recognising the number of Non-executive Directors reaching the end of their
tenure in the next 18 months, Shriti Vadera has led an extensive external recruitment exercise. This was supported by
Spencer Stuart, and included Shriti spending time in Hong Kong and Singapore meeting with prospective candidates.
As a result of this search Chua Sock Koong and Ming Lu will join the Board on 1 May 2021. These appointments are part
of an ongoing process to refresh the Board and make sure it has the right skills and experience to support the Group,
in particular pan Asian operating experience, relevant financial services expertise and a high degree of digital familiarity.
The next phase of appointments will focus on experience and knowledge of specialist financial services.
The Committee is engaged in succession planning for the Senior Independent Director, the Chair of the Remuneration
Committee and a further Non-executive Director as Philip Remnant, Anthony Nightingale and Alice Schroeder will
reach nine years on the Board in 2022.
144 Prudential plc

Group overview
Executive Directors, The Committee’s work during the year supported the Board in its responsibility for executive succession planning
Group Chief to ensure continuous and effective leadership of the Group.
Executive and
Group Executive J
Committee
Strategic report
The Committee assisted the Board by reviewing the succession plans in place for the Group Chief Executive, other
Executive Directors and Group Executive Committee roles. Succession plans for the Group Executive Committee were
discussed with the Group Chief Executive to identify business requirements and to plan for future succession needs.
Succession planning for Executive Directors and the Group Executive Committee includes both longer-term planning
and emergency cover. Assessment and development for internal candidates is undertaken, in addition to mapping for
potential external candidates. Planning for emergency cover is assisted by a broad annual review of talent across the
Group and recognises the possible difficulties in identifying and attracting suitable talent on potentially short notice.
Governance
L
The Committee received feedback on the performance of each Executive Director from the Group Chief Executive
and confirmed the Executive Director succession plans.
During 2020 and into 2021, the Committee’s work has taken into account the proposed separation of the US business
and the consequent shift in priorities and their impact on succession plans. The Committee’s discussions are being

supported by the Group Human Resources Director, Egon Zehnder and Spencer Stuart.
Senior leadership The Committee has oversight of a diverse pipeline of leadership talent extending below the level of the Group Executive
below Group Committee and seeks to attract, retain and develop the next generation of emerging leadership.
Executive
Committee J
The Committee considered succession planning for senior management below Group Executive Committee level,
supported by an annual update on talent and diversity at different levels of the organisation. This includes consideration
of risk retention mitigation initiatives such as leadership development programmes.
In 2020, the focus was on building new capabilities to support the changing business model and future direction of
the business. The Committee also oversaw the formation of a new Executive Council to replace the previous ‘Top 100
Leadership’ group.
In addition to acting as search consultant in respect of certain executive hires, Egon Zehnder provides support for senior management
development assessments.
Process for appointing new Directors

J
The Committee assists the Board in ensuring that there is a formal, rigorous and transparent approach to the appointment of new Directors.
The Committee is involved from the start when a vacancy or a gap in the Board’s skills is identified. Led by the Chair, and working with the
Group Chief Executive and the Group Human Resources Director, a role specification is prepared, reflecting the desired skills and experience
and the Group’s Diversity and Inclusion Policy. This specification takes into account feedback from the Committee. Once agreed, specialist
talent agencies are typically engaged to create a shortlist of candidates which is reviewed by the Committee and other stakeholders.
Interviews with individuals then take place with selected Committee members and feedback is provided to all members. In this manner,
a preferred candidate is selected and the Committee then recommends the individual to the Board for appointment. For the appointment
of Executive Directors, the process is led by the Group Chief Executive working closely with the Chair. The Senior Independent Director
leads the Committee in the process of appointing a new Chair.
Contemporaneous with this process, due diligence checks are undertaken on the candidate and Prudential liaises with the relevant
regulatory authorities. The Committee is kept updated on this process as appropriate.

Prudential plc

Diversity
Board and Group J
Executive
Committee Given the global reach of the Group’s operations, its business strategy and long-term focus, the Board makes every
effort to ensure it is able to recruit Directors with diversity of thought and perspective who will support and challenge
the ongoing transformation of the organisation. The Board seeks net addition of backgrounds, experience and skills
that broaden its capability to deliver the strategy of a leading international business.
The Group’s Diversity and Inclusion Policy applies at all levels of the business and the Committee is responsible for
overseeing a diverse pipeline for the Board and other senior executives and driving a culture Group-wide where our
people feel valued, treated fairly and respected: enabling them to fully contribute their thoughts and perspectives
and to be their authentic selves.
The Board does not endorse quotas for Board diversity but appoints candidates to ensure a diversity of overall
composition and skills mix from the best available talent.
Succession plans are based on merit and against objective criteria, and promote diversity across gender, social and
ethnic background, nationality, and cognitive and personal strengths.
An element of Executive Directors’ remuneration is based on achieving a diversity target. Further information is set out
in the Directors’ remuneration report.
The Board considers that its diversity of background, thought, perspectives, experience and skills set is enhanced as a
result of Board level succession in 2020 and the recent appointments taking effect in 2021. The biographies of Directors
on pages 122 to 126 provide more details.
The Committee considers the pipeline for diverse talent of the Group Executive Committee level remains strong with
31 per cent female representation of those who are regarded as senior management and part of the leadership teams.
The Committee is also introducing measures for tracking local representation in senior management positions as well as
experience other than insurance. Inclusive leadership practices are implemented starting with the Board and Committee
and throughout the organisation.
Further details of the gender make-up of the Board, the Group Executive Committee, management and employees
can be found on page 95.
Group-wide The Committee plays an important role in reviewing the Group’s diversity and inclusion initiatives to monitor that these
oversight are in line with our strategic objectives. This not only ensures the Group has access to a diverse talent pool and pipeline
for future leadership but also that the culture of inclusion retains our talent.
The demerger of M&G in 2019 presented an opportunity to reassess the diversity & inclusion strategy as part of
Prudential’s global culture framework to enable the next phase of growth. The aspiration is to build a more diverse
workforce and cultivate a workplace where diversity of thought, mindset, skill set, experience and identity are fully
valued and can authentically contribute to transform the business.
The Committee supported the appointment of a Group Diversity & Inclusion Director and the creation of a global
Diversity & Inclusion Council. The Council is composed of representatives from all business units with the goal to
empower employees and create a sense of belonging by respecting and appreciating differences and deliver the
purpose ‘to help people get the most out of life’, by creating a culture in which diversity is celebrated and inclusion
assured, for our colleagues, customers and partners.
As part of the Group’s commitment to diversity, Prudential is a signatory to the HM Treasury ‘Women in Finance Charter’
which aims to increase the number of women working in senior management in financial services companies. As at
31 December 2020 the percentage of women in senior management was 32 per cent which already exceeds the target
to meet 30 per cent by the end of 2021. For the purposes of Provision 23 of the UK Code, the percentage of women
in senior management positions, including their direct reports, was 30 per cent.
A full description of the Group’s activities on diversity and inclusion can be found in the ESG report, on pages 93 to 98.
146 Prudential plc

Group overview
Non-executive Directors, independence, time commitment and terms of appointment

Independence H
I
The Committee considers the independence of the Non-executive Directors as required by the UK Code and HK Listing
Strategic report
Rules as part of any recommendation of the appointment of new Non-executive Directors and when recommending
Non-executive Directors for election.
Monitoring and safeguarding the independence of the Non-executive Directors is essential to comply with their
statutory and regulatory obligations. Independence helps ensure effective scrutiny of management and individual
Executive Directors against agreed objectives.
Each Non-executive Director provides an annual confirmation of his or her independence as required under the
Governance
Hong Kong Listing Rules.
All Non-executive Directors were considered to be independent, taking into account UK and HK requirements.
Although Kai Nargolwala has exceeded the nine-year tenure suggested by the UK Corporate Governance Code,
he continues to demonstrate independence of judgement. Kai will not offer himself for re-election at the AGM in May.
Prior to recommending their appointments as Non-executive Directors, the Committee considered the independence of
Ming Lu and Chua Sock Koong.

The Committee considered the independence of the Audit Committee members in line with US regulatory
requirements, concluding that all members remain independent within the meaning of the Sarbanes-Oxley legislation.
Time commitment Time required for Non-executive Director role
H
I
Setting out clear expectations on time commitment means Non-executive Directors are able to ensure they devote
sufficient time for the proper performance of their duties.
The Committee reviews the time commitment required of the Non-executive Directors. Time requirements take account
of preparation for and attendance at Board meetings and other regular commitments, as well as additional time that may
be required for unforeseen events or future projects.
All Non-executive Directors currently serve on at least one of the Board’s principal Committees, which requires
an additional commitment of time dependent on the Committee and role.
Following the demerger the Committee carried out a review of the time commitment required of the Non-executive
Directors to align to the new structure of Board and Committee meetings. It was concluded that the expected time
commitment of 32.5 days per annum remains appropriate. This will be kept under review considering the impact of
the pandemic on the operation of the Board and Committees.

External appointments
The Committee considers the external commitments of Directors proposed for appointments and all Non-executive
Directors confirm on appointment that they are able to devote sufficient time to the Group’s affairs to meet the demands
of the role.
The external commitments of Directors were considered when recommending Directors for election at the next AGM.
Prudential recognises the need for Non-executive Directors to dedicate sufficient time to their role while also
demonstrating an appropriate range of experience and skills through external appointments.
All Non-executive Directors are required to discuss any additional commitments with the Chair prior to accepting these
as they might impact the time which the Director is able to devote to their role. The Chair escalates matters to the
Committee as appropriate.
Where appropriate, the Committee or the Board reviewed time requirements for additional external positions taken
on by Directors during the year.

Prudential plc

Terms of It is important that Non-executive Directors have clear terms of appointment which set out their duties to Prudential
appointment and that their tenure is considered as part of ongoing succession activities.
Non-executive Directors are appointed for an initial term of three years, and subject to review by the Committee
and re-election by shareholders, it is expected that Non-executive Directors serve a second term of three years.
After six years, Non-executive Directors may be appointed for a further year, up to a maximum of three years in total.
Reappointment is subject to rigorous review as well as re-election by shareholders.
The Directors’ remuneration report sets out the tenure of each Non-executive Director and the terms of their letters
of appointment, in addition to the terms of Executive Directors’ service contracts.
Anthony Nightingale, Philip Remnant, Alice Schroeder and David Law will all have served two three-year terms or more
at the time of the next AGM. When considering their re-election, the Committee considered their continuing
appointment particularly carefully. The Committee recommended that they each serve for a further term of one year,
subject to shareholder re-election.
Ming Lu and Chua Sock Koong will be provided with a letter of appointment, on standard terms, confirming their duties
and obligations.
Environmental, Social and Governance (ESG)
The Committee played a key role in setting ESG strategy and the oversight of ESG activities.
During the year, the Committee received updates on climate-related risk and progress towards implementing the
recommendations of the TCFD.
Committee members, as well as Board members more widely, were among those engaged as internal stakeholders
in the development of the Group’s ESG strategic ambition which will guide the Group’s activity and decision-making
in this area. Each Committee member spent time with management to contribute their views and experiences as part
of the shaping of the ESG strategy. In addition, the Committee received regular updates during the development of the
ESG strategy and heard from the newly established executive Group ESG Committee.
An additional meeting was held in October to review the ESG strategic framework ahead of the fully-articulated strategic
ambition which was presented to the Board in December 2020. This strategic framework focuses on three priorities:
making health and financial security accessible; stewarding the human impacts of climate change; and building social
capital.
For more information on our ESG strategy and activities, please see the ESG report on pages 70 to 117.
Conflicts of interest Directors have a statutory duty to exercise independent judgement when carrying out their role and to avoid conflicts
of interest. In addition, the Company has in place procedures to identify and, where necessary, mitigate potential
conflicts of interest. These processes help to ensure decisions are made in the best interests of the Company.
The Board has delegated authority to the Committee to identify and, where necessary, authorise any actual or
potential conflicts of interest.
When recommending a candidate for appointment to the Board, the Committee considers the external appointments
of the proposed candidate and recommends authorisation of any conflicts to the Board as appropriate, attaching
conditions to the authorisation where necessary.
The Committee considered the external positions of Ming Lu and Chua Sock Koong prior to recommending their
appointments to the Board.
Prior to proposing Directors for election or re-election, the Committee considered the external appointments of
Directors and reviewed existing conflict authorisations, reaffirming or updating any terms or conditions attached
to authorisations where necessary.
If a Director makes a request to take on a new external position during the year, the Chair considers the proposed
external appointment and escalates to the Committee for authorisation where a conflict or potential conflict
could arise.
The Board considers that the procedures for dealing with conflicts of interests operate effectively.
148 Prudential plc

Group overview
Board evaluation L
Following an update to its terms of reference in December 2019, the Committee provides oversight of the process
by which the Board, its Committees and individual Directors’ effectiveness is assessed.
Strategic report
The annual evaluation of effectiveness should be formal and rigorous and be externally facilitated every three years.
At the start of 2020, the Committee reviewed the results of the 2019 evaluation and noted that the Board, its
Committees and individual Directors had continued to operate effectively during 2019. The Committee also
reviewed the suggested action points ahead of Board approval.
In accordance with the UK Corporate Governance Code, the Committee appointed an external facilitator,
Ffion Hague of Independent Board Evaluation, to carry out the 2020 evaluation.
Governance
The evaluation was conducted during September and October, with an initial discussion of the output discussed
with the Committee and the Board in December. Please see page 133 for a summary of the review and action plan.
Group governance The Committee is responsible for reviewing the Group’s governance arrangements.
During the year, the Committee carried out various activities relating to subsidiary governance, including:

—— Overseeing the search for and appointment of the Chair of the Jackson Financial Inc board in preparation
for the proposed separation of the Jackson business; and
—— Reviewing governance arrangements for the Group’s subsidiaries with a particular focus on changes to the risk
and audit committee arrangements for Prudential Corporation Asia given the evolving structure of the Group,
and arrangements for Jackson in preparation for the proposed separation.

Prudential plc
Committee reports
M O

David Law
Chair of the Audit Committee Audit Committee
report
Dear shareholder
As Chair of the Audit Committee, I am pleased to present this report
on the Committee’s activities during 2020. In what has been a
challenging year, I have observed many examples of how the Group
has responded to the global pandemic while at the same time
continuing to press ahead with strategic change. Throughout, the
Committee has continued to provide the Board with assurance as to
the integrity of the Group’s financial reporting and, together with the
Risk Committee, monitor the effectiveness of the second and third
lines of defence, which are an even more integral part of our internal
control environment at this difficult time.
Good communication has never been more important than in the

current circumstances and, as a result, we have added additional
meetings to deal with particular issues, such as the accounting
implications of the proposed separation and divestment of Jackson,
including the accounting of the associated transaction with Athene
in June, and the external audit tender. Potential conflicts of interest
have been monitored, as they were for the separation of M&G.
Coordination with the Risk Committee has also been important and,
while we were disappointed to lose the experience of Sir Howard
Davies after his many years of valuable contribution, we were
Committee members delighted to welcome Jeremy Anderson to the Committee. During
David Law (Chair) the year, Howard, Jeremy and I have agreed the most appropriate
Committee to address particular matters, as well as holding a joint
Jeremy Anderson
Risk and Audit Committee session, as last year, to focus on cyber
Howard Davies (until 14 May 2020)
and information security, to which all Non-executive Directors
Philip Remnant
were invited.
Alice Schroeder
Amy Yip (from 3 March 2021) Not surprisingly, throughout 2020 a key focus of the Committee
has been the impact of Covid-19 on controls and financial reporting,
Regular attendees including key judgements and disclosures. I am pleased to say the
Group has responded well to the social-distancing and working-
—— Chair of the Board from‑home measures implemented across all our markets and has
—— Group Chief Executive carefully considered their effects on key controls and processes.
—— Group Chief Financial Officer and Chief No significant deterioration in the control environment has been
Operating Officer observed. The Committee also reflected on any wider control
—— Group Chief Risk and Compliance Officer and accounting implications of the change to the Jackson hedge
—— Director of Group Finance modelling that impacted their statutory capital.
—— Director of Group Financial Accounting
and Reporting The introduction of accounting standard IFRS 17, now expected
—— Company Secretary to come into effect in 2023, has also continued to be a significant
—— Group Chief Internal Auditor challenge, given the scope of changes it entails. The Committee
—— External Audit Partner received updates during 2020 on external developments and lobbying
as the standard was being developed and on the Group’s progress
Number of meetings in 2020: towards its implementation.
11
150 Prudential plc

E
We have paid particular attention to our whistleblowing procedures We assessed the effectiveness of GwIA and I have met regularly
Group overview
and monitored these for any indicators of issues. I regularly meet with the Group Chief Internal Auditor and the Group-wide Quality
privately with the Group Resilience Director to discuss whistleblowing Assurance Director to discuss internal audit work and matters arising.
cases and their resolution. These are also discussed in private sessions Where particular issues have been raised, management have been
with the Committee or the relevant local audit committee. During the invited to Committee meetings to respond. We have monitored
year, we conducted an external review of the processes and enhanced resource levels and delivery of and amendments to the audit plan,
the governance arrangements. which by necessity has had to be more flexible than in prior years.
Internal Audit have responded well.
Strategic report
External auditor and audit tender
An important part of the Committee’s work consists of overseeing the Regulatory developments
relationship with the Group’s current audit firm KPMG LLP (KPMG), Following the Hong Kong IA replacing the Prudential Regulation
including safeguarding independence, approving non-audit fees and Authority as the Group’s regulator, a key focus for the Committee
satisfying ourselves that it is in the best interests of shareholders for during 2020 has been the Group’s programme to demonstrate
the Committee to recommend the annual reappointment of KPMG. readiness for compliance with the Hong Kong IA’s new group-wide
During the year, the Financial Reporting Council (FRC) conducted supervision framework, effective from the first half of 2021. The
a review of KPMG’s audit of Prudential’s financial statement for the Committee has held a number of discussions on the requirements
Governance
year ended 31 December 2019. The Committee was pleased with the and received proposals for the assurance work that will be needed
outcome, as no significant recommendations for improvement were to demonstrate compliance. I also met privately with the Hong Kong
noted. The KPMG team continues to look at ways it can enhance its IA during the year.
audit and challenge of management, something also encouraged by
the Committee in its own effectiveness review of KPMG in 2020. Committee governance
Following the demerger of M&G plc in October 2019, the Committee
The Committee discussed with KPMG the impact of Covid-19 on its was focused on overseeing the development and embedding of
own business to ensure it had the resources and technology necessary new governance arrangements across the Group’s Asian business,

to complete its audit work satisfactorily. We also meet privately with building direct communication and escalation links with the existing
KPMG and I have held a number of meetings with the lead partner local audit committees of the significant businesses. Regular direct
team throughout the year. I have also had a review meeting with communication with each of the local chairs remains a key component
KPMG’s UK Senior Partner. of our governance framework, and I have worked closely with the
respective chairs of our significant business unit audit committees
During the year, the Committee oversaw a formal competitive tender during the year. At each meeting, I update the Committee on
process to select an audit firm to succeed KPMG, in accordance with important points raised at local level, and after the meeting I report
regulatory requirements and FRC guidance. to the Board on the main matters discussed.
Following regular discussion by the Committee in 2020 and formal In order to foster a close and collegiate working relationship between
evaluation of potential candidates, a shortlist of eligible audit firms the Committee and the local audit committees, Jeremy Anderson
were invited to tender and the process concluded with presentations and I chaired a session attended by all of the non-executive directors
to Committee members in September 2020. Given my former position at the four major Prudential Corporation Asia businesses.
at PwC, I voluntarily recused myself from the decision-making and
asked the Group Chief Internal Auditor to support the audit tender In May 2020, we held a private session without the Executives to
process. Alice Schroeder chaired the final Committee meetings and discuss the results of our 2019 effectiveness evaluation and set the
the presentations by shortlisted candidate firms. key focus areas for 2020. These included consideration of the impact
of Covid-19 on financial matters, the implications of the proposed
The Committee was impressed by the quality of each candidate’s separation and divestment of Jackson, and the audit tender.
presentations and team, but, on balance, the Committee determined
that, given the Group’s future strategic direction, Ernst & Young LLP Finally I would like to thank the Committee members for their diligence

(EY) was the best fit as the Group’s audit firm. The Committee and contribution throughout the year and management for their
recommended to the Board two firms with a preference that EY responsiveness to challenge and quality of papers.
be engaged as the Group’s audit firm for the year 2023 onwards.
The Board approved this recommendation at its meeting in December
2020, subject to future shareholder approval. Further details on the
audit tender process are set out in the Audit Tender section at the
end of this report.
Internal audit David Law

Throughout 2020, the Committee continued to receive regular Chair of the Audit Committee
briefings from the Group Chief Internal Auditor. Group-wide Internal
Audit (GwIA) undertook a programme of risk-based audits covering
matters across the business units in addition to assurance work. The
work undertaken by GwIA during the year was important in supporting
the proposed separation and divestment of Jackson and the control
environment of the Group under the revised working conditions.

Prudential plc
Committee reports / Audit Committee report / continued

Feb Mar1 May Jul Aug1 Sep Dec 2
Financial reporting and external auditor

Periodic financial reporting including:
—— Full and half-yearly report and accounts
—— Key accounting judgements and disclosures, including tax
—— Associated audit reports
Audit planning, fees, independence, effectiveness and reappointment
Environmental, social and governance reporting
Internal control framework
Internal control framework including effectiveness
Internal audit
Status updates and effectiveness
Internal audit plan
Financial crime and Speak Out
Financial crime prevention and Speak Out – regular updates
Governance and reporting
Updates from significant business audit committees
Internal governance framework including effectiveness
Business unit audit committee effectiveness and terms of reference
Committee terms of reference and effectiveness
Notes
1 Two meetings were held in March and two in August to discuss full year and half year financial reports.
2 An additional meeting to the scheduled meetings was held in December to discuss the proposed separation and divestment of Jackson.
In addition:
–A meeting was held in June to discuss the disclosures in connection with the equity investment by Athene in Prudential’s US business.
–T wo joint meetings were held with the Risk Committee: in May to discuss cyber security and governance matters (all Non-executive Directors were invited); and September
to discuss Form S-1 Registration Statement and recommend it to the Board.
The Committee also held two informal meetings, also in September, to progress the audit tender.
152 Prudential plc

Group overview
Financial reporting
Overview M
One of the Committee’s key responsibilities is to monitor the integrity of the financial statements and any other periodic
Strategic report
financial reporting. This has primarily focused on the Annual Report and Accounts but also covers the Group’s
Environmental, Social and Governance (ESG) Report, which is now largely replicated in the Annual Report, and the
annual update of the Group’s published Tax Strategy.
In reviewing these and other items, the Committee received reports from management and, as appropriate, reports from
internal and external assurance providers, which in some cases were provided at the explicit request of the Committee.
When considering financial reporting matters, the Committee assesses compliance with relevant accounting standards,
Governance
regulations and governance codes. No material changes to accounting policies were made during 2020. The Committee
continued to receive updates on the Group’s plans to implement IFRS 9 ‘Financial Instruments’ and IFRS 17 ‘Insurance
Contracts’, which are not expected to be effective before 2023. The approach to adopting these standards is further
discussed in note A3.2.
Throughout its review of financial reporting matters and disclosure, the Committee considered the impact of the
Covid-19 pandemic and the short-term uncertainties that it has created. Further explanation on the financial impact
Covid-19 has had on the business is set out in the Group Chief Financial Officer and Chief Operating Officer’s report.

The following sections set out the key assumptions, judgements and other matters considered as part of their review
of the 2020 Annual Report and Accounts.
Key assumptions N
and judgements
The Committee reviewed the key assumptions and judgements supporting the Group’s IFRS results, including those
made in valuing the Group’s investments, insurance liabilities and deferred acquisition costs under IFRS, together with
reports on the operation of internal controls to derive these amounts. The Committee also reviewed the assumptions
underpinning the Group’s European Embedded Value (EEV) metrics.
Assumption setting
The measurement of insurance liabilities are based on estimates of future cash flows, including those to and from
policyholders, over a long period of time. These estimates can, depending on the type of business, be highly
judgemental. The Committee considered changes to assumptions and other estimates used to derive IFRS insurance
liabilities and for EEV reporting. Peer benchmarking was considered where available alongside current experience.
The Committee noted that Covid-19 had not significantly increased the morbidity and mortality claims incurred by the
business. The key assumptions reviewed were:
—— Persistency, mortality, morbidity (including expectations of future medical costs inflation and any related premium
rises) and expense assumptions within the Asia life businesses;

—— Policyholder behaviour (eg guaranteed benefit utilisation and persistency) and mortality assumptions affecting the
measurement of Jackson guaranteed liabilities (see note C3.3 of the IFRS financial statements); and
—— Economic assumptions, including investment return and associated risk discount rates, given the current low interest
rate environment.
The Committee was satisfied that the assumptions adopted by management were appropriate. Further information on
the effects of material changes to insurance assets and liabilities is included in note C3 to the IFRS financial statements
and in the EEV basis results.
Valuation of investments
The Committee received information on the carrying value of investments in the Group’s balance sheet including
information on how those values were calculated for those investments which require more judgement (for example the
impairment process for debt securities and commercial loans in the US). Further information on the valuation of assets
is contained in note C2 of the IFRS financial statements. The Committee satisfied itself that overall investments were
valued appropriately.
Intangible assets including deferred acquisition costs (DAC)

The Committee received information to enable it to review the more material intangible asset balances. This included
the assumptions that supported the amortisation profile of the DAC balance in the US, as described in note A3.1
‘Other items requiring application of critical estimates or judgements’ and whether there had been any indication of
impairment of the Group’s distribution rights assets or goodwill in light of lower sales and increased economic volatility
following the Covid-19 pandemic. The Committee was satisfied that there was no impairment of the Group’s intangibles
at 31 December 2020. Further information is contained in note C4 of the IFRS financial statements.

Prudential plc

Other financial N
reporting matters
Proposed separation of Jackson and associated transactions
In June 2020, the Group reinsured substantially all of its in-force portfolio of US fixed and fixed index annuities (see
note D1.1). It also announced a $500 million equity investment into Jackson by Athene (see note D1.2). The Committee
reviewed the accounting for these transactions and the planned market announcement, taking advice from the Group’s
external advisors. The Committee also reviewed the draft public documents prepared by Jackson and the Group
in connection with the proposed separation of Jackson, alongside input provided by the Group’s external advisers
and auditor.
US Statutory reporting and changes to hedge modelling as announced to the market on 28 January 2021
The Committee considered in detail the changes to Jackson’s hedge modelling for its US statutory results given the
impact on the Group’s capital management plans for the proposed separation of Jackson. As part of this process,
the Committee received the views and recommendations of the Jackson Audit Committee and management and the
reports and conclusions of the external advisers who had reviewed the model and tested the revised output. They also
considered any implications on the Group financial reporting, noting that there was no direct impact on IFRS reporting
and that a consequential refinement of the method to project future hedge costs for EEV was planned for the FY20
results, as discussed in note 2 (iv) (b) of the EEV financial statements.
Going concern and viability statements

The Committee considered various analyses from management regarding the Group’s and the parent company’s capital
and liquidity position taking into account the Group’s principal risks. This included scenarios assessing the impact on
the Group’s plan of different new business levels depending on the length of time Covid-19 restrictions remain in place,
as well as stress scenarios which assume a deterioration in the macroeconomic environment. It also considered scenarios
which both included and excluded the proposed separation of Jackson. Following this review, it recommended to the
Board that it could conclude that the financial statements should continue to be prepared on the going-concern basis
and that the disclosures on the Group’s longer-term viability were both reasonable and appropriate.
Fair, balanced and understandable requirement

The Committee carried out a formal review of whether the Annual Report and Accounts were ‘fair, balanced
and understandable’ as required by the UK Corporate Governance Code. In particular, they considered whether
the report gave a full picture of the Group’s business model, strategy and performance in the year, with important
messages appropriately highlighted. They also considered the level of consistency between financial statements
and narrative sections, whether performance measures were clearly explained and the prominence of alternative
performance measures.
After completion of its detailed review, the Committee was satisfied that, taken as a whole, the Group’s Annual Report
and Accounts were fair, balanced and understandable.
Taxation
The Committee regularly received updates on the Group’s tax matters and provisions for certain open tax items,
including tax matters in litigation. The Committee was satisfied that the level of provisioning adopted by management
was appropriate. See notes B4 and C7 of the IFRS financial statements.
Parent company financial statements

The Committee reviewed the parent company profit and loss account and balance sheet, which includes the
recoverability of the parent company’s investment in subsidiaries by assessing and confirming that the net assets of the
relevant subsidiaries (being an approximation of their minimum recoverable amount) were in excess of their carrying
value at the balance sheet date and that those subsidiaries have historically been profit-making.
154 Prudential plc

Group overview
External audit
Review of effectiveness, non-audit services and auditor reappointment
External audit M
effectiveness O
Strategic report
The Group’s external auditor is KPMG LLP (KPMG) and oversight of the relationship with them is one of the Committee’s
key responsibilities. The Committee reviewed the effectiveness of the audit throughout the year taking into account:
—— The detailed audit strategy for the year, approach to risk assessment and coverage of the audit response to
highlighted significant risks;
—— Group materiality and how that is applied to the individual business units;
—— Insight around the key accounting judgements, including benchmarking, and the way KPMG applied constructive
challenge and professional scepticism in dealing with management;
Governance
—— The outcome of management’s internal evaluation of the auditor as discussed below; and
—— Other external evaluations of KPMG, with a focus on the FRC’s annual quality review.
There is an open dialogue on emerging risks and issues between the Group Lead Partner and Committee members
via a regular schedule of meetings aligned to key reporting milestones. The Committee formally met with the Group
Lead Partner without management present.
Internal evaluation of KPMG was conducted using a questionnaire survey that was circulated to the Committee

members, independent members of the business unit audit committees, the Group Chief Financial Officer and Chief
Operating Officer and the Group’s senior financial leadership for completion. A key component of the evaluation was
the degree of challenge and robustness of approach to the audit. The survey asked 29 questions over four categories
(audit quality and execution, team performance, process and communication) in relation to the 2019 audit.
KPMG were given the opportunity to respond to the findings in the reports and where necessary, proposed
enhancements to the audit process and team.
FRC’s Audit Quality Review (AQR)

The FRC’s AQR team carried out a review of KPMG’s audit of Prudential’s financial statements for the year ended
31 December 2019. This included discussions with the Chair of the Committee. Following completion of the AQR,
the Committee was provided with a Review Report from the FRC’s AQR team. The Committee was pleased to note
that no significant recommendations were made by the FRC for further improvement and a number of areas of good
practice were highlighted.


Prudential plc

Auditor M
independence
and objectivity The Committee has responsibility for monitoring auditor independence and objectivity and is supported in doing so by
the Group’s Auditor Independence Policy (the Policy). The Policy is updated annually and approved by the Committee.
It sets out the circumstances in which the external auditor may be permitted to undertake non-audit services and is
based on four key principles which specify that the auditor should not:
—— Have a mutual or conflicting interest with the Group;

—— Audit its own firm’s work;
—— Act as management or employees for the Group; or
—— Be put in a position of being an advocate for the Group.
The Policy has two permissible service types: those that require specific approval by the Committee on an engagement
basis and those that are pre-approved by the Committee with an annual monetary limit capped at no more than
5 per cent of the Group audit fee in the proposed year and capped at $65,000 individually. Effective from 2020,
the policy also provides that the total fees payable to KPMG for non-audit services, other than those required by law
or regulation, shall be limited to no more than 70 per cent of the average audit fees paid in the past three consecutive
financial years. In accordance with the Policy, the Committee approved these permissible services, classified as either
audit or non-audit services, and monitored the usage of the annual limits on a quarterly basis. Non-audit services
undertaken by KPMG were agreed prior to the commencement of work and were confirmed as permissible for the
external auditor to undertake in accordance with the Policy which complies with the rules and regulations of the FRC’s
Revised Ethical Standard (2019), the US Securities and Exchange Commission (SEC) and the standards of the Public
Company Accounting Oversight Board (PCAOB).
The Committee monitored the nature and extent of non-audit services on a regular basis to ensure the provision of
non-audit services complied with the Group’s policy and did not impair the auditor’s objectivity or independence.
The Committee noted that KPMG typically only performed non-audit services where they complemented its role as
external auditor, for example the review of half year and EEV financial statements or additional assurance to support
capital market requirements. This work has by necessity been significant as a result of the demerger of M&G in the
prior year and the proposed separation of Jackson. It is not however considered to detract from the objectivity and
independence of KPMG due to the nature of the work and the involvement of separate teams.
In keeping with professional ethical standards, KPMG also confirmed its independence to the Committee and set out
the supporting evidence for their conclusion in a report that was considered by the Committee prior to publication
of the financial results.
The Committee will continue to monitor developments to ensure the Group’s policies and processes around audit
effectiveness and independence evolve in line with market practice.
Fees paid to M
the auditor
The fees paid to KPMG for the year ended 31 December 2020 amounted to $16.0 million (2019: $30.4 million) of which
$1.0 million (2019: $13.2 million) was total amounts payable in respect of non-audit services, except those required by
law and regulation, as defined by the FRC’s Revised Ethical Standard (2019). A breakdown of the fees payable to KPMG
can be found in note B2.4 to the IFRS financial statements.
In 2019, $7.3 million of the $13.2 million spent on non-audit services, excluding those required by law and regulation
was for one-off services associated with the demerger of M&G plc. Excluding these one-off fees in 2019, total non-audit
service fees that are subject to non-audit fee cap were $5.9 million compared with $3.8 million in 2020. The decrease in
2020 primarily reflects a reduction in the level of elective regulatory disclosure work no longer being required. The ratio
of non‑audit fees for the Group in 2020 over the average of audit fees for the past three years is 28 per cent for the
Group, 42 per cent below the 70 per cent cap set by the FRC.
In all these cases, the audit firm was considered the most appropriate to carry out the work, given its knowledge of the
Group and the synergies that arise from running these engagements alongside its main audit.
All non-audit services were pre-approved by the Committee and were in line with the Policy discussed above.
Reappointment Based on the outcome of the effectiveness evaluation and all other considerations, the Committee concluded that there
was nothing in the performance of the auditor which would require a change. The Committee therefore recommended
that KPMG be reappointed as the auditor. A resolution to this effect will be proposed to shareholders at the 2021 Annual
General Meeting.
156 Prudential plc

Group overview
Audit tender The Committee acknowledges the provisions contained in the UK Code in respect of audit tendering, along with
European rules on mandatory audit rotation and audit tendering. In conformance with these requirements and as we
committed in our Annual Report 2018, the Company has conducted a competitive tender to change audit firm for the
2023 financial year end. The external audit was last put out to competitive retender in 1999 when the present auditor,
KPMG, was appointed. Since 2005, the Committee has annually considered the need to retender the external
Strategic report
audit service.
The tender process has been led by the Audit Committee with the support of the Group Chief Internal Auditor.
The overall objective of the audit tender has been to select an audit firm that would provide a high quality and effective
audit. The planning for this tender process commenced in 2019 with the Committee Chair meeting with a number
of firms, including firms outside of the ‘Big Four’, to assess interest and ability to tender for the audit, with focus
on capability and resource to service the key Asian business units. This was supplemented by a formal request for
Governance
information to those firms who indicated they would be interested in tendering . A formal invitation to tender was issued
in June 2020 to those firms that confirmed they are able to undertake the audit. The formal assessment of candidate firms
took place from July to September and was based on the candidate firms’ written responses and a series of formal
presentations to business units prior to the final presentation given to the Committee. The Committee recommended
two firms to the Board with a preference for one and this was approved by the Board in December 2020. A description
of the tender process is set out at the end of this report.
The auditor tender timeline takes into account the complexity of the Group and the expected timing of the introduction

of IFRS 17 and allows the appointee time to ensure they meet the auditor independence requirements to which the
Group is subject. The timing remains subject to the Committee’s normal annual review of auditor performance and
recommendation to shareholders.
Throughout the 2020 financial year, the Company has with the provisions of the Statutory Audit Services for Large
Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities)
Order 2014 issued by the UK Competition and Markets Authority.
In line with the Financial Reporting Council’s Ethical Standard, the rules and regulations of the SEC and the standards
of the PCAOB, a new Group Lead Partner, Philip Smart, was appointed in respect of the 2017 financial year. Mr Smart is
expected to be in place for a five-year term until the completion of the 2021 reporting cycle. A new Group Lead Partner
will currently be required for the 2022 audit and an appropriate transition plan is being developed.
Second line oversight
Whistleblowing
Whistleblowing E
The Group continues to operate a Group-wide whistleblowing programme (‘Speak Out’), hosted by an independent
third party (Navex). The Speak Out programme received ad hoc reports from a wide variety of channels, including a web
portal, hotline, email and letters. Reports are captured, confidentially recorded by Navex, and triaged by Group Security
Investigations prior to investigation by the appropriate teams.
The Committee is responsible for oversight of the effectiveness of the Group’s whistleblowing arrangements. European Embedded Value (EEV) basis results
The Committee received regular reports on the most serious cases and other significant matters raised through the
programme and the actions taken to address them. The Committee was also briefed on emerging Speak Out trends
and themes. The Committee may, and has, requested further reviews of particular areas of interest.
The Committee reviews the Group’s Speak Out programme annually, satisfying itself that it continues to comply
with regulatory and governance requirements. The Committee also considered the consistency of approach adopted
across subsidiary audit committees. The Speak Out programme has been further strengthened during the year by the
establishment of new management level committees. Where relevant, the Committee requested information on the
sharing of lessons learnt.
The Chair and Committee spent time privately with the Group Resilience Director to understand outcomes of
investigations, ensure that investigations were adequately resourced and appropriately managed, that there had been
no retaliation against anyone making a report and that investigations were not improperly influenced.
A review of the Speak Out programme and its oversight was undertaken in 2020.

Prudential plc

Third line oversight

Internal audit
Third line oversight O
Internal audit
Regular reporting The Committee received regular updates from Group-wide Internal Audit (GwIA) on audits conducted and
management’s progress in addressing audit findings within agreed timelines. Any delays in implementing remediation
actions were escalated to the Committee and given particular scrutiny.
The independent assurance provided by GwIA formed a key part of the Committee’s deliberations on the Group’s
overall control environment. During 2020, the areas reviewed included: change management and transformation
(in particular relating to the proposed separation of Jackson Financial Inc), financial controls, outsourcing and third-party
supply, customer outcomes, cyber risk, compliance and regulatory, and the second line of defence. In addition, GwIA
performed more business monitoring during 2020 to obtain a broader view of the business and enable more regular
assessments of emerging risks and changes in the control environment. This has been achieved through a variety of
methods including stakeholder discussions and an increasing use of data analytics.
The Group Chief Internal Auditor reports functionally to the Committee Chair and for management purposes to the
Group Chief Executive, and also has direct access to the Chair of the Board. In addition to formal Committee meetings,
the Committee meets with the Group Chief Internal Auditor in private to discuss matters relating to, for example, the
effectiveness of the internal audit function, significant audit findings and the risk and control culture of the organisation.
The Committee Chair also meets with GwIA’s Quality Assurance Director to discuss the outcome of the quality reviews
of GwIA’s work and actions arising.
Annual internal C
audit plan and
focus for 2021 GwIA now operates a rolling six-month approach to audit planning. The Committee approved the plan for the second
half of 2020. It also considered and approved the Internal Audit Plan, resource and budget for the first half of 2021.
The 2021 Internal Audit Plan was formulated based on a bottom-up risk assessment of audit needs mapped against
various metrics combined with top-down challenge. The plan was then mapped against a series of risk and control
parameters, including the top risks identified by the Risk Committee, to verify that it is appropriately balanced between
financial, business change, regulatory and operational risk drivers and provides appropriate coverage of key risk areas
and audit themes within a risk-based cycle of coverage. Key areas of focus for 2021 include: strategic change initiatives,
customer outcomes, cyber security, financial risk and financial controls, culture, outsourcing and digitisation.
GwIA will also continue to consider how to address the needs of the audit committees of the material subsidiaries in Asia
and the GWS standards being introduced by the Hong Kong IA.
Effectiveness of M
Internal Audit
The Committee is responsible for approval of the GwIA charter, audit plan, resources, and for monitoring the
effectiveness of the function.
The Committee also assesses the effectiveness of GwIA through a combination of External Quality Assessment reviews,
required every five years, and an annual internal effectiveness review.
A 2020 Internal Effectiveness review, performed by the GwIA Quality Assurance Director, was conducted in accordance
with the professional practice standards of the Chartered Institute of Internal Auditors (CIIA) and assessed continued
conformance with the CIIA guidance for Effective Internal Audit in the Financial Services (the CIIA Code). The review
concluded that GwIA continued to comply with the requirements of internal audit policies, procedures and practices,
and standards in all material respects relating to audit planning and execution, and continued to be aligned with
its mandated objectives and maintained general conformance with the CIIA Code.
During 2020, GwIA also continued to develop its practices with enhancements to methodology, approaches to audits
and the use of data analytics. Latterly in 2020 and in preparation for the proposed separation of Jackson Financial Inc,
the function initiated work to create two appropriately skilled and sized, independent internal audit functions, where
previously there had been a single function.
158 Prudential plc

Group overview
Internal control
Internal control and C O
risk management
systems The Committee is responsible for reporting and making recommendations to the Board on the effectiveness of the
Strategic report
Group’s system of risk management and internal control.
The Committee considered the outcome of the annual review of the systems of risk management and internal control.
The review identified specific areas for improvement and the necessary actions that have been, or are being, taken.
The Committee considered in particular the changes made to US statutory reporting as announced on 28 January
and the actions taken, including an independent review by external advisers of the revised model. They also took
the opportunity to consider with management the existing reviews and controls around model changes more widely,
including in Asia. Alongside the review carried out by management, the Committee considered that enhanced
Governance
governance over the more material Asian subsidiaries as previously discussed was providing them with deeper insight,
as were the projects to prepare for GWS and IFRS 17.
The Committee noted the comparatively low rating for audit and risk governance within the Governance QualityScore
issued by Institutional Shareholder Services and satisfied itself that this reflected historic matters that were the subject
of the FCA’s fine of The Prudential Assurance Company Limited in September 2019, pre the demerger, rather than any
broader concerns about the Company’s governance arrangements.

Governance
Group Governance E
Manual
The Group Governance Manual sets out the policies and procedures by which the Group operates within its framework
of internal governance, taking into account relevant statutory and regulatory matters.
Incorporating our Group Code of Business Conduct, the Group Governance Manual sets out the general principles
by which we conduct our business and ourselves. Each business attests annually to compliance with:
—— Mandatory requirements set out in Group-wide policies, including the Group Code of Business; and
—— Matters requiring prior approval from those parties with delegated authority.
The Committee reviewed the results of the Group Governance Manual annual content review and the results of the
year end compliance attestation for the year ended 31 December 2020.
Competence In relation to the provisions of the UK Code and HK Listing Rules, the Board is satisfied that David Law has recent and
and experience relevant financial experience and that the Committee as a whole has competence relevant to the sectors in which the
business operates.
Full biographies of the Committee members including experience and professional qualifications, are set out on pages
122 to 126.

The Board has determined that David Law qualifies as the designated Audit Committee Financial Expert under the SEC
rules consistent with Section 407 of the Sarbanes-Oxley Act.

Prudential plc
Audit tender in 2020 6. Selection criteria

1. Introduction In order to codify what was required of the firms, a transparent set
The Prudential Group’s Annual Report 2018 noted the Group’s of selection criteria was devised and incorporated in scorecards used
intention to commence a tender process to appoint a new auditor in to evaluate the firms’ proposals and presentations:
line with the UK Code in respect of audit tendering and European rules
on mandatory audit rotation. The external audit tender resulted in the —— Core requirements – the standards candidate firms were required
proposal, subject to shareholder approval at the 2023 AGM, to appoint to demonstrate to enable them to fulfil the audit of all in-scope
EY as the Prudential external auditor for the financial year 2023. business units within the Group; and
—— Further differentiators – criteria designed to assist in distinguishing
The process ran from November 2019 to December 2020, was led between the candidate firms should there be no clear difference
by the Committee and was in compliance with statutory requirements based on the core requirements.
and guidance issued by the FRC.
The selection criteria also took account of local qualification
2. Governance requirements to ensure that these were able to be satisfied.
The objective of the audit tender was to select the best audit firm
to provide a high quality, effective and efficient audit in succession 7. Access to information
to KPMG, recognising the business lines and geographical spread In order to ensure a level playing field (ie a fair, open and transparent
of the organisation. To ensure a transparent and robust selection and tender process), between June and September 2020 both firms were
evaluation process, the Committee assumed responsibility for leading given access to management and key stakeholders across the Group
the tender process and recommending the preferred firm to the Board. in order to help them understand the business and better tailor their
proposals. These meetings included the Head Office locations and
Prior to commencing the audit tender, two potential conflicts of the principal business units. The information received by the candidate
interest were specifically recognised. These related to the Chair of firms from these visits was supplemented with the provision of
the Committee’s former positions and pension from PwC and the additional information made available through a virtual data room
Group Chief Financial Officer and Chief Operating Officer’s former to ensure both firms had the same information.
position and pension from Deloitte. To mitigate the risk the Group
Chief Internal Auditor was asked to support the audit tender process. 8. Evaluation activities
In addition, with the Committee’s agreement, the Chair recused The following activities were conducted to assess the firms and inform
himself from the final decision and asked Alice Schroeder to chair evaluation against each of the evaluation criteria:
those meetings at which decisions regarding the tender were made.
—— Written proposals – Prepared for the Group and principal
3. Participants business units.
Five firms were approached (three from the ‘Big Four’ and two —— Formal assessed presentations – To the Audit Committee in
‘challenger’ firms). The two challenger firms chose not to take part Jackson National Life Insurance Company and Jackson National
in the process due to resources and strategic focus. Request for Asset Management, to Group Finance and a presentation to a
Information (RFI) letters were issued to the remaining candidate firms panel in Prudential Corporation Asia which included the audit
in November 2019. EY and PwC responded positively, confirming their committee chairs of the Hong Kong and Singapore life businesses.
intention to commit to the tender process and that they could meet the —— Meetings with chief finance officers of local business units in
independence requirements. Deloitte noted potential independence Asia and Africa – To assess the firm’s capability in local markets
concerns and subsequently withdrew from the process as they did not and their ability to perform the role of local statutory auditor.
believe these could be resolved. —— Technical case studies – Both firms participated in an exercise
to help assess how they would work with Prudential on a
4. Scope of tender technical matter.
The audit tender was designed to select the Prudential Group’s —— Technology demonstration – These events gave both firms the
external auditor, as well as the auditor for the business units across the opportunity to set out their technology and innovation strategy
group. The audit tender acknowledged that certain local companies and how this could enhance the quality of the audit; and
within the Group had separate auditor rotation requirements. —— Formal Presentations to the Committee – A summary of the
assessments from the above process was presented to the
5. Independence Committee in advance of final formal presentations.
Firms were asked to confirm that they would be able to demonstrate how
independence would be achieved by no later than 31 December 2021, 9. Evaluation
in accordance with the FRC Revised Ethical Standard 2019 and PCAOB The Committee recommended both EY and PwC to the Board and
auditing and related professional practice standards. In response, considered both able to conduct a high quality audit of the Group.
the firms confirmed their ability to assert their independence by The Committee identified a first and second choice, and at its meeting
31 December 2021 and set out how this would be achieved in respect of: on 3 December 2020 the Board resolved that it intends to recommend
EY for appointment for the year ending 31 December 2023, subject
—— Current engagements (non-audit services) with Prudential; to shareholders’ approval at the AGM in 2023. In making this decision,
—— Prudential’s management of the firm’s investments and investments the Board noted that EY had particularly differentiated themselves
Prudential may hold in the firm; with the Asian experience of their team.
—— Internal procedures for dealing with the personal independence
of the firm’s partners, former partners and staff (in respect of direct 10. Transition
investments, pensions of former partners and pensions held); and KPMG will remain the Group’s auditor until 2023. Over the intervening
—— Other current business relationships with Prudential. period EY and the Group will start the transition process, including
independence in respect of non-audit services and other business
Prudential is satisfied that the required independence of the audit firm relationships globally and preparation for the introduction of revised
can be achieved. accounting procedures IFRS 17 and IFRS 9.
160 Prudential plc

C O

Jeremy Anderson
Risk Committee
Group overview
Chair of the Risk Committee
report
Strategic report
Governance
Dear shareholder
As Chair of the Risk Committee from May, I am pleased to report
on the Committee’s activities and focus during 2020. It was certainly
an eventful year to step into the role, with the Committee considering
key strategic and externally driven changes that will leave an indelible
mark on the Group’s operations into the future. I would like to take this
opportunity to thank my predecessor, Howard Davies, who has served

as a Non-executive Director and chaired the Committee since October
2010, for his outstanding contribution. I would also like to take this
opportunity to thank my fellow Committee members and everyone
on the Prudential team who supported me in my transition to Chair.
Committee operation
The Committee assists the Board in providing leadership, direction
and oversight of the Group’s overall risk appetite, limits and strategy.
It also oversees and advises the Board on current and future risk
exposures of the Group, including those which have the potential to
impact on the delivery of the Group’s Business Plan. The Committee
reviews the Group Risk Framework and recommends changes to it for
approval by the Board to ensure that it remains effective in identifying
and managing the risks faced by the Group. The Committee received
regular reports from the Group Chief Risk and Compliance Officer,
who is advised by the Group Executive Risk Committee (GERC).
I provided feedback on the performance of the Group Chief Risk and
Committee members Compliance Officer to the Group Chief Executive as part of the annual
evaluation of the Board and its members. The Committee also received
Jeremy Anderson (from 1 January 2020, regular reports from the Group-wide Internal Audit function and
and Chair from 14 May 2020) updates from other areas of the business as needed.

David Law
Kai Nargolwala The risk governance arrangements for the Group’s major businesses
Alice Schroeder were delayered and strengthened in 2020 with the implementation
Tom Watjen of direct lines of communication, reporting and oversight of the risk
Howard Davies (Chair until 14 May 2020) committees of these businesses by the Committee. To support the
enactment of these arrangements, the terms of reference for the major
business unit risk committees were aligned and approved locally and
Regular attendees include a standing invitation for the Group Chief Risk and Compliance
—— Chair of the Board Officer and Group Chief Executive and the requirement for relevant
—— Group Chief Executive risk escalations directly to the Committee.
—— Group Chief Risk and Compliance Officer
—— Group Chief Financial Officer and Chief
Operating Officer
—— Company Secretary
—— Group Chief Internal Auditor
—— Chief risk officers of the main business
units and members of the Group Risk

Leadership Team are invited to attend
each meeting as appropriate.
Number of meetings in 2020:

8

Prudential plc
Committee reports / Risk Committee report / continued
Covid-19 risks and responses The Group Chief Risk and Compliance Officer briefed the Committee
As the Covid-19 crisis started to take hold at the start of the year the regularly on developments in systemic risk regulation and the Insurance
Group responded incisively. An additional meeting of the Committee Capital Standards (ICS). We considered the Group’s FY 2019 ICS
was convened in March to consider the potential impacts and results, including the results from the 2020 data collection exercise and
disruption to the Group’s people, customers and service delivery and the latest developments in the Standards in December. Many of the
to its solvency, liquidity position and credit risk exposures. At the same policy requirements that resulted from the Group’s prior designation
meeting the Committee reviewed and approved a recalibration to the in 2016 as a Global Systemically Important Insurer (G-SII) have been
Group’s Economic Capital (ECap) solvency risk appetite target given adopted into the Insurance Core Principles (ICPs) and the Common
the evident shift in the position in the economic cycle triggered by Framework (ComFrame). The Committee therefore considered and
the pandemic. High cadence monitoring, with a focus on solvency approved the Group’s 2020 Systemic Risk Management Plan, Liquidity
and liquidity risks to the Group, was performed through a series of Risk Management Plan and Recovery Plan.
meetings of the Critical Incident Group (CIG), invoked by the Group
Chief Risk and Compliance Officer under the Group’s Critical Incident Transformation risk, including the proposed Jackson separation,
Procedures. Key updates from the CIG meetings were provided to and other in-depth reviews
the Committee. During 2020, a key area of consideration for the Committee was the
risks associated with the Group’s key strategic change initiatives, which
In addition to the operational and market impact of Covid-19, the included the Athene reinsurance and equity injection transactions and
pandemic has accelerated digital adoption at the Group’s agency the Group’s digital transformation, as well as those related to IFRS 17
business and increased the user base of Prudential’s digital health and LIBOR transition. The Committee also considered risk opinions
application Pulse. Increased digitalisation was an emerging focus related to the financial and non-financial risks to the execution of
during 2020 and will remain a prominent theme in 2021. For the the Jackson separation strategy and reviewed the risk disclosures
remainder of the year, the Committee also considered changes to the within key in-progress transaction documentation, including those
Group’s sales processes (including the rollout of virtual face-to-face for the Prudential plc shareholder Circular and Jackson’s Form 10
sales processes across its markets and associated regulatory and Information Statement.
conduct risk implications) and the impact to sales, claims, lapses and
surrenders. The Committee also monitored the operational resilience In-depth reviews were performed on existing and emerging high-risk
of the business and its key third parties as well as its information areas including the risks related to the Group’s insurance products
security posture and cyber defence capabilities amidst the crisis. in Asia and Africa; the product portfolio at Prudential Life Thailand;
and the actions for managing the risks from historically low interest
Regulatory matters rates during the year in Hong Kong, Singapore, Thailand and Vietnam.
To align Hong Kong’s regulatory regime with international standards The latter review formed part of a series of work considering the
and practices, the Hong Kong Insurance Authority (IA) has developed long-term impact of lower interest rates on product profitability and
a new group-wide supervision (GWS) framework for multinational local business unit solvency. Following a 2019 deep dive review
insurance groups under its supervision. On 24 July 2020 the Insurance performed on Digital Transformation and Artificial Intelligence (AI),
(Amendment) (No. 2) Ordinance, being the enabling primary legislation a number of developments resulting from the review were considered
providing for the GWS Framework, was enacted. This primary by the Committee during 2020. This included progress updates on
legislation is supported by subsidiary legislation and guidance material the development of AI governance and Ethics Principles for the Group.
from the Hong Kong IA. The relevant subsidiary legislation, including
the Insurance (Group Capital) Rules, was tabled before the Legislative Risk appetite and principal risks
Council on 6 January 2021 and will also come into operation on The Committee performed its regular review of the Group’s risk
29 March 2021. The GWS framework is expected to become effective policies and proposed changes to the Group risk appetite statements.
for Prudential upon designation by the Hong Kong IA in the second Aligned with these reviews, proposals to amend associated limits
half of 2021, subject to transitional arrangements. The framework is were also considered. The Committee reviewed the Group’s annual
based on a principle-based and outcome-focused approach and allows ORSA report in May, and in light of the change in the Group’s risk
the Hong Kong IA to exercise direct regulatory powers over the holding profile following the Athene transactions and the changes in the
companies of multinational insurance groups, reinforcing Hong Kong’s economic environment driven by the pandemic, an interim refreshed
position as a preferred base for large insurance groups in Asia Pacific ORSA update was reviewed by the Committee in September.
and as a global insurance hub. During 2020, the Hong Kong IA In addition to the frequent monitoring performed during the most
engaged with the Group and other relevant stakeholders in the acute phases of the market turmoil in the first half of 2020, we regularly
development of the GWS framework, which will be anchored on reviewed the strength of our capital and liquidity positions (including
the requirements for three pillars: capital, risk and governance, and the results of stress and scenario analyses) under the Hong Kong IA’s
disclosure. Prior to the GWS framework becoming effective, the Group Local Capital Summation Method (LCSM) to assess the resilience
remains subject to the Regulatory Letter signed with the Hong Kong of the buffer above the Group’s regulatory capital requirements.
IA, which outlines the interim supervision arrangements from October
2019 when it became the Group-wide supervisor of the Group. The Committee also considered the principal risks facing the
Group and received updates on these through the course of the year,
During the year, the Committee has received regular updates from as well as reports from the risk committee chairs of the Group’s major
the Group Chief Risk and Compliance Officer on GWS developments businesses, with the chief risk officers of Prudential Corporation
as well as compliance with the existing regime and the Group’s Asia and Jackson regularly attending Committee meetings. A fuller
preparation for the implementation of the new framework. explanation of principal risks facing the Group and the way in which
the Group manages these is set out in the Group Chief Risk and
Compliance Officer’s report on pages 45 to 69. During 2020,
the Committee considered risk assessments and opinions on key
areas covering the risks associated with the Group’s Business Plan
and executive remuneration.
162 Prudential plc

In respect of our principal risks, we continued to focus on the risks to Following the demerger of M&G in October 2019, the Committee
Group overview
the Group’s financial viability and non-financial sustainability. This was focused on overseeing the development and embedding of new
includes those arising from the external business and macroeconomic governance arrangements across the Group’s Asian business, building
environment in which the Group operates, including the implications direct communication and escalation links with the existing local risk
of sustained low interest rates; risks arising from the nature of the committees of the significant businesses. Regular direct communication
Group’s business and industry; risks around global legal and regulatory with each of the local chairs remains a key component of our
compliance; and environmental, social and governance (ESG) related governance framework, and I have worked closely with the respective
risks. In May 2020, a joint session with the Audit Committee on cyber chairs of our significant business unit risk committees during the year.
Strategic report
security included an update on the Group-wide response to Covid-19 At each meeting, I update the Committee on important points raised
related cyber security risks, as well as progress updates on the at local level, and after the meeting I report to the Board on the main
Group’s Privacy Programme and the standardised Information Security matters discussed.
Programme across the businesses. The Committee approved a global
set of ethics principles for artificial intelligence and complex tools In order to foster a close and collegiate working relationship at the
(forming part of the Group Code of Business Conduct) in May, and Committee and with the local audit committees, David Law and
in December was provided a progress update on the development I chaired a session attended by all of the non-executive directors
of the governance in this area. at the four major Prudential Corporation Asia businesses.
Governance
B
The Committee convened an additional meeting in September

focusing on ESG risks, in particular climate-related transition risk for
the Group’s invested assets. Aligned to the strategic focus by the
Group on its purpose, culture and values and the adoption of People &
Jeremy Anderson
Culture as one of the Group’s principal risks at the beginning of 2020,
Chair of the Risk Committee

the Committee considered how the Group’s culture initiative and
purpose could be applied to support sound risk management practice,
behaviours, conduct and awareness. In December 2020, after a
successful period of road-testing, the Committee approved a new
Group Customer Conduct Risk Policy.
Committee governance
The Committee works closely with the Audit Committee to ensure
both Committees are updated and aligned on matters of common
interest. Where responsibilities are perceived to overlap between
the two Committees, David Law and I agree the most appropriate
Committee to consider the matter. Aligned with the consolidation
of the Risk, Compliance and Security functions under the leadership
of the Group Chief Risk and Compliance Officer during 2019, the
Committee assumed responsibility for Compliance oversight from the
Audit Committee with effect from 1 January 2020. The Committee
considered and approved the Risk and Compliance plans for the year.


Prudential plc

Feb Mar May Jul Sep1 Dec
Risk and market updates

Group Chief Risk and Compliance Officer reporting
Updates from significant business risk committees
Risk management
Group principal risk identification and discussions 1
—— Covid-19 related risks
—— Information security and privacy
—— ESG including climate related transition risks
Deep dives
Business unit specific risk matters
Risk assessment of Business Plan
Risk function effectiveness
Risk oversight of remuneration
Regulatory and Compliance
Group regulatory and compliance reporting
GWS
Risk and Compliance Framework
Internal model development and changes
Group Risk appetite review
Risk limit updates
Risk, Compliance and Security policy framework
Group-wide Internal Audit update
Governance arrangements and terms of reference (including business units)
External reporting
Full year and half year risk disclosures
ECap full and half year results
Own Risk and Solvency Assessment
Systemic risk reports (LRMP, SRMP, RCP)
ICS results
Note
1 An additional meeting to the usual scheduled meetings was held in September to discuss ESG risks, in particular climate-related transition risk for the Group’s invested assets.
In addition:
–A meeting was held in June to discuss the risk opinion on the equity investment by Athene in Prudential’s US business.
–T wo joint meetings with the Audit Committee were held: in May to discuss cyber security and governance matters (all Non-executive Directors were invited); and in September
to discuss Form S-1 Registration Statement.
164 Prudential plc

Group overview
C
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Risk and The Group Risk Framework and risk policies were subject to both their regular annual review and a gap analysis of
Compliance the Group’s policies was performed against the incoming requirements of the Hong Kong Insurance Authority’s (IA’s)
framework Group-wide Supervision Framework. Changes were recommended by the Committee for approval by the Board.
Strategic report
Annually, business units are required to assess and certify their compliance with the Group Risk Framework and
associated policies as part of the annual Group Governance Manual certification process. The certification process
is facilitated by the Risk, Compliance and Security function and subject to oversight by the Committee.
The Committee conducted its annual review of risk effectiveness in February. It also considered the effectiveness of,
and approved updates to, the Group Risk Mandate which formally sets out the purpose and responsibilities of the Group
Risk function and its effectiveness in overseeing the key risks to the Group.
Governance
The Committee also reviewed the methodology and calibration of the Group internal model.
Group Risk The Committee is responsible for recommending changes in the Group’s overall risk appetite and tolerance to the Board
appetite for approval.
In March, the Committee reviewed and approved a reduction in the Group’s Economic Capital (ECap) solvency risk
appetite given the change in the position of the economic cycle triggered by the pandemic, and the reversal of this

change on the subsequent recovery of the economic cycle indicators.
The Committee also performed its annual review of the Group Risk Appetite Statement and associated limits. These are
defined in aggregate for financial and non-financial risks by the setting of objectives for its liquidity, capital requirements
and non-financial risk exposure. As part of this review, the Committee approved the adoption, following a period of
road-testing, of a revised Liquidity Coverage Ratio (LCR) metric and a revision of the LCR trigger level.
Group-wide Since the demerger of M&G plc, the Group has been subject to the consolidated supervision of the Hong Kong IA
Supervision as Prudential’s Group-wide supervisor.
Framework
(GWS) Key updates on GWS developments and implementation progress were provided to the Committee during the year.
Business Plan As part of its role in overseeing and advising the Board on future risk exposures and strategic risks, the Committee
reviewed the risk assessment of the Business Plan, which included key financial risks (including those associated with
the challenging macroeconomic and geopolitical environments, being more uncertain than those foreseen in previous
Plan assessments, and including prolonged low interest rates) and non-financial risks (including the execution risks in
delivering the Group’s announced strategy for Jackson; risks to top-line sales growth and increasing third party risk).
The analysis review included sensitivity assessments of the impact of various plausible scenarios.
Own Risk and The ORSA is a key ongoing process for identifying, assessing, controlling, monitoring and reporting the risks to which
Solvency the Group is exposed and assessing capital adequacy over the business planning horizon.

Assessment
(ORSA) In May, the Committee considered the Group’s ORSA report, based on the Business Plan, prior to its approval by the
Board. An additional interim ORSA report was considered by the Committee in September, produced in light of the
change in the Group’s risk profile following the Athene transactions and the changes in the economic environment
driven by the pandemic.
Stress and The Committee is responsible for reviewing the outcome and results of stress and scenario testing, which is a key
scenario testing risk identification, measurement and management tool for the Group.
Stress and scenario testing is a key component of the Group’s ORSA and the risk assessment of the Business Plan,
as described above, as well as its Recovery Planning and Reverse Stress Testing (RST).
The Group’s Recovery Plan, considered by the Committee in September, included an assessment of the financial and
operational resilience of Prudential. The Plan concluded that despite the challenging conditions linked to Covid-19
and significant stress experienced in the first half of 2020, the Group’s position remained strong and that a range of
credible recovery actions remain available, at both Group and business unit level which are considered sufficient to
recover the Group’s position if it comes under severe stress.

Prudential plc
C
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Systemic Risk The FSB has endorsed a new Holistic Framework for systemic risk management and suspended G-SII designations
Management until a review is undertaken in 2022.
Many of the policy requirements that resulted from the Group’s prior designation in 2016 as a Global Systemically
Important Insurer (G-SII) have been adopted into the Insurance Core Principles (ICPs) and ComFrame – the common
framework for the supervision of Internationally Active Insurance Groups (IAIGs). As Prudential is expected to satisfy
the criteria of an IAIG, these measures are anticipated to continue for the Group. The Committee therefore considered,
and recommended for approval by the Board, the Systemic Risk Management Plan, Recovery Plan and Liquidity Risk
Management Plan.
Transformation During 2020, a key area of consideration for the Committee was the proposed Jackson separation, which contributed
activity and to the portfolio of key strategic change activity across the Group. The Committee’s work included consideration of risk
proposed Jackson opinions related to the financial and non-financial risks to the execution of the proposed Jackson separation, reviewing
separation the risk disclosures within key in-progress transaction documentation, including those for the Prudential plc shareholder
Circular and Jackson’s Form 10 Information Statement and the revision to Jackson’s hedge modelling for US statutory
standards for calculating reserves and capital.
The Committee was provided with updates on other transformation activity throughout the year. It received regular
updates on the Group’s portfolio of key strategic change initiatives, including those related to IFRS 17, the Group’s
digital transformation and LIBOR transition.
Covid-19 The impact of the Covid-19 pandemic has been broad, with implications for the Group’s solvency and liquidity position
related risks and many of its principal risks. At an additional meeting of the Committee convened in March as the crisis started to
unfold, the Committee reviewed and approved a recalibration to the Group’s Economic Capital (ECap) solvency risk
appetite. Key updates focusing on solvency and liquidity risks to the Group from the meetings of the Critical Incident
Group, convened by the Group Chief Risk and Compliance Officer under the Group’s Critical Incident Procedures,
were provided to the Committee.
The Committee received regular updates on the nature and extent of the impacts across its principal risks, including
the changes to the Group’s sales processes (including the rollout of virtual face-to-face sales processes across its markets
and associated regulatory implications) and the impact to sales, claims, lapses and surrenders. The Committee also
monitored the operational resilience of the business and its key third parties as well as its information security posture
amidst the crisis.
Group principal The Committee evaluated the Group’s principal risks, considering recommendations for promoting additional risks and
risks changes in the scope of existing risks. In addition to those impacted by the pandemic as outlined above, the Committee
also received regular reporting on principal and emerging risks and external events, such as the international responses
to the enactment of the national security law in Hong Kong, over the course of the year within the Group Chief Risk and
Compliance Officer’s regular report to the Committee. Further information about how the Group identifies emerging
and principal risks can be found in the Group Chief Risk and Compliance Officer’s report.
Additional meetings of the Committee were convened in March and September focusing on Covid-19 driven risks
and ESG risks, in particular climate-related transition risk for the Group’s invested assets, respectively.
The Group Chief Risk and Compliance Officer’s reports also provided the Committee with regulatory updates; the
implications of the developing global capital standards including the engagement with the Hong Kong IA on the
development of GWS; and developments in the area of systemic risk management.
Deep dives As part of its risk oversight responsibilities, the Committee also considers the result of ‘deep dive’ risk reviews performed
over the year.
In 2020, these focused on the risks related to the Group’s insurance products in Asia and Africa; the product portfolio
at Prudential Life Thailand; and the actions for managing interest rate risk in Hong Kong, Singapore, Thailand and
Vietnam. The latter review formed part of a series of work considering the impact of lower for longer interest rates.
Following a 2019 deep dive review performed on Digital Transformation and Artificial Intelligence (AI), a number
of developments resulting from the review were considered by the Committee during 2020. This included progress
updates on the development of AI governance and Ethics Principles for the Group.
166 Prudential plc

Group overview
C
O
Information security During 2020, updates were provided to the Committee on progress made in the operationalisation of the Group-wide
and privacy governance model and strategy for cyber security management and data privacy risks.
Strategic report
In May, in a joint session of the Risk and Audit Committee to which all Non-executive Directors were invited, updates
on the Group-wide response to Covid-19 related cyber security risks, and progress on the Group’s Privacy Programme
and the standardised Information Security Programme across the businesses, were provided.
The Committee received regular updates on Group-wide information security and privacy metrics providing a view
of security posture across the businesses.
Remuneration The Committee has a formal role in the provision of advice to the Remuneration Committee on risk management
Governance
considerations in respect of executive remuneration. It considered risk management assessments of proposed executive
remuneration structures and outcomes during the year, making related recommendations to the Remuneration
Committee for their consideration.
Compliance and The Committee received regular reporting on key compliance risks and mitigation activity throughout the year.
audit reporting It also reviewed and approved updates to regulatory compliance risk-related policies including changes to the
Personal Account Dealing Policy and the Conflicts of Interest Policy. The Committee also approved, after a successful
period of road-testing, a new Group Customer Conduct Risk Policy.

The Committee received updates from Group-wide Internal Audit throughout the year relating to effectiveness
of risk management and internal control systems and other matters relating to its responsibilities.

Prudential plc
Statutory and regulatory disclosures
Financial reporting Suitable insurance cover is in place in respect of legal action against
The Directors have a duty to report to shareholders on the performance directors and senior managers of companies within the Group.
and financial position of the Group and are responsible for preparing the
financial statements on pages 206 to 308 and the supplementary Qualifying third-party indemnity provisions are also available for
information on pages 320 to 347. It is the responsibility of the auditor the benefit of the Directors of the Company and certain other such
to form independent opinions, based on its audit of the financial persons, including certain directors of other companies within the
statements and its audit of the EEV basis supplementary information, and Group. These indemnities were in force for 2020 and remain so.
to report its opinions to the Company’s shareholders and to the Company. Contract of significance
Its opinions are given on pages 310 to 319 and pages 349 to 351. At no time during the year did any Director hold a material interest
Company law requires the Directors to prepare financial statements in any contract of significance with the Company or any subsidiary
for each financial year that give a true and fair view of the financial undertaking.
affairs of the Company and of the Group. The criteria applied in the Securities dealing and inside information
preparation of the financial statements are set out in the Statement Prudential has adopted securities dealing rules relating to transactions
of Directors’ responsibilities on pages 309 and 348. Company law also by Directors on terms no less exacting than required by Appendix 10
requires the Board to approve the Strategic report. In addition, the UK to the HK Listing Rules and by relevant UK regulations. Having made
Code requires the Directors’ statement to state that they consider the specific enquiry of all Directors, the Directors have complied with
Annual Report and financial statements, taken as a whole, is fair, these rules throughout the period.
balanced and understandable and provides the information necessary
for shareholders to assess the Company’s position and performance, The Group has adopted an Inside Information Policy which includes
business model and strategy. guidance and procedures for the identification, dissemination and
escalation of inside information as well as appropriate controls on
The Directors are further required to confirm that the Strategic report the disclosure of such information in line with regulatory requirements.
includes a fair review of the development and performance of the All staff are made aware of the policy and receive communications
business, with a description of the principal risks and uncertainties. reminding them of their obligations when they work on any confidential
Such confirmation is included in the Statement of Directors’ matters in the business or are notified when the Company enters or
responsibilities on page 309. exits a closed period.
The Strategic report provides, on pages 10 to 69, a description of the Requirements of Listing Rule 9.8.4
Group’s capital position, financing and liquidity. The risks facing the Information to be included in the Annual Report and Accounts under
Group’s business are discussed in the Group Chief Risk and Compliance Listing Rule 9.8.4 may be found as follows:
Officer’s report of the risks facing our business and how these are
managed on pages 45 to 69. Listing Rule Description Page
The Directors who held office at the date of approval of this Directors’ 9.8.4 (4) Details of long-term incentive schemes required
report confirm that, so far as they are each aware, there is no relevant audit by Listing Rule 9.4.3 191
information of which the Company’s auditor is unaware; each Director has 9.8.4 (10) Contracts of Significance involving a Director 168
taken all the steps that he or she ought to have taken as a Director to make
himself or herself aware of any relevant audit information and to establish 9.8.4 (12) Details of shareholder waiver of dividends 397
that the Company’s auditor is aware of that information. This confirmation 9.8.4 (13) Details of shareholder waiver of future dividends 397
is given and should be interpreted in accordance with the provisions of
Section 418 of the Companies Act 2006.
US regulation and legislation
Going concern As a result of its listing on the New York Stock Exchange, the Company is
In accordance with the guidance issued by the Financial Reporting required to comply with the relevant provisions of the Sarbanes-Oxley
Council in September 2014, ‘Guidance on Risk Management, Internal Act 2002 as they apply to foreign private issuers and have adopted
Control and Related Financial and Business Reporting’, after making procedures to ensure such compliance. In particular, in relation to
sufficient enquiries, the Directors have a reasonable expectation that Section 302 of the Sarbanes-Oxley Act 2002 which covers disclosure
the Company and the Group have adequate resources to continue controls and procedures, a Disclosure Committee has been established,
their operations for a period of at least 12 months from the date that reporting to the Group Chief Executive, chaired by the Group Chief
the financial statements are approved. Further information is provided Financial Officer and Chief Operating Officer and comprising members
in note A1 on page 215. of head office management. The work of the Disclosure Committee
supports the Group Chief Executive and Group Chief Financial Officer
Powers of the Board and Chief Operating Officer in making the certifications regarding the
The Board may exercise all powers conferred on it by the Company’s effectiveness of the Group’s disclosure procedures.
Articles and the Companies Act 2006. This includes the powers of the
Company to borrow money and to mortgage or charge any of its assets Change of control
(subject to the limitations set out in the Companies Act 2006 and Under the agreements governing Prudential Corporation Holdings
the Company’s Articles) and to give a guarantee, security or indemnity Limited’s life insurance and fund management joint ventures with
in respect of a debt or other obligation of the Company. China International Trust & Investment Corporation (CITIC), if there
is a change of control of the Company, CITIC may terminate the
Rules governing the appointment of Directors agreements and either, (i) purchase the Company’s entire interest in
The appointment and removal of Directors is governed by the the joint venture or require the Company to sell its interest to a third
provisions in the Articles of Association (the Articles), the UK Code, party designated by CITIC, or (ii) require the Company to purchase all
the HK Code (as appended to the Hong Kong Listing Rules) and the of CITIC’s interest in the joint venture. The price of such purchase or
Companies Act 2006. sale is to be the fair value of the shares to be transferred, as determined
Director indemnities by the auditor of the joint venture.
Subject to the provisions of the Companies Act 2006, the Company’s Customers
Articles permit the Directors and officers of the Company to be The five largest customers of the Group constituted in aggregate less
indemnified in respect of liabilities incurred as a result of their office. than 30 per cent of its total revenue from sales for each of 2020 and 2019.
168 Prudential plc

Index to principal Directors’ report disclosures
Information required to be disclosed in the Directors’ report may be found in the following sections:
Group overview
Information Section in Annual Report Page number(s)
Disclosure of information to auditor Statutory and regulatory disclosures 168

Directors in office during the year Board of Directors 122-126
ESG report ESG report 70-117
Strategic report
Employment practices ESG report 93-98
Greenhouse gas emissions ESG report 114-117
Charitable donations ESG report 108-110
Political donations and expenditure ESG report 108
Remuneration Committee report Directors’ remuneration report 179-202
Directors’ interests in shares Directors’ remuneration report 197
Governance
Agreements for compensation for loss of office Directors’ remuneration report 199
or employment on takeover
Details of qualifying third-party indemnity provisions Governance report 168
Internal control and risk management Governance report and Strategic report 139-140 and 45-69
Powers of Directors Governance report 168

Rules governing appointment of Directors Governance report 168
Significant agreements impacted by a change of control Governance report 168
Future developments of the business of the Company Group Chief Executive’s report 5-9
Post-balance sheet events Note D3 of the notes on the Group financial statements 289
Rules governing changes to the Articles of Association Shareholder information 396
Structure of share capital, including changes during Shareholder information, Governance report 396-397 and
the year and restrictions on the transfer of securities, and note C8 of the notes on the Group financial statements 168 and 282
voting rights and significant shareholders
Business review Group overview and strategic report 5-117
Changes in borrowings Group Chief Financial Officer and Chief Operating 32 and 274
Officer’s report and note C5 of the notes on the
Group financial statements
Dividend details Group overview and strategic report 3 and 34
Financial instruments Strategic report and Additional information 45-69 and 379-383
Corporate governance statement including compliance Governance report 118-169
with the Code

Fostering the Company’s business relationships ESG report 78-81
Monitoring culture ESG report 78-81 and 93-98
In addition, the risk factors set out on pages 379 to 390 and the additional unaudited financial information set out on pages 354 to 378, are
incorporated by reference into the Directors’ report.
The Directors’ report is signed on behalf of the Board of Directors by
Tom Clarkson
Company Secretary
2 March 2021

Prudential plc
Directors’
remuneration
report
Contents
172 Annual statement from the Chair
of the Remuneration Committee
176 Our Executive Directors’ remuneration
at a glance
177 Summary of the current Directors’
remuneration policy
179 Annual report on remuneration
203 Additional remuneration disclosures
This report has been prepared to comply

with Schedule 8 of The Companies (Directors’
Remuneration Policy and Directors’ Remuneration
Report) Regulations 2019, as well as the Companies
Act 2006 and other related regulations.
The following sections were subject to audit:

Table of 2020 and 2019 Executive Director total
remuneration (the ‘single figure’) and related notes
(including details of all fixed and variable remuneration
elements shown in the single figure table), Pension
entitlements, Long-term incentives awarded in 2020,
Chair of the Board and Non-executive Director
remuneration in 2020 and 2019, Statement of
Directors’ shareholdings and Payments to past
Directors and payments for loss of office.
170 Prudential plc

171
Annual Report 2020
Prudential plc

Directors’
remuneration report
Anthony Nightingale CMG SBS JP

Chair of the Remuneration Committee Annual statement
from the Chair of
the Remuneration
Committee
Dear shareholder,
I am pleased to present our Directors’ remuneration report
for the year to 31 December 2020 on behalf of the members
of the Remuneration Committee.
By way of preface, I would like to share the context for the key
decisions the Committee took during 2020 and for the developments
in our arrangements planned for 2021.
In the Committee’s 2019 report, we presented a new Directors’

remuneration policy. In April 2020, in light of the Covid-19 pandemic
and the need for continued restraint in executive remuneration,
the Committee clarified how we intended to operate the new policy,
as described in the ‘Aligning pay and performance in the context of
Covid-19’ section of this report. These clarifications included reversing
salary increases awarded for 2020, reducing pension benefits of
incumbent Executive Directors from 25 per cent to 13 per cent of
salary in line with the UK workforce and reversing the proposed
increase in the Prudential Long Term Incentive Plan (PLTIP) award
level for the Group Chief Financial Officer and Chief Operating
Officer. The 2020 Directors’ remuneration policy was approved by
shareholders at the 2020 AGM with 95.8 per cent votes cast in favour.
During 2021, the Committee intends to operate within the 2020 policy
and in line with our previous clarifications.
D P
As described below, a number of changes are planned in the application

of the policy for 2021 to maintain the strong connection between
incentive arrangements and the Group’s evolving strategy. I have had
the opportunity during late 2020 and early 2021 to discuss these changes
with many of our major shareholders, as well as the organisations that
represent and advise them. I am pleased to say that we have had the
benefit of substantive feedback from over 40 per cent of our shareholder
register and that the majority of shareholders and advisory bodies who
provided input are supportive of the remuneration arrangements that
we proposed for 2021. These arrangements are in line with our approved
2020 remuneration policy. On behalf of the Committee, I would like to
thank the shareholders and advisory bodies for their engagement to
date and look forward to continuing this useful dialogue into the future.
Reflecting 2020 financial performance

Prudential’s executive remuneration arrangements reward the
achievement of Group, business, functional and personal targets,
provided that this performance is delivered within the Company’s
risk framework and appetites, and that the conduct expectations
of Prudential, our regulators and other stakeholders are met.
172 Prudential plc

As set out in the Strategic report section earlier in this Annual report, despite the unexpected challenges throughout 2020 the Group delivered
Group overview
positive operating results as we continue to develop our capabilities and presence in our chosen Asia and Africa markets. The table below
illustrates achievement of KPIs:
Performance measures Group performance ($m)3 2020 bonus achievement4
Adjusted operating profit from continuing operations1

Prudential’s primary measure of profitability and a key driver
of shareholder value.
4%
Strategic report
5,310 5,507
Adjusted operating profit accounted for 35 per cent Above target level,
of Group financial bonus targets. approaching stretch
target level
Governance
2019 2020
Life new business profit from continuing operations

A measure of the future profitability of the new business
sold during the year and an indicator of the profitable growth 4,405
36%
Below minimum
of the Group.
threshold

New business profit accounted for 15 per cent 2,802
of Group financial bonus targets.
2019 2020
Operating free surplus generated from continuing operations2

A measure of the internal cash generation of our business units. 1%
Operating free surplus generated accounted for 30 per cent 2,861 2,886
of Group financial bonus targets. Above stretch target level
2019 2020
Business unit remittances5 European Embedded Value (EEV) basis results

Cash flows across the Group6 reflect our aim of achieving
a balance between ensuring sufficient net remittances from 1,465
47%
Below minimum
business units to cover the dividend (after corporate costs)
threshold
and the use of cash for reinvestment in profitable opportunities.
A cash flow measure was used to determine 20 per cent 771

of the Group financial bonus targets.
2019 2020
Notes
1 In this report ’adjusted operating profit’ refers to adjusted IFRS operating profit based on longer-term investment returns from continuing operations.
2 For insurance operations, operating free surplus generated represents amounts maturing from the in-force business during the period less investment in new business
and excludes non-operating items. For asset management businesses, it equates to post-tax operating profit for the year.
3 As reported basis.
4 Targets and the level of achievement are set out in the ‘Annual bonus outcomes for 2020’ section of the Annual report on remuneration.
5 2019 business unit remittances exclude remittances from discontinued remittances.
6 Group cash flow includes business unit remittances net of dividends and corporate costs.

Prudential plc
Annual statement from the Chairman of the Remuneration Committee / continued
2020 adjusted operating profit was 4 per cent higher than prior year on an actual exchange rate basis (and on a constant exchange rate basis)
reflecting the performance outlined in the Strategic report, and delivered a result that is above the approved targets.
Life new business profit was 36 per cent lower than prior year on an actual exchange rate basis (37 per cent on a constant exchange rate basis).
This reflected the change in geographical sales mix, most notably the fall in Hong Kong APE, as a result of the challenging trading environment
caused by the Covid-19 pandemic. This result was below the minimum threshold.
Operating free surplus generation was 1 per cent higher than 2019 on an actual exchange rate basis (and on a constant exchange rate basis)
and this result was above the approved stretch target.
Business units remittance levels were 47 per cent lower than 2019 and were below minimum threshold. Holding company cash was $1.5 billion
at the year end, after dividends, corporate costs and strategic investment in Asia, though, reflecting the lower level of remittances received
from the business units, the Group cash flow measure was below the minimum threshold level.
The Group achieved these results while maintaining appropriate levels of capital and while operating within the Group’s risk framework
and appetites in the challenging market environment.
Reflecting stakeholders’ 2020 experiences

In reaching its decisions for 2020, the Committee considered the experience of the Company’s stakeholder groups, particularly in the context
of the pandemic. More details can be found in the ESG section of the Strategic report:
Investors Our people

—— At the half year, the Company announced a change in the —— Almost all employees have spent at least part of 2020 working
dividend policy, aligned with the revised Group strategy to focus remotely, in line with local restrictions and guidance.
on value creation through growth. Dividends are expected to
grow broadly in line with the growth in Asia and will be set taking —— No employees were furloughed or made redundant as a result of
into account financial prospects, investment opportunities and the pandemic. Our remuneration programmes operated as usual
market conditions. during the pandemic period with medical insurance coverage
extended to offer free Covid testing where necessary. Employees
—— While the Company’s share price reduced by 7 per cent during received their regular remuneration during any periods of
2020, our one-year TSR performance has been stronger than our shielding or self-isolation.
comparators, outperforming the median of the 2020 PLTIP peer
group (Prudential, (8.6) per cent compared with the peer group —— In July 2020 the Global Diversity & Inclusion Council was
median of (12.5) per cent on a point to point basis). established to empower employees and create a sense of
belonging by respecting and appreciating differences.
—— On 28 January 2021, Prudential announced that it was considering
an equity raise of around $2.5-3 billion to increase financial —— A range of initiatives was launched to support employees’
flexibility and take advantage of Asia growth opportunities. wellbeing and mental health, including the Group’s first global
wellbeing day held on World Mental Health day.
Governments and Regulators Suppliers
—— Group has not sought any government support during the —— All London Head Office suppliers with fewer than 100 employees
pandemic. A job support payment inadvertently received from were automatically switched to 10-day payment terms.
one government was repaid in full.
—— Human rights and modern slavery considerations are embedded
—— The Group has engaged frequently with its Lead Regulator across all supplier and supply chain arrangements.
on the development of the proposed Group-wide Supervision
(GWS) framework which is expected to become effective
from March 2021.
Customers Society
—— Customer service processes made claiming easier with dedicated —— The Group created a $2.5 million Covid-19 relief fund.
hotlines, fast-track claims processing and policy premium grace
period extensions. —— The Prudence Foundation Safe Steps Covid-19 campaign provided
practical advice about safety in the pandemic and reached over
—— Free limited-time Covid-19 cover was offered in Asia and the 250 million people daily across Asia and 80 million people a month
‘Pulse by Prudential’ app put artificial intelligence-powered across Africa.
medical symptom checking, wellness advice and tele-medicine
into people’s hands. —— Significant progress was made in redefining the Group’s ESG
ambition and strategy including the creation of the Responsibility
—— A total of $4.2 million was spent on goodwill payments. and Sustainability Working Party of the Board.
174 Prudential plc

D P R
Rewarding 2020 performance Engaging shareholders on 2021 remuneration arrangements
Group overview
The Committee determined remuneration outcomes having In late 2020 and early 2021, we consulted with our major shareholders
considered the financial performance of the Group, its delivery and the main institutional voting agencies on the proposed
to stakeholders and the personal contribution of executives. implementation of our Directors’ remuneration policy in 2021. We had
constructive conversations about our approach to remuneration and
As set out above, 2020 saw the Group perform well against its key received broad support for our proposals, as summarised below:
operating profit and operating free surplus generation targets in the
face of difficult external conditions. This performance, combined with —— We proposed rebalancing the AIP metrics for 2021 with an
Strategic report
his effective personal leadership, resulted in an overall bonus outcome increased weight assigned to the EEV new business profit, in line
for Mr Wells of 66 per cent of his maximum opportunity. However, with our strategy of driving growth in profitable new business.
the Committee and Mr Wells recognised the impact on investors of
elements of the Group’s announcement on 28 January 2021 with —— On the PLTIP, we proposed that RoEV replaces the RoE measure
respect to Jackson and the Committee exercised its discretion to for 2021 awards to reflect the focus on achieving sustained growth
reduce Mr Wells’s 2020 bonus outcome by 30 per cent (from 66 to in embedded value per share while the TSR peer group is revised
46 per cent of his maximum opportunity). to reflect the footprint of the post-separation Group. These changes
ensure the strong alignment of remuneration structures with the
Governance
The Committee believes that the bonuses it awarded to the other Group’s strategic priorities.
Executive Directors for 2020 (between 70 per cent and 80 per cent
of executives’ maximum Annual Incentive Plan (AIP) opportunities) —— The Committee has taken the decision not to award salary increases
appropriately reflect underlying Company performance, individual to Executive Directors for 2021. Details of the proposed operation
and/or functional performance and wider factors. of the incentive plans in 2021 are included in the ‘Statement of
implementation of remuneration policy in 2021’ section. 2021 will
Over the longer term, the Group has demonstrated positive operating be the ninth consecutive year in which the increases generally
results delivering total cumulative adjusted operating profits of offered to executives have been below or close to the bottom of

$18,472 million in the 2018, 2019 and 2020 financial years. Based on the salary increase budget ranges for the broader workforce.
this strong cumulative adjusted operating profit performance over
the period and performance against our sustainability scorecard, In 2020 and 2021, non-financial incentive measures included a shared
the Committee determined that 68.75 per cent of the Prudential annual ESG objective and the Conduct and Diversity elements in the
Long Term Incentive Plan (PLTIP) awards made to Executive Directors Sustainability Scorecard. Looking further ahead, I anticipate that the
in 2018 would vest. These awards will be released to participants Group’s renewed focus on measuring its ESG impact (described in
from April 2021, but remain subject to a two-year post-performance our ESG Report) may result in further ESG measures being used within
holding period. The portion of the awards related to Prudential’s total the Company’s incentive plans. This is something that the Committee
shareholder return (TSR) lapsed as TSR performance was ranked has considered and that I have discussed with shareholders. The
below the median of the peer group. Committee will take advice from the newly established Responsibility
and Sustainability Working Party about how we might develop robust
The total 2020 remuneration or ‘single figure’ for the Group Chief and stretching incentive targets which are meaningfully connected
Executive, Mike Wells, is 11 per cent lower than his total restated 2019 with the Group’s ESG strategy.
‘single figure’, notwithstanding his exceptional leadership and personal
performance. This chiefly reflects the reduction in the value of his I trust that you will find this report a clear account of the way in
2020 bonus and the decrease in the pension contribution from which the Committee has implemented the Directors’ remuneration
25 per cent to 13 per cent of salary. policy during 2020 and of the proposed Directors’ remuneration
arrangements for 2021.
Preparing for the intended separation and divestment of Jackson
As the Group prepares for the proposed separation and divestment
of the Jackson business, the Committee established a set of principles

to underpin decisions on remuneration relating to the separation,
including:
—— Executives should not be advantaged or disadvantaged by the Anthony Nightingale, CMG SBS JP
separation; Chair of the Remuneration Committee
—— The value of outstanding awards and their key terms (vesting dates,
2 March 2021
holding periods, malus and clawback provisions) should be
unaffected;
—— If performance conditions are revised, the new conditions should
be no more or less stretching than those originally attached to
the awards; and
—— Where the Committee has applied discretion, this will be
clearly disclosed.
These principles are consistent with those adopted in respect of

the 2019 demerger of the M&G business and will be the basis for
the decisions which will be taken by the Committee and disclosed

in due course, including the treatment of outstanding share awards.

Prudential plc
175
Annual Report 2020
Our Executive Directors’ remuneration at a glance
What performance means for Executive Directors’ pay

At Prudential, remuneration packages are designed to ensure strong alignment between pay and performance. 2020 saw the Group perform well
against its key operating profit and operating free surplus generation targets in the face of difficult external conditions. This has been reflected in
both the annual bonuses paid and the release of long-term incentive awards, as set out in the Annual report on remuneration.
The value of the performance-related elements of remuneration is added to the fixed packages provided to Executive Directors to calculate
the 2020 ‘single figure’ of total remuneration. The total 2020 ‘single figure’ for the Group Chief Executive is 11 per cent less than the total 2019
‘single figure’. This chiefly reflects the reduction in the value of his 2020 bonus and the decrease in the pension contribution from 25 per cent
to 13 per cent of salary. The values for the current Executive Directors are outlined in the table below:
Fixed pay Variable pay
Pension 2020 2019
2020 and 2020 PLTIP single single
salary benefits bonus vesting figure1 figure2
Executive Director Role ($000) ($000) ($000) ($000) ($000) ($000)
Mark FitzPatrick Group Chief Financial 980 410 1,186 1,405 3,981 4,316
Officer and Chief
Operating Officer
James Turner3 Group Chief Risk and 950 812 1,322 729 3,813 3,146
Compliance Officer
Mike Wells Group Chief Executive 1,481 646 1,355 3,398 6,880 7,671
Notes
1 The 2020 single figure is presented in USD (the Company’s reporting currency).
2 The revised 2019 single figure reflects the actual PLTIP value for awards with performance period ending in 2019, valued using the share price on the date of vesting of £10.21 (£12.60 for Mark
FitzPatrick), and including additional dividends paid. The 2019 single figure has been converted to USD.
3 Mr Turner relocated to Hong Kong on 1 August 2019 and has since been paid in HK dollars, while Messrs Wells and FitzPatrick are paid in sterling. Exchange rate fluctuations will therefore impact
the reported values. Actual amounts paid and the rates of exchange used to convert into a single currency are set out in the Notes to the ‘single figure’ table in the Annual report on remuneration.
Aligning pay and performance in the context of Covid-19

Prudential has a highly resilient business model and remains well placed to support its customers and distribution partners, and deliver profitable
growth for its shareholders. Nevertheless, in light of the challenges presented by Covid-19 and the need for continued restraint in executive
remuneration, in April 2020 Prudential’s Executive Directors proposed the following changes to their remuneration, which were accepted by
the Remuneration Committee:
—— A reduction in the salaries of Executive Directors to the level on 31 December 2019, reversing the 2 per cent salary increase with effect from
1 April 2020.
—— A reduction in the pension benefits of incumbent Executive Directors from 25 per cent to 13 per cent of salary, with effect from 14 May 2020,
a level in line with the employer pension contribution available to the UK workforce.
—— The Group Chief Financial Officer and Chief Operating Officer’s 2020 PLTIP award was maintained at 250 per cent instead of moving to the
level of 300 per cent of salary provided by the policy.
In recognition of the continued focus on pay restraint and after due deliberation, the Committee considered there should be no salary increases
for the Executive Directors for 2021. The factors taken into account by the Committee when determining that the pay freeze should apply
included treatment of all Company stakeholders and pay fairness. 2021 will be the ninth consecutive year in which the increases generally offered
to executives have been below or close to the bottom of the salary increase budget ranges for the broader workforce.
Remuneration packages for 2021, effective 1 January 2021, are set out in detail in the Annual report on remuneration and are summarised below:
Annual Incentive Plan (AIP)
Maximum Bonus PLTIP
2021 salary 2021 salary bonus deferred award
Executive Director Role (Local currency) (USD)1 (% of salary) (% of bonus) (% of salary)2
Mark FitzPatrick Group Chief Financial Officer £760,000 $975,000 175% 40% 250%
and Chief Operating Officer
James Turner Group Chief Risk and HKD7,330,000 $945,000 175% 40% 250%
Compliance Officer
Mike Wells Group Chief Executive £1,149,000 $1,473,000 200% 40% 400%
Notes
1 The exchange rate used to convert pay to USD is the reporting rate during 2020 of 1.2824:1 for GBP and 1:7.7560 for HKD. All salaries are rounded to the nearest $1,000/£1,000 or HKD 10,000.
2 The PLTIP award is subject to a three-year performance period and a holding period which ends on the fifth anniversary of the award.
176 Prudential plc

Summary of the current Directors’ remuneration policy
The current Directors’ remuneration policy was approved at the AGM on 14 May 2020 and is expected to fully apply until the 2023 AGM,
Group overview
when shareholders will be asked to approve a revised Directors’ remuneration policy. The Committee is comfortable that the current Policy
operated as intended and that the overall 2020 remuneration paid to Executive Directors set out below was appropriate.
The pages that follow present a summary of the current Directors’ remuneration policy. The complete policy is available on the Company’s
website at www.prudentialplc.com/investors/governance-and-policies/policies-and-statements.
Strategic report
Summary of the Directors’ remuneration policy
Current key elements Key features of operation How we implemented the policy in 2020
2020
2021
2022
2023
2024
2025
of remuneration of the current policy
Fixed pay Salary and Salaries reviewed annually with increases A 2% salary increase was made with effect
benefits generally aligned with those of the from 1 January 2020 followed by a reduction to
workforce. Benefits reflect individual the 31 December 2019 level from 1 April 2020
Governance
circumstances and are competitive in the
local market Pension contributions for the incumbent
Executive Directors reduced to 13% of salary
Pension Pension contributions and/or a cash from 14 May 2020, in line with the employer
supplement up to 22.5% of salary (20% pension contribution available to the
from 14 May 2021). Executive Directors UK workforce
based in Hong Kong receive this in addition
to contributions into the Hong Kong
Mandatory Provident Fund

Short-term variable pay Cash bonus The maximum opportunity is up to 200% The Group Chief Executive was awarded a
One-year performance of salary maximum bonus opportunity of 200% of salary
assessed on financial,
functional and personal Deferred bonus 40% of bonus is deferred into shares Other Executive Directors were awarded
objectives, set with for three years a maximum opportunity of 175% of salary
reference to business plans Award is subject to malus and clawback 2020 bonuses were paid based on financial
approved by the Board. provisions, including in circumstances and personal objectives and, in the case of
Awards are subject to the where there are non-financial issues and the Group Chief Risk & Compliance Officer,
achievement of a Pillar I personal conduct which falls short of the functional objectives
capital underpin aligned Company’s expectations
with the Hong Kong
Insurance Authority capital
framework
Long-term variable pay Prudential Maximum award under the Plan is 550% of Awards in 2020 were below the plan limits:
Three-year performance Long Term salary although regular awards are below
assessed on a Plan this level — Group Chief Executive: 400% of salary
combination of: (PLTIP) — Other Executive Directors: 250% of salary
Awards are subject to a three-year vesting
— Financial measures; period from date of grant and a further Weight of 2020 PLTIP measures was as
Performance period
two-year holding period from the end of the follows: 50% TSR, 30% Operating return on
Holding period
otal Shareholder Return

—T vesting period average shareholders’ funds (RoE) and 20%
(TSR) relative to sustainability scorecard
international insurance Awards are subject to malus and clawback
peers; and provisions, including in circumstances On vesting, the Committee will review awards
where there are non-financial issues and to ensure that participants do not benefit from
—S
ustainability scorecard windfall gains. The Committee will consider

personal conduct which falls short of the
of capital, conduct and Company’s expectations Prudential’s stretching performance targets,
diversity measures share price performance of Prudential and its
The proportion of awards which will vest peers, the prices of the indices on which
for threshold performance is 20% Prudential is listed and any other factors
deemed relevant
Share ownership guidelines Share Significant in-employment share ownership The post-employment shareholding
ownership guidelines for all Executive Directors requirement is implemented by requiring
guidelines as follows: Executive Directors retiring from the Board
to obtain clearance to deal in the Company’s
— 4 00% of salary for the Group Chief shares during the two years following
Executive their retirement
— 2 50% of salary for other Executive
Directors
Executives have five years from the later
of the date of their appointment, or the date
of an increase in these guidelines, to build
this level of ownership
Executive Directors leaving the Board are
required to hold the lower of their actual

shareholding at their retirement date and
their in-employment share ownership
guideline for a period of two years, subject
to Remuneration Committee discretion

Prudential plc
Summary of the current Directors’ remuneration policy / continued
Principles underlying the policy

When determining the 2020 Directors’ remuneration policy, the Committee had regard to a number of key principles as illustrated below:
Current key elements How we implemented the policy in 2020
of remuneration
Simplicity The Committee is comfortable that the current remuneration structure is simple as it consists of fixed
remuneration, annual and long-term incentives only.
This structure is largely unchanged from our previous policy. Stakeholders are familiar with the operation
of reward arrangements and there is a demonstrable link between performance and reward outcome.
P The Group Risk Committee formally provides advice to the Committee on risk management considerations
to inform decisions over bonus payments and long-term incentive vesting levels.
Risk
The policy provides the Committee with substantial flexibility to adjust incentive outcomes, to reduce or
cancel unvested awards and to reclaim both bonus and long-term incentive payments. The Committee’s
discretionary powers have been formalised and additional malus and clawback triggers for personal
conduct introduced in relation to the AIP and PLTIP to take into account non-financial and individual factors.
The time horizon for our long-term incentives extends for five years, including the holding period on awards.
There are currently significant in-employment share ownership guidelines for all Executive Directors
providing a material connection to the sustained success of the Company. Executives have five years from
the later of the date of their appointment, or the date of an increase in these guidelines, to build this level
of ownership.
A post-employment shareholding requirement for Executive Directors provides continued alignment with
the success of the Company and stakeholder interests even after leaving the Board. This obligation will be
implemented by requiring Executive Directors retiring from the Board to obtain clearance to deal in the
Company’s shares during the two years following their retirement.
P New and existing Executive Directors are offered pension benefits of 13 per cent of salary, aligned with
the employer pension contribution available to the UK workforce.
Alignment to culture
The conduct measure in the PLTIP rewards for appropriate management action and ensures that there are
no significant conduct/culture/governance issues that result in significant capital add-ons or material fines.
The pay arrangements for Executive Directors are aligned with those of the senior leadership team.
The vesting period attached to the long-term incentives reflects the time horizon of the business plan.
The additional post-vesting holding period and post-employment shareholding requirement strengthens
the community of interests between Executives and other stakeholders.
Q The Committee has consulted with the Company’s largest shareholders and their advisers on the current
policy and executive pay decisions before they are implemented.
Clarity
Details on Executive Director pay are clearly set out in the Annual report on remuneration.
Q There are no incentive awards for below threshold performance. Financial targets are set against the
Board-approved Plan.
Proportionality
Under the PLTIP, 20 per cent of each portion of the award will vest for achieving threshold performance.
The Committee approves the termination arrangements of Executive Directors to ensure that there is
no reward for failure.
The PLTIP leaver rules are another safeguard that there is no reward for failure under this plan.
The Committee’s discretionary powers have been formalised and additional malus and clawback triggers
for personal conduct introduced in relation to the AIP and PLTIP to take into account non-financial and
individual factors.
Q The levels of awards under incentive arrangements to Executive Directors at threshold, on-target and
maximum performance points are clearly defined and presented in relevant sections of this report.
Predictability
178 Prudential plc

Annual report on remuneration
The Board has established Audit, Remuneration, Risk and Nomination & Governance Committees as principal standing committees of the Board.
Group overview
These committees form a key element of the Group governance framework.
The operation of the Remuneration Committee

Members
Anthony Nightingale (Chair of the Committee)
Kai Nargolwala
Philip Remnant
Strategic report
Thomas Watjen
Fields Wicker-Miurin
Amy Yip
Individual Directors’ attendance at meetings throughout 2020 is set out in the ‘Governance’ section.
Role and responsibilities
Governance
The role and responsibilities of the Committee are set out in its terms of reference, which are reviewed by the Committee and approved by
the Board on a periodic basis, and which can be found on the Company’s website at www.prudentialplc.com/~/media/Files/P/Prudential-V3/
content-pdf/gremco-tor-at-01-01-2021-v2.pdf. The Committee’s role is to assist the Board in meeting its responsibilities regarding the
determination, implementation and operation of the overall remuneration policy for the Group, including the remuneration of the Chair of
the Board, Executive Directors, Group Executive Committee members and the Company Secretary, as well as overseeing the remuneration
arrangements of other staff within its purview.

The principal responsibilities of the Committee set out In their terms of reference during 2020 were:
—— Approving the operation of performance-related pay schemes operated for the Executive Directors, other members of the Group Executive
Committee and the Company Secretary, and determining the targets and individual payouts under such schemes;
—— Reviewing the operation and awards made under all share plans requiring approval by the Board and/or the Company’s shareholders;
—— Monitoring compliance of the Chair and Executive Directors and other members of the Group Executive Committee with share ownership
guidelines;
—— Reviewing and approving individual packages for the Executive Directors and other members of the Group Executive Committee,
and the fees of the Chair. Similarly, reviewing and approving fees for the Non-executive Directors of the Group’s material subsidiaries;
—— Reviewing workforce remuneration practices and related policies across the Group when setting the remuneration policy for Executive
Directors, as well as the alignment of incentives and awards with culture;
—— Reviewing and approving the content and format of the UK gender pay gap report;
—— Monitoring the remuneration and risk management implications of remuneration of senior executives across the Group and other selected
roles; and
—— Overseeing the implementation of the Group remuneration policy for those roles within scope of the specific arrangements referred to

in the draft Hong Kong IA GWS Framework.

Prudential plc
179
Annual Report 2020
Annual report on remuneration / continued
In 2020, the Committee met five times. Key activities at each meeting are shown in the table below:
Meeting Key activities
February 2020 Approve the 2020 Directors’ remuneration policy and the 2019 Directors’ remuneration report; consider 2019 bonus
awards for Executive Directors; note the personal and functional objectives to be used for the 2020 Annual Incentive
Plan; consider vesting of long-term incentive awards with a performance period ending on 31 December 2019; approve
2020 long-term incentive awards and performance measures; approve the content and format of the UK Gender Pay
Gap Report; note an update on the Board’s review of the Committee’s effectiveness; and review the appointment of the
Committee’s independent adviser and approve the remuneration package of the Company Secretary.
March 2020 Ratify 2019 bonus outcome and 2017 PLTIP vesting level approved at the February meeting in light of audited financial
results.
June 2020 Note shareholder, voting agency and media reaction to the 2020 Directors’ remuneration policy and 2019 Directors’
remuneration report; approve the policy for authorising expense claims submitted by the Group Chief Executive and
Chair; note an update on market trends; note the governance report on the remuneration of staff within the Committee’s
purview; review progress towards share ownership guidelines by the Chair of the Board, Executive Directors and other
Group Executive Committee members; approve the Chair of the Board’s fee; review the Committee’s remit against all
applicable legislative and regulatory requirements, including GWS; discuss the TSR peer group to be used for 2021 and
subsequent PLTIP awards; and discuss the process for the Committee adviser tender.
September 2020 E
Review the workforce remuneration dashboard (including the Group’s response to the Covid pandemic); review
proposed 2021 salaries for Executive Directors; approve the content and process for consulting shareholders on
remuneration proposals; approve amendments to the Committee’s Terms of Reference for recommendation to the
Board; approve remuneration-related proposals and documentation connected with the intended separation of Jackson;
note a report of the Company’s performance against competitors; review proposals for performance measures for 2021
incentive plans; and approve the appointment terms of the Chair of the Board in contemplation of her appointment.
December 2020 Consider shareholder consultation feedback; approve Group Executive Committee members’ 2021 salaries; approve
the financial performance conditions, drawing on advice from the Group Risk Committee, to be attached to 2021
bonuses; review the first draft of the 2020 Annual report on remuneration; note an update on regulatory changes with
implications for remuneration arrangements; approve the criteria to identify staff covered by the Hong Kong IA GWS
Framework for the 2021 performance year and approve changes to the Group Remuneration Policy; review the draft
of the Gender Pay Gap report; review the level of participation in the Company’s all employee share plans and dilution
levels resulting from the Company’s share plans; and approve remuneration-related proposals and documentation
connected with the intended separation of Jackson.
The Chair and the Group Chief Executive attend meetings by invitation. The Committee also had the benefit of advice from:
—— Group Chief Risk and Compliance Officer;

—— Group Chief Financial Officer and Chief Operating Officer;
—— Group Human Resources Director; and
—— Director of Group Reward and Employee Relations.
Individuals are not present when their own remuneration is discussed and the Committee is always careful to manage potential conflicts
of interest when receiving views from Executive Directors or senior management about executive remuneration proposals.
As part of our broader programme of shareholder engagement, the Chair of the Committee held meetings with shareholders and the principle
advisory bodies to discuss decisions taken in respect of the Executive Directors’ remuneration arrangements for 2021. We have had the benefit
of substantive feedback from over 40 per cent of our shareholder register and are pleased that the majority of shareholders and advisory
bodies who provided input were supportive of our proposals and commended the manner in which we conducted the consultation process.
During 2020, Deloitte LLP was the independent adviser to the Committee. Deloitte was appointed by the Committee in 2011 following
a competitive tender process. As part of this process, the Committee considered the services that Deloitte provided to Prudential and its
competitors, as well as other potential conflicts of interest. Deloitte is a member of the Remuneration Consultants’ Group and voluntarily
operates under their code of conduct when providing advice on executive remuneration in the UK. Deloitte regularly meets with the Chair
of the Committee without management present. The Committee is comfortable that the Deloitte engagement partner and team providing
remuneration advice to the Committee do not have connections with Prudential that may impair their independence and objectivity. The total
fees paid to Deloitte for the provision of independent advice to the Committee in 2020 were £75,500 charged on a time and materials basis.
During 2020, Deloitte provided Prudential management advice on remuneration, capital optimisation, digital and technology, taxation, internal
audit, real estate, global mobility and other financial, ESG, risk and regulatory matters. Remuneration advice is provided by an entirely separate
team within Deloitte. The Committee reviewed Deloitte’s appointment in March 2019 and considered Deloitte to be independent. As disclosed
in the 2019 Directors’ remuneration report, the Committee agreed to review the appointment of its independent adviser during 2020. In light
of the restrictions resulting from Covid-19, the tender process commenced in late 2020 and will be completed during 2021.
180 Prudential plc

In addition, management received external advice and data from a number of other providers. This included market data and legal counsel.
Group overview
This advice, and these services, are not considered to be material.
As set out in the Governance section of this Annual report, in 2020 the Board conducted an external valuation of its effectiveness which included
an assessment of the Remuneration Committee. The Committee was found to be functioning effectively. During the year, the Company has
acted in a manner that is consistent with the appropriate provisions of the UK Corporate Governance Code regarding Directors’ remuneration.
Table of 2020 Executive Director total remuneration (the ‘single figure’)
Strategic report
Total 2020
Total 2020 Total 2020 remuneration
2020 2020 2020 2020 fixed Total 2020 remuneration the ‘single
2020 taxable total PLTIP pension remuneration~ variable the ‘single figure’ in
$000s salary benefits* bonus† releases‡ benefits § remuneration~ figure’^ GBP (£000)#
Mark FitzPatrick 980 239 1,186 1,405 171 1,390 2,591 3,981 3,104
James Turner1 950 643 1,322 729 169 1,762 2,051 3,813 2,973
Mike Wells 1,481 388 1,355 3,398 258 2,127 4,753 6,880 5,364
Governance
Total 3,411 1,270 3,863 5,532 598 5,279 9,395 14,674 11,441
* Benefits include (where provided) the cost of providing the use of a car and driver, medical insurance, security arrangements, relocation/expatriate benefits and shares awarded due to participation
in the Share Incentive Plan (SIP).
† The total value of the bonus, comprising both the 60 per cent delivered in cash and 40 per cent bonus deferred into Prudential plc shares for three years. The deferred part of the bonus is subject
to malus and clawback in accordance with the malus and clawback policies, but no further performance conditions.
‡ In line with the regulations, the estimated value of the 2020 PLTIP releases for all Executive Directors has been calculated based on the average share price over the last three months of 2020 (£11.95)
and includes the accumulated dividends delivered in the form of shares. The Committee’s approach to determining the level of vesting for this award is set out in the ‘Remuneration in respect of

performance periods ending in 2020’ section. The number of Prudential plc shares under award have been adjusted in line with the approach set out in the section on ‘Remuneration decisions taken
in relation to the demerger’ of the 2019 Directors’ remuneration report. The actual value of vesting PLTIP awards, based on the share price on the date awards are released, will be shown in the 2021
report. Due to the share price depreciation over the vesting period, the estimated value per share of the 2018 PLTIP awards is 32% lower than the value per share at grant. As a result, no value
is attributable to share price appreciation. Therefore, no adjustment to vesting levels has been proposed as a result of the share price appreciation.
§ 2020 pension benefits include cash supplements for pension purposes and contributions into defined contribution schemes as outlined in the ‘pension benefit entitlement’ section.
~ Total fixed remuneration includes salary, taxable benefits and pension benefits. Total variable remuneration includes total bonus and PLTIP releases.
^ Each remuneration element is rounded to the nearest $1,000 and totals are the sum of these rounded figures. Total remuneration is calculated using the methodology prescribed by Schedule 8 of
Statutory Instrument 2013 No. 1981 – The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. Total 2020 remuneration has been converted
to US dollars using the exchange rate of 1.2824:1 for GBP and 1:7.7560 for HKD. Exchange rate fluctuations will therefore impact the reported value.
# Total 2020 remuneration has been converted to GBP using the exchange rate of 1 GBP to 9.9461 HKD.
Note
1 Mr Turner relocated to Hong Kong on 1 August 2019 and has since been paid in HK dollars.
Table of 2019 Executive Director total remuneration (the ‘single figure’)
We note that this table was presented in sterling in the 2019 Annual Report. All amounts have been restated to reflect the transition to US dollars
as the main reporting currency.
Total 2019
Total 2019 remuneration
2019 2019 2019 2019 2019 Total 2019 Total 2019 remuneration the ‘single
2019 taxable total LTIP pension Other fixed variable the ‘single figure’
$000s salary benefits* bonus† releases‡ benefits§ payments¶ remuneration~ remuneration~ figure’^ in GBP (£000)#
Michael Falcon1,2,3 $303 $161 $1,566 $0 $75 $6,319 $539 $7,885 $8,424 £6,599
Mark FitzPatrick $970 $190 $1,633 $1,280 $243 $0 $1,403 $2,913 $4,316 £3,381

John Foley2,4 $383 $146 $0 $0 $96 $0 $625 $0 $625 £489
Nic Nicandrou2,3,5 $525 $180 $902 $895 $131 $0 $836 $1,797 $2,633 £2,063
James Turner3,6 $865 $431 $1,343 $291 $216 $0 $1,512 $1,634 $3,146 £2,465
Mike Wells $1,467 $288 $2,804 $2,746 $366 $0 $2,121 $5,550 $7,671 £6,010
Total $4,513 $1,396 $8,248 $5,212 $1,127 $6,319 $7,036 $19,779 $26,815 £21,007
* Benefits include (where provided) the cost of providing the use of a car and driver, medical insurance, security arrangements, relocation/expatriate benefits and shares awarded due to participation
in the Share Incentive Plan (SIP).
† The total value of the bonus, comprising both the 60 per cent delivered in cash and 40 per cent bonus deferred into Prudential plc shares or ADRs for three years. The deferred part of the bonus
is subject to malus and clawback in accordance with the malus and clawback policies, but no further performance conditions.
‡ The value of the 2019 PLTIP releases for all Executive Directors has been calculated using the share price at vesting of £10.21 (£12.60 for Mark FitzPatrick, who was granted the 2017 PLTIP award
in August 2017, on appointment) and includes the accumulated dividends delivered in the form of shares/ADRs. The number of Prudential plc shares/ADRs under award have been adjusted in line
with the approach set out in the section on ‘Remuneration decisions taken in relation to the demerger’ in the 2019 Annual Report. Due to the share price depreciation over the vesting period,
the value per share of the 2017 PLTIP awards is 39% lower (30% lower for Mark FitzPatrick) than the value per share at grant. As a result, no value is attributable to share price appreciation. Therefore,
no adjustment to vesting levels has been proposed as a result of the share price appreciation. Awards were granted using a share/ADR price of £16.75/US$42.12 for all Executive Directors other
than Mark FitzPatrick and £18.005 for Mark FitzPatrick in 2017.
§ 2019 pension benefits include cash supplements for pension purposes and contributions into defined contribution schemes as outlined in the ‘pension benefit entitlement’ section of the 2019
Directors’ remuneration report.

¶ The value of Mr Falcon’s buy-out award has been included in its entirety as it was granted without performance conditions during his period of Board service. The award vests in line with the original
vesting schedule with the final tranche vesting 30 days commencing on the date of release of Prudential plc’s results for 2020.
~ Total fixed remuneration includes salary, taxable benefits and pension benefits. Total variable remuneration includes total bonus, PLTIP releases and other payments.
^ Each remuneration element is rounded to the nearest $1,000 and totals are the sum of these rounded figures. Total remuneration is calculated using the methodology prescribed by Schedule 8 of
Statutory Instrument 2013 No. 1981 – The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. Total 2019 remuneration has been converted
to US dollars using the exchange rate of 1.2765 for GBP and 7.8351 for HKD.
# Total 2019 remuneration has been converted to GBP using the exchange rate of 1 GBP to 10.0015 HKD and 1 GBP to 1.2765 USD.

Prudential plc
Notes
1 Michael Falcon was appointed to the Board on 7 January 2019 as Chairman and Chief Executive Officer, Jackson Holdings LLC.
2 Michael Falcon, Nic Nicandrou and John Foley stepped down from the Board on 16 May 2019. The remuneration above was paid in respect of their service as Executive Directors. While salary
and certain monthly paid benefits reflect what was actually delivered during the period, other benefits, bonus, LTIP releases and pension benefits are pro-rata for the period. The 2019 LTIP
release for Nic Nicandrou has been pro-rated for 28.5 months of the LTIP’s 36-month performance period to reflect his time as an Executive Director during the LTIP’s performance period.
3 Michael Falcon, Nic Nicandrou and James Turner are paid in their local currency and exchange rate fluctuations will therefore impact the reported values.
4 John Foley stepped down from the Board on 16 May 2019. He subsequently left the Company on the demerger of M&G plc from Prudential plc on 21 October 2019. As an Executive Director
of Prudential plc during 2019 Mr Foley was eligible to receive a 2019 bonus award of up to 180% of salary. Since transferring to M&G plc it was agreed with M&G plc that his 2019 bonus would
be assessed and determined by the M&G plc Remuneration Committee and would be paid by M&G plc. No 2019 bonus award was paid to Mr Foley by Prudential plc.
Mr Foley’s 2017-2019 PLTIP award was exchanged for an equivalent award over M&G plc shares. Under the terms of the Demerger Agreement this replacement award should be of an
equivalent value; with the same release schedule; subject to equivalent malus and clawback provisions and subject to performance conditions which are relevant to M&G plc and which are no
more or less onerous than those which originally applied.
The amount of any bonus payment (including any deferred component) to John Foley in respect of 2019 (including that awarded for performance and service during the pre-demerger period)
and the vesting of Mr Foley’s replacement 2017-2019 long-term incentive award were disclosed by M&G plc and described in the M&G plc Directors’ remuneration report as set out in the M&G
plc 2019 Annual Report.
5 To facilitate Nic Nicandrou’s relocation to Hong Kong, benefits included £95,000 to cover accommodation.
6 James Turner relocated to Hong Kong on 1 August 2019 and since has been paid in HK dollars; 2019 benefits included £160,000 to cover accommodation.
Remuneration in respect of performance in 2020

Base salary
R
Executive Directors’ salaries were reviewed in 2019 with changes effective from 1 January 2020. When the Committee took these decisions
it considered:
—— The salary increase budgets for other employees, which vary across our business units, reflecting local market conditions;
—— The performance and experience of each Executive Director;
—— The relative size of each Executive Director’s role; and
—— The performance of the Group.
After careful consideration by the Committee, all Executive Directors received a salary increase of 2 per cent. The 2020 salary increase budgets
for other employees across our business units were between 2.5 per cent and 5.1 per cent.
To provide context for the market review, information was also drawn from the following market reference points:
Executive Role Benchmarks used to assess remuneration
Mark FitzPatrick Group Chief Financial Officer and Chief Operating Officer FTSE 40
International insurance companies
James Turner Group Chief Risk and Compliance Officer FTSE 40
International insurance and financial services
companies with operations in Asia
Mike Wells Group Chief Executive FTSE 40
International insurance companies
As announced by the Company in April 2020, after careful consideration by the Committee, salaries for Executive Directors were reduced
to December 2019 levels from 1 April 2020 in light of the Covid-19 pandemic and its impact on the communities Prudential serves globally.
As a result, Executive Directors received the following salaries in 2020:

2020 salary 2020 salary 2020 salary 2020 salary
(local currency) (USD)1 from (local currency) (USD)1 from
Executive Director from 1 January 2020 1 January 2020 from 1 April 2020 1 April 2020
Mark FitzPatrick, Group Chief Financial Officer and Chief Operating Officer £776,000 $995,000 £760,000 $975,000
James Turner1, Group Chief Risk and Compliance Officer HKD 7,480,000 $964,000 HKD 7,330,000 $945,000
Mike Wells, Group Chief Executive £1,172,000 $1,503,000 £1,149,000 $1,473,000
Note
1 2020 salaries were converted to US dollars using an exchange rate of 1 GBP to 1.2824 US Dollar and the exchange rate of 1 USD to 7.7560 HKD. All salaries are rounded to the nearest
$1,000/£1,000 or HKD 10,000.
182 Prudential plc

Pension benefit entitlements
Group overview
Pension benefit arrangements which became effective on 14 May 2020 are set out in the table below.
Executive Director 2020 pension benefit1 Life assurance provision
James Turner Pension supplement in lieu of pension of 13 per cent Eight times salary.
of salary and a HKD18,000 employer payment to the
Hong Kong Mandatory Provident Fund.
Strategic report
Mark FitzPatrick and Mike Wells Pension supplement in lieu of pension of 13 per cent Four times salary plus an additional four times
of salary. salary dependants’ pension.
Note
1 Pension contributions for all incumbent Executive Directors were reduced from 25% of salary to 13% of salary from 14 May 2020, in line with the employer pension contribution available
to the UK workforce. The table above shows the effective 2020 pension contribution rates applicable from 14 May 2020.
Annual bonus outcomes for 2020
Governance
Target setting
Financial AIP metrics comprise 80 per cent of the bonus opportunity for all Executive Directors apart from the Group Chief Risk and Compliance
Officer, for whom this accounts for 40 per cent of the bonus opportunity. The performance ranges are based on the annual business plans
approved by the Board and reflect the ambitions of the Group, in the context of anticipated market conditions. The financial element of Executive
Directors’ 2020 bonuses was determined by the achievement of four Group measures, namely adjusted operating profit, operating free surplus
generation, EEV new business profit and cash flow, which are aligned to the Group’s growth and cash generation focus.
Personal objectives comprise 20 per cent of the bonus opportunity for all Executive Directors. These objectives were established at the start of

the year and reflect the Company’s Strategic Priorities set by the Board. For 2020, Executive Directors had one shared strategic objective linked
to developing plans to determine the Group’s exposure to climate-related risks and opportunities.
Functional objectives account for the remaining 40 per cent of the Group Chief Risk and Compliance Officer’s bonus opportunity. These are
based on the Group Risk Plan and are developed with input from the Chair of the Group Risk Committee.
AIP payments are subject to meeting minimum capital thresholds which are aligned to the Group risk framework and appetites (as adjusted for
any Group Risk Committee approved counter-cyclical buffers), as described in the Group Chief Risk and Compliance Officer’s report section
of this report.
The Committee seeks advice from the Group Risk Committee on risk management considerations to inform decisions about remuneration
architecture and performance measures to ensure that risk management, culture and conduct are appropriately reflected in the design and
operation of Executive Directors’ remuneration.
Performance assessment
The Committee determines the overall value of the bonus, taking account of the inputs described above and any other factors which it considers
relevant. The table below illustrates the weighting of performance measures for 2020 and the level of achievement under the AIP. As set out
earlier in this report, the Committee exercised discretion to reduce the bonus outcome for Mike Wells by 30 per cent:
Weighting of measures Achievement against performance measures
(% of total bonus opportunity) (% of maximum for each component)

Group Group 2020 AIP outcome1
financial Functional Personal financial Functional Personal (% of total bonus
Executive Director measures objectives objectives measures objectives objectives opportunity)
Mark FitzPatrick 80% – 20% 63.4% – 94.0% 69.5%

James Turner 40% 40% 20% 63.4% 90.0% 92.9% 79.9%
Mike Wells 80% – 20% 63.4% – 74.8% 65.7% reduced to 46.0%
Note
1 All bonus awards are subject to 40 per cent deferral for three years and the deferred bonus will be paid in Prudential plc shares or ADRs.

Prudential plc
Financial performance
The Committee reviewed performance against the performance ranges at its meeting in February 2021. Group adjusted operating profit was
approaching the stretch target. Group free surplus generation exceeded the stretching target established by the Board. Below threshold Group
cash flow reflects the lower level of remittances received from the business units. Life new business profit achievement was below threshold
reflecting the negative impact of Covid-19.
The Committee considered a report from the Group Chief Risk and Compliance Officer which had been approved by the Group Risk Committee.
This report confirmed that the 2020 results were achieved within the Group’s and business units’ risk framework and appetite. The Group Chief
Risk and Compliance Officer also considered the effectiveness of risk management and internal controls, and specific actions taken to mitigate
risks, particularly where these may be at the expense of profits or sales. The report also confirmed that the Group met minimum capital
thresholds which were aligned to the Group risk framework and appetites. The Committee took into account this advice when determining
AIP outcomes for Executive Directors.
The level of performance required for threshold, plan and maximum payment against the Group’s 2020 AIP financial measures and the results
achieved are set out below:
Weighting Threshold Target Stretch target Achievement
2020 AIP measure ($m) ($m) ($m) ($m)
Group adjusted operating profit 35% 4,602 5,113 5,625 5,507

Group operating free surplus generated 30% 2,955 3,284 3,612 3,905
Group cash flow 20% 104 302 434 (478)
Group EEV new business profit 15% 3,141 4,161 4,535 2,802
Personal performance
P
As set out in our Directors’ remuneration policy, a proportion of the annual bonus for each Executive Director is based on the achievement
of personal objectives including:
—— The executive meeting their individual conduct and customer measures;

—— The executive’s contribution to Group strategy as a member of the Board; and
—— Specific goals related to the function for which they are responsible and progress on major projects.
At the end of the year, the Committee considered the performance of all executives against objectives established at the start of the year. At its
meeting in February 2021, it concluded that there had been a high level of performance against these 2020 objectives. All executives met their
individual conduct measures and each Executive Director made a significant contribution to the achievement of Group strategy during 2020.
The below summarises performance against the personal objectives and strategic priorities for the current Executive Directors:
Shared strategic objective

2020 key strategic objective Achievement Performance relative to target
Develop plans to determine the —— Identified potential metrics to measure carbon exposures and Above the stretch target
Group’s exposure to climate- investment portfolios within the scope of carbon footprinting and
related risks and opportunities. used scenario modelling to refine the understanding of the nature
of the potential climate risks.
—— Invested in digital solutions to support our customers and broader
society to adapt to climate change.
—— Developed ESG framework, aligned with Group strategy making
health and financial security accessible, stewarding the human
impacts of climate change and building social capital.
184 Prudential plc

Mark FitzPatrick, Group Chief Financial Officer and Chief Operating Officer  
Group overview
2020 key strategic deliverables Achievement Performance relative to target
Advance Project Scott, —— Developed and led the financial planning and corporate Above the stretch target
developing and executing finance plans for the execution of the separation of Jackson.
strategic routes for Jackson. —— Led the determination of the preferred route for separation
and created optionality for the pivot to alternative routes.
—— Led the execution of the preparation of the financial processes
Strategic report
supporting execution including the management of multi-
jurisdictional stakeholder documentation.
Lead strategic communications —— Raised $1 billion of Group debt in three days of global marketing. Above target
between Prudential and the debt This was completed virtually and it was the first deal in the US
and equity markets. debt market for a number of years.
—— Managed and co-ordinated virtual results, ad hoc Webex and
conference call events in 2020 including the $27.6 billion US
Governance
reinsurance agreement alongside $500 million equity investment
by Athene Holding Ltd into the US business.
Deliver reporting changes —— Reviewed the requirements of the new standard on insurance Above the stretch target
including IFRS 17, LCSM accounting IFRS 17, ‘Insurance Contracts’, including targeted
and GWS. amendments to this standard issued in June 2020.
—— Implemented the local capital summation method (LCSM) that

has been agreed with the Hong Kong Insurance Authority (IA)
to determine Group regulatory capital requirements until the
Group-wide Supervision (GWS) Framework is effective in 2021.
Recognising Mr FitzPatrick’s very strong performance against both his individual and shared personal objectives during 2020, the Committee
judged that 19 per cent of a maximum of 20 per cent attributable to personal objectives was appropriate.
James Turner, Group Chief Risk and Compliance Officer

2020 key objectives Achievement Performance relative to target
Lead strategic communications —— Worked closely with the HKIA and industry peers in support of Above the stretch target
between Prudential and key development of GWS legislation and associated guidelines, with
regulators, ensuring constructive the GWS Bill passed by the HK Legislative Council (HK LegCo)
and open relationships. in July 2020.
—— Developed a strong relationship with the HKIA in its first year acting
Oversee the internal Regulatory as Group-wide Regulatory Supervisor.
Communication Policy which sets —— Regular and transparent communication with the HKIA on the
out the values and behaviours Group’s response and positions versus risk appetite linked to the
to ensure that communication is impact of Covid-19.
appropriate, complete and timely. —— Proactive engagement with the HKIA & DIFS on developments in

the Group’s strategy, particularly in relation to the progress towards
Maintain constructive an independent US business.
engagement and relationships —— Provided insight to regulators on key Group risks and associated
with industry peers. developments as part of the annual College of Supervisors.
—— Focused on exploratory discussions with HKIA and peers on
HK RBC capital regime given economic capital focus.
Develop the Risk & Compliance —— Led realignment of function towards Group-wide supervisor, Above target
leadership team and key talent and operational centres to support business strategy, despite
to enable strong succession significant headwinds linked to the pandemic.
planning/talent pipeline. —— Monitored the implementation of Group-wide regulatory capital
rule changes and risks arising including Jackson for early adoption
Further develop close working of NAIC rules for VA business and PCA for implementation
relationships and strong lines of LCSM.
of communication within the
Group-wide risk and compliance
management structure to operate
as one team, to most effectively

support prompt identification
and oversight of Group-wide
risks and issues.
Recognising Mr Turner’s very strong performance against both his individual and shared personal objectives during 2020, the Committee
judged that 19 per cent of a maximum of 20 per cent attributable to personal objectives was appropriate.

Prudential plc
185
Annual Report 2020
Mike Wells, Group Chief Executive

2020 key objectives Achievement Performance relative to target
Advance Project Scott, —— Pursued numerous explorations for all options for the separation Above the stretch target
developing and executing during the year with several third parties following expressions
strategic routes for Jackson. of interest.
—— Secured and completed reinsurance and primary capital
transactions with Athene.
—— Announced full separation intent for Jackson in August 2020.
—— Announced the Jackson demerger which will take place in the
second quarter of 2021 and will accelerate the separation.
—— Secured the appointment of high calibre Chair of JFI and monitored
the creation of an equity story for Jackson that supported value
creation through the demerger.
Develop and implement the —— Launched several initiatives (eg Pru Connect, flexible working Above the stretch target
Group’s approach to talent arrangements) to support employees’ wellbeing and mental health.
management, Group culture —— Supported employees through both the pandemic and the
and diversity & inclusion. post-demerger restructuring activity taking place in Jackson and
Angel Court, communicating regularly and clearly and prioritising
the fair treatment of all our employees.
—— Recruited global lead on D&I and formed Global D&I Council
established to empower employees and create a sense of belonging
by respecting and appreciating differences.
—— Organised an array of remote events including the PCA Virtual
Regional Conference, staff Townhalls and meetings of the NABU
Diversity & Inclusion Council and the Global D&I Council.
—— Refreshed Company values as part of the work on corporate
purpose.
—— Supported the efforts of the two Non-executive Directors,
Kai Nargolwala for Asia and Africa and Tom Watjen for the US
and the UK in their ongoing activity in their roles as conduits
between employees and the Board.
Build, deploy and leverage —— Led the development by the Executive team of the Group’s digital Above the stretch target
digital enablers for customer proposition, specifically the digital health app, Pulse by Prudential.
proposition, operational This has enabled the Company to provide its customers a greater
efficiency and distribution; range of services, including through partnerships with others.
develop regional models —— Delivered and executed increased engagement with policy-makers
to acquire new customers, on health systems, health financing and the role of technology
leveraging ‘Pulse’ platform. across the Group’s markets to support and promote the roll out
of Pulse.
—— Identified and drove the opportunity to accelerate and introduce
a range of innovative measures (eg dedicated hotline, fast-track
processing of claims, policy premium grace period extensions)
to both deal with the short impact of the virus and provide the
means for the customers to emerge in a stronger position once
the effect of the virus has subsided.
Make progress towards business —— Focused considerable effort and application of relationship At target level
expansion in China and tackle management in negotiating potential changes in the ownership
strategic opportunities in India. of the joint venture operations in China and India.
—— Sought and initiated relationship with the incoming new Chairman
of CITIC to continue the dialogue despite Covid travel restrictions.
—— Explored potential business combinations with financial advisers
and Principals.
Recognising Mr Wells’s very strong performance against both his individual and shared personal objectives during 2020, the Committee judged
that 15 per cent of a maximum of 20 per cent attributable to personal objectives was appropriate.
186 Prudential plc

Functional performance
Group overview
The Group Chief Executive and the Chair of the Group Risk Committee undertakes the assessment of performance against functional objectives
for the Group Chief Risk and Compliance Officer. 2020 achievement is summarised below:
Summary of 2020 functional objectives Achievement Performance relative to target
Group-wide Risk & Compliance —— Strong progress made in business readiness to Above target
Developments implement HKIA GWS requirements in advance of
Oversee implementation of HKIA GWS legislation becoming effective and Group designation
Strategic report
requirements within the Group, including in 2021.
embedding of the defined statutory capital —— Project to enhance the current Economic Capital
metric (LCSM) and development of the framework to deliver the next generation of models for
economic capital model (GIECA). the Group, fully reflecting the new shape of the Group
and GIECA requirements has been initiated and is
Target enhancements to the non-financial making good progress.
risk framework to reflect changing external —— Significant focus on non-financial risk framework
and internal risk drivers. within the function and by the Group Risk Committee.
Governance
—— Framework enhancements delivered in respect of
Customer-related Conduct, AI ethics principles,
operational resilience, whistleblowing arrangements
and metrics to support the Group’s understanding
of climate-related transition risk.
Risk & Compliance Oversight —— Convened and chaired the Incident Group to monitor Above target

Define and provide oversight of the Group’s and manage the impact to the Group’s capital and
adherence to the framework of the Group- liquidity positions resulting from Covid-19.
wide Risk & Compliance policies, risk appetite —— Provided insight on both principal and emerging risks.
and limits. Ensure that the Risk framework, In addition to risks related to Covid-19, this included
policies and GIECA model are fit for purpose focus on evolving geo-political risks and the impact
and meet regulatory expectations. of a long-term low interest rate environment.
—— Retained focus on managing the risks of the ongoing
Ensure the business is sufficiently informed business, performing defined role in providing risk
on external risk perspectives and challenged, management support and oversight, as well as objective
where appropriate to take effective actions challenge to ensure the Group remained within its risk
and decisions. appetite. Delivered disclosures and key regulatory
outputs such as the ORSA and Recovery plan.
Provide Non-executive and Executive —— Provided clear and concise risk analysis and opinions
management information and insight to in support of Board decisions including, the Athene
fully support members in meeting their equity investment and reinsurance transaction, and the
responsibilities and duties set out in their Group’s strategy and path to an independent Jackson.
Terms of Reference in respect of risk
management.
Deliver key regulatory outputs and risk

disclosures.

Support the identification and management
of emerging and top risks by the business,
including deep dives into areas identified
in the Top Risk process (eg interest rate
management, Jackson financial risk oversight,
speak out).
Provide risk opinions on all strategic initiatives

to support Executive and Non-executive
Management decision making, specifically:
—— Provide clear, timely risk opinions in

support of the Jackson strategic objective
to ‘create and leverage optionality with
Jackson’s post-demerger ownership
structure; including continuing to evaluate
and execute upon third-party and or

public capital alternatives’.
—— Provide clear, timely risk opinions in

support of PCA strategic objectives.

Prudential plc
187
Annual Report 2020
Summary of 2020 functional objectives Achievement Performance relative to target
Operating model Implementation —— Despite headwinds created by the pandemic, Above target
Operationalise a Group-wide function for the completed significant operational and structural
International business, improving efficiency changes to align the Group-wide function more closely
and effectiveness through collaboration and with the lead regulator and operational businesses.
coordination. Successfully manage the move —— Successfully transitioned to new ways of working
of key team leadership and talent to further across multiple time zones providing strong
strengthen the HK based team. stewardship and enhanced monitoring of risks
during the most acute phases of the pandemic.
Maintain the capability, effectiveness and
the sustainable bench-strength of the Risk
& Compliance function, ensuring that it is
controlled effectively and complies with
the relevant requirements of the applicable
regulatory environments.
In recognition of James Turner’s very strong performance against his functional objectives during 2020, the Committee judged that 36 per cent
of a maximum of 40 per cent attributable to functional objectives was appropriate.
2020 bonus awards

The Committee determined the 2020 AIP awards below on the basis of the performance of the Group and of the individual executives. In making
these decisions, it reflected on factors including:
—— Adherence to the behavioural, conduct and risk management considerations; and

—— The experience of the Group’s stakeholders during 2020. These considerations included the ways in which the Company supported its
customers, people, suppliers and communities during the pandemic. Specifically, the Committee noted that no employees were furloughed
or made redundant as a result of the pandemic. Our remuneration programmes operated as usual during the pandemic period with medical
insurance coverage extended to offer free Covid testing where necessary. Employees received their regular remuneration during any periods
of shielding or self-isolation. Prudential repaid in full government support inadvertently received in one location.
As set out earlier in this report, the Committee exercised discretion to reduce the 2020 bonus outcome for Mike Wells by 30 per cent.
2020
bonus award
Actual 2020 (including
Maximum AIP award cash and
2020 AIP (% of maximum deferred
Executive Director Role 2020 salary1 (% of salary) opportunity) elements)
Mark FitzPatrick Group Chief Financial Officer $975,000 175% 69.5% $1,185,547
and Chief Operating Officer
James Turner Group Chief Risk and Compliance Officer $945,000 175% 79.9% $1,321,909
Mike Wells Group Chief Executive $1,473,000 200% 46.0% $1,354,601
Notes
1 Salaries are converted to US dollars using an exchange rate of 1.2824 for GBP and 7.7560 for HKD.
2 40 per cent of all bonus awards are deferred into shares for three years.
188 Prudential plc

Long-term incentives vesting in respect of performance to 31 December 2020
Group overview
Prudential Long Term Incentive Plan (PLTIP)
Target setting
Our long-term incentive plans have stretching performance conditions that are aligned to the strategic priorities of the Group. In 2018,
all Executive Directors were granted awards under the PLTIP. In determining the financial targets the Committee had regard to the stretching
nature of the three-year Business Plan for adjusted operating profit and capital positions as set by the Board. Further, in setting the conduct and
diversity targets under the sustainability scorecard, the Committee considered input from Group-wide Internal Audit and the Group Chief Risk
and Compliance Officer on conduct risk for the conduct measure and had regard to the Company’s commitment under the Women in Finance
Strategic report
Charter for the diversity measure.
The weightings of the measures are detailed in the table below:

Weighting of measures
Sustainability Scorecard Vesting (% of maximum)
Adjusted ECap
operating operating
Governance
Group Solvency capital Threshold Stretch
Executive Director Group TSR1 profit2 measure3 generation4 Conduct5 Diversity6 performance performance
Mark FitzPatrick 25% 50% 6.25% 6.25% 6.25% 6.25% 25% 100%
James Turner7 50% 20% 7.50% 7.50% 7.50% 7.50% 25% 100%
Mike Wells 25% 50% 6.25% 6.25% 6.25% 6.25% 25% 100%
Notes
1 Group TSR is measured on a ranked basis over three years relative to peers.

2 Adjusted operating profit is measured on a cumulative basis over three years.
3 At the time of award a Solvency II operating capital generation measure was used in the sustainability scorecard. As set out in the ‘Remuneration decisions taken in relation to the demerger’
section of the 2019 Directors’ remuneration report, Solvency II operating capital generation was replaced with Group free surplus generation from 1 July 2019 since Prudential ceased to be
subject to Solvency II capital requirements and no longer calculated or disclosed a Solvency II position following the demerger of the M&G business and the change in the Company’s Group-wide
supervisor.
4 This is cumulative three-year ECap Group operating capital generation, less cost of capital (based on the capital position at the start of the performance period).
5 Conduct is assessed through appropriate management action, ensuring there are no significant conduct/culture/governance issues that could result in significant capital add-ons or material fines.
6 Diversity is measured as the percentage of the Leadership Team that is female at the end of 2020. The target for this metric has been based on progress towards the goal that the Company set
when it signed the Women in Finance Charter, where 30 per cent of our Leadership Team should be female by the end of 2021.
7 James Turner was granted this award as the Group Chief Risk Officer. Therefore, his award is linked to performance measures with different weightings, as set out above, in line with the
requirements of Solvency II.
As discussed in the section on ‘Remuneration decisions taken in relation to the demerger’ of the 2019 Directors’ remuneration report,
the Committee adjusted the performance conditions attached to the 2018 PLTIP awards in order to take account of the demerger, ensuring that
the revised performance conditions are no more or less stretching than those originally attached to the awards. The performance assessment
provided below and overleaf is based on these adjusted targets.
Performance assessment
In deciding the proportion of the awards to be released, the Committee considered actual financial results against performance targets.
The Committee also reviewed underlying Company performance to ensure vesting levels were appropriate, including an assessment of whether
results were achieved within the Group’s risk framework and appetite. Finally, overall vesting levels were reviewed to ensure that levels of reward
provided remain reflective of the Company’s performance in the challenging circumstances. The Directors’ remuneration policy summary
section contains further details of the design of Prudential’s long-term incentive plans.

Group adjusted operating profit performance
Under the adjusted operating profit measure, 25 per cent of the 2018 awards vest for meeting the threshold adjusted operating profit target set at
the start of the performance period, increasing to full vesting for performance at or above the stretch level. The table below illustrates the cumulative
performance achieved over 2018 to 2020 compared to the adjusted Group targets which exclude M&G plc from the point of demerger:
2018-20 adjusted cumulative targets Vesting under
2018-20 the adjusted
cumulative operating
Group Threshold Plan Maximum achievement profit element
Adjusted operating profit $14,216m $15,795m $17,375m $18,472m 100%
The cumulative adjusted operating profit target established for the PLTIP is expressed using exchange rates consistent with the reported disclosures.

Prudential plc
TSR performance
Under the Group TSR measure attached to 2018 PLTIP awards, 25 per cent of the award vests for TSR at the median of the peer group increasing
to full vesting for performance within the upper quartile. TSR is measured on a local currency basis since this has the benefit of simplicity and
directness of comparison. No adjustments were made to the peer group used for 2018 awards in respect of the demerger. The peer group for
the 2018 awards is set out below:
Aegon AIA AIG Allianz
Aviva AXA Generali Legal & General
Manulife MetLife Old Mutual Prudential Financial
Standard Life Sun Life Financial Zurich Insurance Group
Following the demerger of Quilter from Old Mutual and Old Mutual’s delisting from the FTSE on 26 June 2018, the Committee determined
that Old Mutual be retained as a TSR peer with no adjustment to its performance during the period prior to its demerger and delisting, and that
Old Mutual’s TSR performance from the date of its demerger and delisting would track an index of the peers (excluding Prudential plc) for all
outstanding PLTIP awards.
Prudential’s TSR performance during the performance period (1 January 2018 to 31 December 2020) was ranked below the median of the peer
group. The portion of the awards related to TSR will therefore lapse.
Sustainability scorecard performance

Capital measure – Group Solvency II operating capital generation/Group operating free surplus generation
Under the Group Solvency II operating capital generation and Group operating free surplus generation measure, performance below threshold
results in nil vesting, 25 per cent of the award vests for achieving threshold, increasing to full vesting for performance above the stretch level.
The weighted average of the adjusted Group Solvency II operating capital generation from 1 January 2018 to 30 June 2019 (target $7.0 billion)
and the Group operating free surplus generation from 1 July 2019 to 31 December 2020 (target $5.6 billion), which excludes M&G plc
performance from the point of demerger, met the cumulative stretch target and therefore generated 100 per cent vesting on this element.
Capital measure – Group ECap operating capital generation

Under the Group ECap operating capital generation measure, performance below threshold results in nil vesting, 25 per cent of the award vests
for achieving threshold, increasing to full vesting for performance above the stretch level. The adjusted cumulative Group ECap operating capital
generation was below the target of $6.8 billion (which excludes M&G plc from the point of demerger) and therefore generated a 0 per cent
vesting outcome on this element of the PLTIP.
Details of cumulative achievement under the capital measures have not been disclosed as the Committee considers that these are commercially
sensitive and would put the Company at a disadvantage compared to its competitors. The Committee will keep this disclosure policy under
review based on whether, in its view, disclosure would compromise the Company’s competitive position.
Conduct assessment
Under the conduct measure, performance below threshold results in nil vesting, 25 per cent of the award vests for partial achievement of the
Group’s expectations, increasing to full vesting for achieving the Group’s expectations. During the performance period there were no conduct,
culture or governance issues that resulted in significant capital add-ons or material fines so 100 per cent of this element of the PLTIP vested.
Diversity assessment
Under the diversity measure, performance below threshold results in nil vesting, 25 per cent of the award vests for achievement of threshold
diversity target (27 per cent of Leadership Team being female) increasing to full vesting for achieving the stretch diversity target (29 per cent
of Leadership Team being female). On 31 December 2020, 32.5 per cent of our Leadership Team was female. Since this was above the
29 per cent level required for full vesting, the portion of the awards related to diversity that therefore vested was 100 per cent. Please note
that in 2019 the Leadership Team was subdivided into the Leadership Team and the Executive Council. Both of these leadership groups are
considered for the purposes of this assessment.
190 Prudential plc

PLTIP vesting
Group overview
The Committee considered a report from the Group Chief Risk and Compliance Officer which had been approved by the Group Risk Committee.
This report confirmed that the financial results were achieved within the Group’s risk framework and appetite. On the basis of this report and the
performance of the Group described above, the Committee decided not to apply a discretionary adjustment to the arithmetic vesting outcome
under the 2018 PLTIP awards and determined the vesting of each Executive Director’s PLTIP awards as set out below:
Maximum value Percentage
of award at of the PLTIP Number of Value of
Executive Director full vesting1 award vesting shares vesting2 shares vesting1
Strategic report
Mark FitzPatrick, Group Chief Financial Officer and Chief Operating Officer $2,043,699 68.75% 91,685 $1,405,043
James Turner, Group Chief Risk and Compliance Officer $1,714,510 42.50% 47,545 $728,612
Mike Wells, Group Chief Executive $4,942,317 68.75% 221,721 $3,397,803
Notes
1 The share price used to calculate the value of the PLTIP awards with performance periods which ended on 31 December 2020 and vest in April 2021 for all Executive Directors, was the average
share price for the three months up to 31 December 2020, being £11.95 converted at the exchange rate of 1 GBP to 1.2824 USD. The number of Prudential plc shares under award has been
adjusted in line with the approach set out in the section on ‘Remuneration decisions taken in relation to the demerger’ in the 2019 Directors’ remuneration report.
Governance
2 The number of shares vesting includes accrued dividends. Shares vesting will be subject to a two-year holding period.
Long-term incentives awarded in 2020

2020 share-based long-term incentive awards
The table below shows the awards of conditional shares made to Executive Directors under the PLTIP and the performance conditions attached
to these awards. Awards are made annually with face value determined by reference to each Director’s salary, as set out in the Directors’
remuneration policy. As set out earlier in this report, the increase planned to the PLTIP award level for Mr. FitzPatrick was not applied and the
award was made at 250 per cent of salary.

Percentage Weighting of
Face value of award of awards performance conditions
Number of released for
shares achieving End of Sustainability
subject % of threshold performance Group scorecard§
Executive Director Role to award salary (USD)† targets‡ period TSR RoE
Mark FitzPatrick Group Chief Financial Officer 175,115 250% 2,436,557 20% 31 December 50% 30% 20%
and Chief Operating Officer 2022
James Turner Group Chief Risk and 177,562 250% 2,470,605 20% 31 December 50% 30% 20%
Compliance Officer 2022
Mike Wells Group Chief Executive 423,594 400% 5,893,904 20% 31 December 50% 30% 20%
2022
† Awards for Executive Directors are calculated based on the average share price over the three dealing days prior to the grant date, being £10.85/$13.91.
‡ The percentage of awards released for achieving maximum targets is 100 per cent.
§ Each of the four measures within the sustainability scorecard has equal weighting. They are LCSM, Group ECap operating capital generation, diversity and conduct.
As disclosed by the Company at the time of grant, the Committee will review awards on vesting to ensure that participants do not benefit from
windfall gains. The Committee will consider Prudential’s stretching performance targets, the share performance of Prudential and its peers,
the prices of the indices on which Prudential is listed and any other factors deemed relevant.

Relative TSR
Under the Group TSR measure, 20 per cent of the award will vest for TSR at the median of the peer group, increasing to full vesting for
performance within the upper quartile. TSR is measured on a local currency basis since this has the benefit of simplicity and directness
of comparison. A comprehensive review of the TSR peer group which anticipated the Group’s post-demerger footprint was undertaken
for the 2019 PLTIP awards. The companies were selected based on organisational size, product mix and geographical footprint. The peer
group for 2020 PLTIP awards is the same as that used for 2019 and is set out below:
Aegon AIA Equitable Holdings China Taiping Insurance
Great Eastern Lincoln National Manulife MetLife
Ping An Insurance Principal Financial Prudential Financial Sun Life Financial

Prudential plc
Operating return on average shareholders’ funds

Operating return on average shareholders’ funds is calculated as adjusted IFRS operating profit based on longer-term investment returns
(‘adjusted operating profit’) after tax and net of non-controlling interests divided by average shareholders’ funds, and is assessed at Group level.
20 per cent of the award will vest for achieving the threshold level of performance of 16.7 per cent, increasing to full vesting for reaching the
stretch level of at least 22.9 per cent.
Sustainability scorecard
Under the 2020 sustainability scorecard, performance will be assessed for each of the four measures, at the end of the three-year performance
period. Performance will be assessed on a sliding scale. Each of the measures has equal weighting and the 2020 measures are set out below:
Capital measure: Cumulative three-year ECap Group operating capital generation relative to threshold, less cost of capital (based on the
capital position at the start of the performance period).
Vesting basis: Performance below threshold results in nil vesting, 20 per cent vesting for achieving threshold, increasing to full vesting
for performance above stretch level. The threshold figure for this metric will be published in the Annual Report for the
final year of the performance period.
Capital measure: Cumulative three-year LCSM operating capital generation relative to threshold.
Conduct measure: Through strong risk management action, ensure there are no significant conduct/culture/governance issues that result
in significant capital add-ons or material fines.
Vesting basis: Performance below threshold results in nil vesting, 20 per cent vesting for partial achievement of the Group’s
expectations, increasing to full vesting for achieving the Group’s expectations.
Diversity measure: Percentage of the Executive Council and Leadership Team that are female at the end of 2022.
Vesting basis: Performance below threshold results in nil vesting, 20 per cent vests for meeting the threshold of at least 27 per cent
of our Executive Council and Leadership Team being female at the end of 2022, increasing to full vesting for reaching
the stretch level of at least 33 per cent being female at that date.
192 Prudential plc

A
Pay comparisons
Group overview
Performance graph and table
The chart below illustrates the TSR performance of Prudential, the FTSE 100 (as the Company has a premium listing on the London Stock
Exchange) and the peer group of international insurers used to benchmark the Company’s performance for the purposes of the 2020 PLTIP
awards. The chart illustrates the performance of a hypothetical investment of $100 in ordinary shares of Prudential plc over the 10-year period
1 January 2011 to 31 December 2020 compared to a similar investment in the FTSE 100 or an index of the Company’s peers. Total shareholder
return is based on Returns Index data calculated on a daily share price growth plus re-invested dividends (as measured at the ex-dividend dates).
Strategic report
Prudential TSR vs. FTSE 100 and peer group average – total return per cent over 10-year period to December 2020
400
350
300
$298
Governance
250
200
$181
150 $157

100
50
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Prudential FTSE 100 Peer group
Note
The index of Prudential’s peers represents the average daily total shareholder return performance of the peer group used for the 2020 PLTIP awards (excluding companies not listed
at the start of the period).
The information in the table below shows the total remuneration for the Group Chief Executive over the same period:
$0001 2011 2012 2013 2014 2015 2015 2016 2017 2018 2019 2020
Group Chief Executive T Thiam T Thiam T Thiam T Thiam T Thiam M Wells M Wells M Wells M Wells M Wells M Wells
2
Salary, pension and benefits 1,986 2,169 2,201 2,406 938 3,048 3,029 2,415 2,423 2,122 2,126
Annual bonus payment 2,512 3,160 3,207 3,501 1,077 1,903 2,904 2,673 2,848 2,804 1,355
(As % of maximum) (97%) (100%) (99.8%) (100%) (77.3%) (99.7%) (99.5%) (94%) (95%) (96%) (46.0%)
LTIP vesting 4,045 9,733 8,167 16,233 5,174 6,564 4,016 5,955 4,837 2,746 3,398

(As % of maximum) (100%) (100%) (100%) (100%) (100%) (100%) (70.8%) (95.8%) (62.5%) (62.5%) (68.8%)
Other payments – – – – – – – – – – –
‘single figure’ of
total remuneration3 8,542 15,062 13,575 22,140 7,189 11,515 9,950 11,042 10,109 7,671 6,880
Notes
1 All remuneration has been converted to USD using the average exchange rate for each respective financial year.
2 Tidjane Thiam left the Company on 31 May 2015. Mike Wells became Group Chief Executive on 1 June 2015. The figures shown for Mike Wells’s remuneration in 2015 relate only to his service
as Group Chief Executive.
3 Further detail on the ‘single figure’ is provided in the ‘single figure’ table for the relevant year. The figures provided reflect the value of vesting LTIP awards on the date of their release other than
for 2020 (for which an estimate is used).

Prudential plc
Relative importance of spend on pay

The table below sets out the amounts payable in respect of 2019 and 2020 on all employee pay and dividends:
Percentage
2019 2020 change
All employee pay ($m)1,2 1,466 1,679 14.5%

Dividends including demerger dividend ($m)3 8,582 n/a n/a
Dividends excluding demerger dividend ($m)3 1,203 420 (65.1)%
Notes
1 All employee pay as taken from note B2.1 to the financial statements.
2 This excludes the costs of employment of M&G plc employees for 2019 in order to present a like-for-like comparison between the two years.
3 Dividends taken from note B5 to the financial statements. The Company’s new dividend policy reflects a rebalancing of capital allocation from cash dividends to reinvestment of capital
into the Asia business, which is expected to deliver profitable and sustainable compounding growth, and high-risk adjusted returns for shareholders.
Percentage change in remuneration

The table below sets out how the change in remuneration for each Director between 2019 and 2020 compared to a wider employee
comparator group:
Salary Benefits Bonus
(% change) (% change) (% change)
Executive Directors1
Mark FitzPatrick 1% 26% (27)%
James Turner 10% 49% (2)%
Mike Wells 1% 35% (52)%
Chair and Non-executive Directors
Paul Manduca 1% 45% n/a
Jeremy Anderson – – –
David Law 1% n/a n/a
Kai Nargolwala2 10% n/a n/a
Anthony Nightingale 4% n/a n/a
Philip Remnant 1% n/a n/a
Alice Schroeder 1% n/a n/a
Shriti Vadera – – –
Thomas Watjen2 10% n/a n/a
Fields Wicker-Miurin 1% n/a n/a
Amy Yip3 0% n/a n/a
Average pay for all UK-based employees 3.76% (3.95)% (7.27)%
Notes
1 The change in the total salaries paid to Messrs FitzPatrick, Turner and Wells in 2020 includes a salary increase reversed from 1 April 2020. The figure for Mr Turner reflects the change
in his package when he relocated to Hong Kong in August 2019.
2 Change in fee levels for Kai Nargolwala and Thomas Watjen is due to the additional fees paid to them as Workforce Engagement Directors.
3 Amy Yip joined the Board In September 2019.
The regulations prescribe that this comparison should include all employees of the parent company. The number of individuals employed by the
parent company is insufficient to be the basis of a representative comparison. Therefore the Committee decided to use all UK-based employees
as the basis for this calculation. As disclosed in the 2019 Directors’ remuneration report, employees in M&G plc have been excluded from the
calculation of average pay in 2019 as M&G plc demerged from Prudential plc on 21 October 2019. The average pay for all employees has been
calculated on a full-time equivalent basis by reference to the total pay awarded to UK employees in 2020 and 2019. The salary increase includes
uplifts made through the annual salary review, as well as any additional changes in the year; for example to reflect promotions or role changes.
The decrease in benefits paid to all UK employees is due to the reduction in the cost to the Company of providing certain benefits.
Group Chief Executive pay compared with employee pay

The table below compares the Group Chief Executive’s ‘single figure’ of total remuneration to that received by three representative
UK employees in 2020.
The pay ratio decreased in 2020 which chiefly reflects the higher pay outcomes for the identified employees and a lower bonus outcome
for the Group Chief Executive.
25th 75th
percentile Median percentile
Year Method pay ratio pay ratio pay ratio
2020 Option B 64:1 42:1 29:1

20191 Option B 78:1 60:1 39:1
Note
1 2019 CEO pay ratio has been recalculated to account for the restated 2019 CEO single figure which includes the actual value of the 2017 PLTIP award at vesting.
194 Prudential plc

Under the regulations there is a choice of three methodologies to determine the 25th, median and 75th full-time equivalent remuneration of our
Group overview
UK employees. The Company has chosen to use the 2020 hourly rate gender pay gap information (collected in accordance with the Equality Act
2010 (Gender Pay Gap Information) Regulations 2017) as this method uses data that is aligned with other disclosures made under our gender pay
gap reporting and includes all UK employees (‘Option B’ in the table above). The employees used in the calculations were identified using the
most recently collected gender pay gap data, on 29 January 2021, following the end of the financial year. Base salary and total remuneration for
these identified employees has then been calculated based on their actual remuneration for 2020. The Committee determined that the identified
employees are reasonably representative since the structure of their remuneration arrangements is in line with that of the majority of employees
within the UK-based Group Head Office workforce. The same methodology used for calculating the ‘single figure’ of the Group Chief Executive
Strategic report
has been used for calculating the pay and benefits of these three UK employees. No elements of remuneration were omitted or adjusted.
The identified individuals were employed on a full-time basis so no further adjustment has been made to their remuneration.
The salary and total remuneration received during 2020 by the indicative employees used in the above analysis are set out below:
25th 75th
percentile Median percentile
2020 salary ($000) 58,000 85,000 116,000
Governance
Total 2020 remuneration ($000) 84,000 126,000 186,000
The Committee believes the median pay ratio is consistent with the pay, reward and progression policies for our UK-based Group Head Office
employees. The base salary and total remuneration levels for the Group Chief Executive and the median representative employee are
competitively positioned within the relevant markets and reflect the operation of our remuneration structures which are effective in appropriately
incentivising staff, having regard to our risk framework, risk appetites and to rewarding the ‘how’ as well as the ‘what’ of performance.

Gender pay gap
Our UK business, Prudential Services Limited, is the employing entity for all of our London Head Office staff including the UK-based Group
Chief Executive and his direct reports. Prudential Services Limited has recently reported its 2020 UK gender pay gap data and details can be
found on the Group’s website (www.prudentialplc.com/about-us/esg/performance/gender-pay-gap-report).
Due to the change in the Group’s business focus, senior management roles are now split between locations in the UK and Asia. The 2020 gender
pay gap calculations are based on the employees based in the UK only, and therefore exclude data for part of our senior management team,
including a number of senior female leaders, who are based in Hong Kong.
While women and men continue to be paid equally for performing similar roles, our gender pay gap reflects the fact that men and women have
traditionally held different roles, particularly in the financial services sector. It highlights the fact that we have more men than women in leadership
and senior operational roles. In addition, a number of senior roles were transferred to M&G as part of the demerger process. Some of these senior
roles were held by women, and as M&G is now excluded from our calculations, this has affected Prudential’s reported gender pay gap for this
year. We continue to focus our efforts on closing the gender pay gap as quickly as possible. Female representation in our leadership roles has
increased from 25 per cent in 2017 to 33 per cent in 2020 in our London Head Office.
Consideration of workforce pay and approach to engagement

During the year, the Committee considered workforce remuneration and related policies in the business units across the Group. Information
presented to the Committee, by way of a dashboard, included how the Company’s incentive arrangements are aligned with the culture and
informed the Committee’s decision-making on executive pay and policy. By way of example, business unit salary increase budgets are

considered as part of the year-end review of Executive Director compensation and salary increases.
As part of the Board’s wider approach to employee engagement, which also included a Group-wide engagement survey, the Committee took
additional measures in 2020 to explain how the remuneration of Executive Directors aligns with the wider Company pay policy. The Company
operates a microsite on its intranet that outlines executive pay arrangements during the previous financial year and key areas of change for 2020.
It explains to employees that total remuneration for Executive Directors is made up of a number of elements and is governed by both the
Directors’ remuneration policy and the Group’s remuneration policy (which is also published on the Company’s website) with the relevant links
to these documents. Employee engagement is led by two Non-executive Directors and the Governance Report section of this report describes
how they discharged this responsibility during 2020.

Prudential plc
195
Annual Report 2020
Chair and Non-executive Director remuneration in 2020

Chair fees
The Chair fee was reviewed by the Committee during 2020 which resulted in no increase being awarded. The fee remains at £765,000
($981,000 converted at the exchange rate of 1.2824). As disclosed in the ‘Letters of appointment of the Chair and Non-executive Directors’
section of this Annual report, Shriti Vadera became the Chair of the Board from 1 January 2021. Her 2021 fee has been set at £765,000
($981,000) with effect from that date.
Non-executive Directors’ fees

The Non-executive Directors’ fees were reviewed by the Board during 2020 which resulted in no increase being awarded.
From From From From
1 July 2019 1 July 2019 1 July 2020 1 July 2020
Annual fees ($) (£) ($) (£)
Basic fee 126,000 99,000 127,000 99,000

Additional fees:
Audit Committee Chair 96,000 75,000 96,000 75,000
Audit Committee member 38,000 30,000 38,000 30,000
Remuneration Committee Chair 83,000 65,000 83,000 65,000
Remuneration Committee member 38,000 30,000 38,000 30,000
Risk Committee Chair 96,000 75,000 96,000 75,000
Risk Committee member 38,000 30,000 38,000 30,000
Nomination & Governance Committee Chair1 – – – –
Nomination & Governance Committee member 19,000 15,000 19,000 15,000
Senior Independent Director 64,000 50,000 64,000 50,000
Workforce engagement role 38,000 30,000 38,000 30,000
Notes
1 There is no fee paid for the role of Nomination & Governance Committee Chair.
2 Fees were denominated in sterling and were converted to USD using an exchange rate of 1.2824 for 2020 and 1.2765 for 2019.
If, in a particular year, the number of meetings is materially greater than usual, the Company may determine that the provision of additional fees
is fair and reasonable.
The resulting fees paid to the Chair and Non-executive Directors are:
Total 2019
Total 2020 Total 2020 Total 2019 remuneration:
2020 2019 remuneration: remuneration: remuneration: the ‘single
taxable taxable the ‘single the ‘single the ‘single figure’
2020 fees 2019 fees benefits* benefits* figure’ figure’ in GBP figure’ in GBP
($000)s† (£000s)‡ ($000s)† (£000s)‡
Chair
Paul Manduca 981 968 319 220 1,300 1,014 1,188 930
Jeremy Anderson1 252 – – – 252 197 – –
Howard Davies2 104 277 – – 104 81 277 217
David Law 281 277 – – 281 219 277 217
Kai Nargolwala 3 242 221 – – 242 189 221 173
Anthony Nightingale 230 222 – – 230 179 222 174
Philip Remnant 287 283 – – 287 224 283 222
Alice Schroeder 204 202 – – 204 159 202 158
Lord Turner4 – 75 – – – – 75 59
Shriti Vadera 5 97 – – – 97 76 – –
Thomas Watjen 242 221 – – 242 189 221 173
Fields Wicker-Miurin 165 163 – – 165 129 163 128
Amy Yip6 165 55 – – 165 129 55 43
Total 3,250 2,964 319 220 3,569 2,785 3,183 2,494
* Benefits include the cost of providing the use of a car and driver, medical insurance and security arrangements (including any tax thereon).
† Each remuneration element is rounded to the nearest $1,000/£1,000 and totals are the sum of these rounded figures. Total remuneration is calculated using the methodology prescribed
by Schedule 8 of the Companies Act. The Chair and Non-executive Directors are not entitled to participate in annual bonus plans or long-term incentive plans.
‡ Total remuneration has been converted to US dollars using the exchange rate of 1 GBP to 1.2824 USD for the 2020 single figure calculations and 1 GBP to 1.2765 USD for the 2019 single figure
calculations. As Non-executive Directors and the Chair don’t receive variable remuneration components, the table above doesn’t include a sum of total fixed and total variable remuneration.
Notes
1 Jeremy Anderson joined the Board on 1 January 2020 and was appointed as the Chair of the Risk Committee in May 2020.
2 Howard Davies stepped down from the Board on 14 May 2020.
3 In 2019 Kai Nargolwala also received an annual fee of £250,000 in respect of his non-executive chairmanship of Prudential Corporation Asia Limited.
4 Lord Turner stepped down from the Board on 16 May 2019.
5 Shriti Vadera joined the Board on 1 May 2020.
6 Amy Yip joined the Board and the Remuneration Committee on 2 September 2019.
196 Prudential plc

Statement of Directors’ shareholdings
Group overview
The interests of Directors in ordinary shares of the Company are set out below. ‘Beneficial interest’ includes shares owned outright, shares
acquired under the Share Incentive Plan (SIP) and deferred annual incentive awards, detailed in the ‘Supplementary information’ section.
It is only these shares that count towards the share ownership guidelines.
1 January 2020
(or on date of
appointment) During 2020 31 December 2020 Share ownership guidelines
Total Total Number Beneficial
Strategic report
beneficial beneficial of shares Share interest as a
interest Number Number interest* subject to ownership percentage of
(number of of shares of shares (number of performance Total interest guidelines‡ basic salary/
shares) acquired disposed shares) conditions† in shares (% of salary/fee) basic fees§
Chair
Paul Manduca 42,500 – – 42,500 – 42,500 100% 66%
Executive Directors
Mark FitzPatrick 72,301 131,511 37,452 166,360 440,695 607,055 250% 262%
Governance
James Turner 80,624 66,348 8,804 138,168 400,443 538,611 250% 224%
Mike Wells1 976,272 295,292 127,479 1,144,085 1,065,936 2,210,021 400% 1,190%
Jeremy Anderson2 – 9,157 – 9,157 – 9,157 100% 111%
Howard Davies3 9,813 – – 9,813 – 9,813 n/a n/a
David Law 9,066 1,988 – 11,054 – 11,054 100% 133%
Kai Nargolwala 70,000 – – 70,000 – 70,000 100% 845%
Anthony Nightingale 50,000 – – 50,000 – 50,000 100% 604%

Philip Remnant 6,916 1,000 – 7,916 – 7,916 100% 96%
Alice Schroeder4 14,500 5,500 – 20,000 – 20,000 100% 241%
Shriti Vadera 5 – 67,500 – 67,500 – 67,500 100% 815%
Thomas Watjen6 10,340 – – 10,340 – 10,340 100% 125%
Fields Wicker-Miurin 4,500 2,000 – 6,500 – 6,500 100% 78%
Amy Yip – 2,500 – 2,500 – 2,500 100% 30%
* Beneficial interests include shares held directly or indirectly by connected persons. There were no changes of Directors’ interests in ordinary shares between 31 December 2020 and 2 March 2021
with the exception of the UK based Executive Directors due to their participation in the monthly Share Incentive Plan (SIP). Mark FitzPatrick acquired a further 28 shares in the SIP and Mike Wells
acquired a further 27 shares in the SIP during this period.
† Further information on share awards subject to performance conditions are detailed in the ‘share-based long-term incentive awards’ part of the ‘Supplementary information’ section.
‡ Holding requirement of the Articles of Association (2,500 ordinary shares) must be obtained within one year of appointment to the Board. The increased guidelines for Executive Directors were
introduced with effect from January 2013 and increased again in 2017. Executive Directors have five years from this date (or date of joining or role change, if later) to reach the enhanced guideline.
The guideline for Non-executive Directors was introduced on 1 July 2011. Non-executive Directors have three years from their date of joining to reach the guideline. During 2019 the guidelines
for Executive Directors and Non-executive Directors were revised to reflect the impact of the demerger.
§ Based on the average closing price for the six months to 31 December 2020 (£11.95).
The Company and its Directors, Chief Executives and shareholders have been granted a partial exemption from the disclosure requirements under Part XV of the Securities and Futures Ordinance
(SFO). As a result of this exemption, Directors, Chief Executives and shareholders do not have an obligation under the SFO to notify the Company of shareholding interests, and the Company is
not required to maintain a register of Directors’ and Chief Executives’ interests under section 352 of the SFO, nor a register of interests of substantial shareholders under section 336 of the SFO.
The Company is, however, required to file with the Stock Exchange of Hong Kong Limited any disclosure of interests notified to it in the United Kingdom.
Notes

1 For the 1 January 2020 figure, Mike Wells’s beneficial interest in shares is made up of 297,320 ADRs (representing 594,640 ordinary shares) and 381,632 ordinary shares. For the 31 December
2020 figure, his beneficial interest in shares is made up of 297,320 ADRs (representing 594,640 ordinary shares) and 549,445 ordinary shares.
2 Jeremy Anderson was appointed to the Board on 1 January 2020. Total interest in shares is shown from this date.
3 Howard Davies stepped down from the Board on 14 May 2020. Total interest in shares is shown at this date.
4 For the 1 January 2020 figure, Alice Schroeder’s beneficial interest in shares is made up of 7,250 ADRs (representing 14,500 ordinary shares). For the 31 December 2020 figure, the beneficial
interest in shares is made up of 10,000 ADRs (representing 20,000 ordinary shares).
5 Shriti Vadera was appointed to the Board on 1 May 2020. Total interest in shares is shown from this date.
6 For the 1 January 2020 figure, Thomas Watjen’s beneficial interest in shares is made up of 5,170 ADRs (representing 10,340 ordinary shares). For the 31 December 2020 figure, the beneficial
interest in shares is made up of 5,170 ADRs (representing 10,340 ordinary shares).

Prudential plc
The bar chart below illustrates the Executive Directors’ shareholding as a percentage of base salary versus the share ownership guideline.
1,400%
1,200% 1,190%
1,000%
800%
600%
400% 400%
250% 262% 250%

200% 224%
0%
Mark FitzPatrick James Turner Mike Wells
Share ownership guidelines as % of salary Beneficial interest as at 31 December 2020, as % of salary
Note
Mark FitzPatrick and James Turner were appointed to the Board in July 2017 and March 2018 respectively so both are within the period over which they were asked to attain the share
ownership guideline.
Outstanding share options

The following table sets out the share options held by the Executive Directors in the UK Savings-Related Share Option Scheme (SAYE) as at the
end of the period. No other directors participated in any other option scheme.
Market Exercise period Number of options
price at
Date of Exercise 31 Dec Beginning End of
grant price 2020 Beginning End of period Granted Exercised Cancelled Forfeited Lapsed period
(pence) (pence)
Mark FitzPatrick 21 Sep 17 1455 1388.5 01 Dec 22 31 May 23 2,061 – – – – – 2,061

James Turner 21 Sep 17 1455 1388.5 01 Jan 21 30 Jun 21 1,237 – – – – – 1,237
Mike Wells 22 Sep 20 964 1388.5 01 Dec 23 31 May 24 – 1,867 – – – – 1,867
Notes
1 No Directors exercised SAYE options in 2020.
2 No price was paid for the award of any option.
3 The highest and lowest closing share prices during 2020 were £15.06 and £7.11 respectively.
4 All exercise prices are shown to the nearest pence.
Directors’ terms of employment

Details of the service contracts of each Executive Director are outlined in the table below. The Directors’ remuneration policy contains further
details of the terms included in Executive Director service contracts.
Notice period Notice period
to the from the
Date of contract Company Company
Executive Directors
Mark FitzPatrick 17 May 2017 12 months 12 months
James Turner 1 March 2018 12 months 12 months
Mike Wells 21 May 2015 12 months 12 months
Directors served on the boards of educational, charitable and cultural organisations without receiving a fee for these services.
198 Prudential plc

Letters of appointment of the Chair and Non-executive Directors
Group overview
Details of Non-executive Directors’ individual appointments are outlined below. The Directors’ remuneration policy contains further details
on their letters of appointment. The Chair and Non-executive Directors are not entitled to receive any payments for loss of office.
Chair/Non-executive Director Appointment by the Board Notice period Time on the Board at 2021 AGM
Chair
Paul Manduca1 15 October 2010
(Chair from July 2012) 12 months n/a
Strategic report
Philip Remnant 1 January 2013 6 months 8 years 4 months
Jeremy Anderson 1 January 2020 6 months 1 year 4 months
David Law 15 September 2015 6 months 5 years 8 months
Kai Nargolwala 1 January 2012 6 months 9 years 4 months
Anthony Nightingale 1 June 2013 6 months 7 years 11 months
Alice Schroeder 10 June 2013 6 months 7 years 11 months
Governance
Shriti Vadera 1 May 2020 6 months 1 year
Thomas Watjen 11 July 2017 6 months 3 years 10 months
Fields Wicker-Miurin 3 September 2018 6 months 2 years 8 months
Amy Yip 2 September 2019 6 months 1 year 8 months
Note
1 Paul Manduca retired from the Board on 31 December 2020. Shriti Vadera became the Chair of the Board from 1 January 2021.

Payments to past Directors and payments for loss of office
There were no payments for loss of office in 2020.
As disclosed in the 2019 Directors’ remuneration report, a number of Directors stepped down from the Board in 2019. Treatment of their
outstanding awards and other remuneration elements was disclosed in 2019. We set out below payments in respect of the awards that vested
during 2020.
Nic Nicandrou
Nic holds a PLTIP award granted in 2018 and as set out in the section ‘Remuneration in respect of performance in 2020’ the performance
condition attached to Nic’s 2018 PLTIP awards was partially met and 68.75 per cent of these awards will be released in 2021. The details of the
release are set out below.
Number of Value of
Award shares vesting1 shares vesting2
PLTIP 119,407 $1,829,874
Notes
1 The number of shares vesting include accrued dividends.
2 The share price used to calculate the value was the average ADR price for the three months up to 31 December 2020, being £11.95.
Barry Stowe
Barry holds a PLTIP award granted in 2018 and as set out in the section ‘Remuneration in respect of performance in 2020’ the performance

condition attached to Barry’s 2018 PLTIP awards was partially met and 68 per cent of these awards will be released in 2021. These awards were
pro-rated for service (nine of 36 months) and the details of the release are set out below.
Number of Value of
Award ADRs vesting1 ADRs vesting2
PLTIP 22,931 $725,537
Notes
1 The number of ADRs vesting include accrued dividends.
2 The ADR price used to calculate the value was the average ADR price for the three months up to 31 December 2020, being $31.64.
Other Directors
A number of former Directors receive retiree medical benefits for themselves and their partner (where applicable). This is consistent with other
senior members of staff employed at the same time. A de minimis threshold of £10,000 has been set by the Committee; any payments or benefits
provided to a past Director above this amount will be reported.

Prudential plc
199
Annual Report 2020
Statement of voting at general meeting

At the 2020 Annual General Meeting, shareholders were asked to vote on the current Directors’ remuneration policy and the 2019 Directors’
remuneration report. Each of these resolutions received a significant vote in favour by shareholders and the Committee is grateful for this support
and endorsement by our shareholders. The votes received were:
% of votes Votes % of votes Votes
Resolution Votes for cast against cast Total votes cast withheld
To approve the Directors’ remuneration policy 1,930,172,979 95.84 83,796,656 4.16 2,013,969,635 1,043,445
(2020 AGM)
To approve the Directors’ remuneration report 1,930,404,646 96.84 63,037,343 3.16 1,993,441,989 21,570,822
(2020 AGM)
Statement of implementation of remuneration policy in 2021

Base salary
Executive Directors’ remuneration packages were reviewed in 2020 with changes effective from 1 January 2021. When the Committee made
these decisions, it considered the salary increases awarded to other employees in 2020 and the expected increases in 2021. The external market
reference points used to provide context to the Committee were similar to those used for 2020 salaries.
In recognition of the continued focus on pay restraint and after due deliberation the Committee considered there should be no salary increases
to the Executive Directors for 2021. The 2021 salary increase budgets for other employees across the Group’s business units were between
2 per cent and 4.6 per cent. On this basis, 2021 will be the ninth consecutive year in which the increases generally offered to executives have
been below or close to the bottom of the range of salary increases budgeted for the broader workforce.
The salaries effective from 1 January 2021 are set out below:
—— Mark FitzPatrick: £760,000

—— James Turner: HKD7,330,000
—— Mike Wells: £1,149,000
2021 pension entitlements

While the approved Directors’ remuneration policy provides for a phased reduction of Executive Directors’ pension benefits to the workforce
rate of 13 per cent of salary, the Committee accelerated this change to be effective on 14 May 2020. Pension levels will remain at this reduced
rate for 2021. In addition, statutory contributions will continue to be made into mandatory pension arrangements in the country in which the
Executive Directors are based, in line with the local requirements.
Annual bonus
No changes have been made to the bonus opportunities for Executive Directors for 2021.
The separation and divestment of Jackson will transform Prudential into a Group targeting the structural opportunities of Asia and Africa.
The post-separation Group will focus on achieving sustained double-digit growth in embedded value per share. This will be supported by growth
rates of new business profit, which are expected to substantially exceed GDP growth in the markets in which the Group operates. It is therefore
imperative that the measures attached to the 2021 AIP and PLTIP awards create a clear focus within the executive team and a straightforward
connection with the value to be delivered to shareholders.
2021 AIP financial measures

The Committee is mindful of the need for the weightings of the AIP measures to be sufficiently aligned with the post-separation Group’s focus
on the high-growth Asia and Africa businesses. The proposed revised weightings of the financial performance measures are set out in the
table below.
Weightings
(% of financial element)
Financial performance measure 2020 2021 Change and rationale
Group EEV new business profit 15% 35% Increase – to focus the executive team on driving growth in
profitable new business which is critical to the growth in embedded
value of the post-separation Prudential Group
Group adjusted operating profit 35% 25% Reduction – to reflect the increased emphasis on growth of new
business. Operating profit is largely driven by the level of historic
in-force business
Group operating free surplus generated 30% 30% No change – reflecting the importance of free surplus to support
growth in investment in new business
Group Holding Company cash flow 20% 10% Reduction – given the strategic priority of allocating capital to
future growth in Asia and Africa whilst continuing to adequately
fund central costs
200 Prudential plc

The Remuneration Committee intends to include Jackson within the targets and results used for the AIP until the Group owns less than 50% of
Group overview
Jackson. From the date on which the Group owns less than 50% of Jackson, Jackson will be removed from Group AIP targets and outcomes for the
remainder of the relevant year. From this date, Group AIP weightings will be consistent with those adopted for the Asia business. The date from
which Jackson is removed from the AIP targets and the resulting changes to the weighting of the bonus metrics will be disclosed in the Annual
Report on Remuneration for the year in which this takes place. Principles which will underpin the approach to the separation of Jackson are
described in the Annual statement from the Chair of the Remuneration Committee.
2021 share-based long-term incentive awards
Strategic report
Award levels
No changes have been made to the PLTIP award levels for Executive Directors for 2021.
Performance conditions
Performance conditions for 2021 PLTIP awards have been revised to ensure that reward remains aligned with the strategic priorities and capital
allocation framework of the post-separation Group. In particular, RoE replaced with RoEV to reflect the focus on achieving sustained double-digit
growth in Embedded Value per share. In addition, the TSR peer group was revised to reflect the footprint of the post-separation Prudential Group.
Governance
The weighting of measures for the 2021 PLTIP awards for all Executive Directors will be as follows:
—— Relative TSR (50 per cent of award);

—— A return on embedded value measure (30 per cent of award); and
—— Sustainability scorecard of strategic measures (20 per cent of award).
The proportion of 2021 long-term incentive awards which will vest for threshold performance will remain at 20 per cent.

The conduct measure in the sustainability scorecard will include Jackson for 2021 awards for the period in which the Group owns at least 50%
of Jackson, whilst the other scorecard metrics and RoEV will be calculated based on the Group excluding the US business. Principles which will
underpin the approach to the separation of Jackson are described in the Annual statement from the Chair of the Remuneration Committee.
Relative TSR
Under the Group TSR measure, 20 per cent of the award will vest for TSR at the median of the peer group, increasing to full vesting for
performance within the upper quartile. TSR is measured on a local currency basis since this has the benefit of simplicity and directness
of comparison.
In 2020 the Committee reviewed the TSR peer group to reflect the footprint post separation of Jackson. The resulting peer group for 2021
PLTIP awards is set out below:
AIA Group Allianz AXA China Life
China Pacific Insurance (CPIC) China Taiping Insurance Great Eastern Manulife Financial
New China Life (NCl) Ping An Insurance Sun Life Financial Zurich Insurance Group
Return on embedded value

RoEV will replace RoE as the PLTIP measure for 2021 awards. The Company believes that this measure is more relevant, considering the Asia
focus of the Group, aligned to the ambition to grow EV and pivot towards EV based valuations.

RoEV will be calculated as the total post-tax EEV operating profit as a percentage of the average EEV basis shareholders’ equity. RoEV will be
assessed at the Group level.
20 per cent of the award will vest for achieving the threshold level of performance of 9 per cent, increasing to full vesting for reaching the stretch
level of at least 11 per cent.

Prudential plc
201
Annual Report 2020
Sustainability scorecard
Under the 2021 sustainability scorecard, performance will be assessed for each of the four measures, at the end of the three-year performance
period. Performance will be assessed on a sliding scale. Each of the measures has equal weighting and the 2021 measures are set out below:
Capital measure: Cumulative three-year ECap Group operating capital generation relative to threshold, less cost of capital (based on the
capital position at the start of the performance period).
Capital measure: Cumulative three-year LCSM operating capital generation relative to threshold.
Conduct measure: Through strong risk management action, ensure there are no significant conduct/culture/governance issues that result
in significant capital add-ons or material fines.
Vesting basis: Performance below threshold results in nil vesting, 20 per cent vesting for partial achievement of the Group’s
expectations, increasing to full vesting for achieving the Group’s expectations.
Diversity measure: Percentage of the Executive Council and Leadership Team1 that are female at the end of 2023.
Vesting basis: Performance below threshold results in nil vesting, 20 per cent vests for meeting the threshold of at least 33 per cent
of our Executive Council and Leadership Team being female at the end of 2023, increasing to full vesting for reaching
the stretch level of at least 37 per cent being female at that date.
Note
1 Please note that in 2020 the definition of the Leadership Team for the purposes of this assessment changed to include Executive Council and other key executives critical for the definition
and execution of our strategy. This is comparable to what was previously referred to as the Leadership Team.
Chair and Non-executive Directors

Fees for the Chair and Non-executive Directors were unchanged in 2020. The Committee has decided to appoint the new Chair, Ms Vadera,
on the same fee (£765,000 per annum) as the outgoing Chair, Mr Manduca.
The Board has established for the period up to the 2022 AGM a Responsibility & Sustainability Working Group which will oversee the embedding
of our new ESG framework and progress on diversity and inclusion initiatives and employee engagement activities. As Chair of the Working
Group, Ms Schroeder will receive a fee of £45,000 per annum while Working Party members will receive a fee of £22,000.

Anthony Nightingale, CMG SBS JP Shriti Vadera
Chair of the Remuneration Committee Chair
2 March 2021 2 March 2021
202 Prudential plc

Additional remuneration disclosures
Directors’ outstanding long-term incentive awards
Group overview
Share-based long-term incentive awards
Conditional Conditional
share awards Market Dividend share awards Date of
outstanding Conditional price at equivalents Rights Rights outstanding end of
at 1 Jan awards in date of on vested exercised lapsed at 31 Dec performance
Year of 2020 2020 award shares note in 2020 in 2020 2020 period
Plan name award (number
(number of (number of of shares (number of
Strategic report
shares) shares) (pence) released) shares)
Mark FitzPatrick PLTIP 2017 117,047 – 1828 6,449 73,155 43,892 – 31 Dec 19
PLTIP 2018 123,110 – 1750 – – – 123,110 31 Dec 20
PLTIP 2019 142,470 – 1605.5 – – – 142,470 31 Dec 21
PLTIP 2020 – 175,115 1049.5 – – – 175,115 31 Dec 22
382,627 175,115 – 6,449 73,155 43,892 440,695
James Turner PLTIP 2017 32,264 – 1672 1,738 20,165 12,099 – 31 Dec 19
Governance
PLTIP 2018 103,281 – 1750 – – – 103,281 31 Dec 20
PLTIP 2019 119,600 – 1605.5 – – – 119,600 31 Dec 21
PLTIP 2020 – 177,562 1049.5 – – – 177,562 31 Dec 22
255,145 177,562 – 1,738 20,165 12,099 400,443
Mike Wells PLTIP 2017 304,166 – 1672 16,414 190,103 114,063 – 31 Dec 19
PLTIP 2018 297,713 – 1750 – – – 297,713 31 Dec 20
PLTIP 2019 344,629 – 1605.5 – – – 344,629 31 Dec 21

PLTIP 2020 – 423,594 1049.5 – – – 423,594 31 Dec 22
946,508 423,594 – 16,414 190,103 114,063 1,065,936
Note
A dividend equivalent was accumulated on these awards.
Other share awards

The table below sets out Executive Directors’ deferred bonus share awards.
Conditional Conditional Market
share awards share awards Date of Market price at
outstanding Conditionally Dividends Shares outstanding end of price at date of
at 1 Jan awarded accumulated released at 31 Dec restricted Date of date of vesting or
2020 in 2020 in 2020 note in 2020 2020 period release award release
Year of (number of (number of (number of (number of (number of
grant shares) shares) shares) shares) shares) (pence) (pence)
Mark FitzPatrick
Deferred 2017 annual
incentive award 2018 33,518 – 771 – 34,289 31 Dec 20 – 1750 –
incentive award 2019 38,411 – 884 – 39,295 31 Dec 21 – 1605.5 –

incentive award 2020 – 48,780 1,123 – 49,903 31 Dec 22 – 1047 –
71,929 48,780 2,778 – 123,487 – – –
James Turner
incentive award 2019 24,560 – 565 – 25,125 31 Dec 21 – 1605.5 –
incentive award 2020 – 42,125 970 – 43,095 31 Dec 22 – 1047 –
24,560 42,125 1,535 – 68,220 – – – –
Mike Wells
incentive award 2017 64,440 – – 64,440 – 31 Dec 19 06 Apr 20 1672 1021
incentive award 2018 58,008 – 1,336 – 59,344 31 Dec 20 – 1750 –
incentive award 2019 66,030 – 1,521 – 67,551 31 Dec 21 – 1605.5 –

incentive award 2020 – 83,782 1,930 – 85,712 31 Dec 22 – 1047 –
188,478 83,782 4,787 64,440 212,607 – – – –
Note
A dividend equivalent was accumulated on these awards.

Prudential plc
Additional remuneration disclosures / continued
All-employee share plans

It is important that all employees are offered the opportunity to own shares in Prudential, connecting them both to the success of the Company
and to the interests of other shareholders. Executive Directors are invited to participate in these plans on the same basis as other staff in
their location.
Save As You Earn (SAYE) schemes

UK-based Executive Directors are normally eligible to participate in the HM Revenue and Customs (HMRC) approved Prudential Savings-
Related Share Option Scheme. This scheme allows all eligible employees to save towards the exercise of options over Prudential plc shares
with the option price set at the beginning of the savings period at a discount of up to 20 per cent of the market price.
Since 2014 participants have been able to elect to enter into savings contracts of up to £500 per month for a period of three or five years. At the
end of this term, participants may exercise their options within six months and purchase shares. If an option is not exercised within six months,
participants are entitled to a refund of their cash savings plus interest if applicable under the rules. Shares are issued to satisfy those options
which are exercised. No options may be granted under the schemes if the grant would cause the number of shares which have been issued,
or which remain issuable pursuant to options granted in the preceding 10 years under the scheme and any other option schemes operated by
the Company, or which have been issued under any other share incentive scheme of the Company, to exceed 10 per cent of the Company’s
ordinary share capital at the proposed date of grant.
Details of Executive Directors’ rights under the SAYE scheme are set out in the ‘Outstanding share options’ table.
Share Incentive Plan (SIP)

UK-based Executive Directors are also eligible to participate in the Company’s Share Incentive Plan (SIP). Since April 2014, all UK-based
employees have been able to purchase Prudential plc shares up to a value of £150 per month from their gross salary (partnership shares) through
the SIP. For every four partnership shares bought, an additional matching share is awarded which is purchased by Prudential plc on the open
market. Dividend shares accumulate while the employee participates in the plan. If the employee withdraws from the plan, or leaves the Group,
matching shares may be forfeited.
The table below provides information about shares purchased under the SIP together with matching shares (awarded on a 1:4 basis)
and dividend shares.
Share Incentive Partnership Matching Dividend Share Incentive
Plan awards shares shares shares Plan awards
held in Trust accumulated accumulated accumulated held in Trust at
at 1 Jan 2020 in 2020 in 2020 in 2020 31 Dec 2020
Year of (number of (number of (number of (number of (number of
initial grant shares) shares) shares) shares) shares)
Mark FitzPatrick 2017 372 150 37 11 570

James Turner 2011 829 – – 20 849
Mike Wells 2015 719 150 38 18 925
Cash-settled long-term incentive awards

This information has been prepared in line with the reporting requirements of the Hong Kong Stock Exchange and sets out Executive Directors’
outstanding share awards and share options. For details of the cash-settled long-term incentive awards held by one Executive Director,
please see our 2019 Annual report on remuneration.
Dilution
Dilution Releases from the Prudential Long Term Incentive Plan and the Prudential Agency Long Term Incentive Plan are satisfied using new issue
shares rather than by purchasing shares in the open market. Shares relating to options granted under all-employee share plans are also satisfied
by new issue shares. The combined dilution from all outstanding shares and options at 31 December 2020 was 1 per cent of the total share capital
at the time. Deferred bonus awards will continue to be satisfied by the purchase of shares in the open market.
204 Prudential plc

Remuneration of the five highest-paid individuals and the remuneration of senior management
Group overview
In line with the requirements of the Stock Exchange of Hong Kong Limited, the following table sets out, on an aggregate basis, the annual
remuneration of i) the five highest-paid employees, and ii) senior management for the year ended 31 December 2020.
Of the five individuals with the highest emoluments in 2020, one was an Executive Director for the full year whose emoluments are disclosed in
this report. The aggregate of the emoluments of the other four individuals for 2020 are set out in the table below. Senior management comprised
the Executive Directors and members of the Group Executive Committee. The table sets outs the aggregate of the emoluments paid to the senior
management team:
Strategic report
Five highest paid Senior management
Components of remuneration HKD000 $000 HKD000 $000
Base salaries, allowances and benefits in kind 16,081 2,073 70,021 9,028
Pension contributions 661 85 9,408 1,213
Performance-related pay 146,736 18,919 155,019 19,987
Payments made on appointment 18,292 2,358 n/a n/a
Governance
Payments made on separation 46,536 6,000 n/a n/a
Total 228,306 29,435 234,448 30,228
Their emoluments for 2020 were within the following bands:

Number of employees
Five highest Senior

Remuneration band HKD Remuneration band USD equivalent paid management
19,000,001 – 19,500,000 2,449,700 – 2,514,200 0 1

25,000,001 – 25,500,000 3,223,300 – 3,287,800 0 1
29,500,001 – 30,000,000 3,803,500 – 3,868,000 0 1
30,500,001 – 31,000,000 3,932,400 – 3,996,900 0 1
31,500,001 – 32,000,000 4,254,800 – 4,319,200 0 1
44,000,001 – 44,500,000 5,673,000 – 5,737,500 0 1
46,000,001 – 46,500,000 5,930,900 – 5,995,400 1 0
46,500,001 – 47,000,000 5,995,400 – 6,059,800 1 0
49,000,001 – 49,500,000 6,317,700 – 6,382,200 1 0
53,000,001 – 53,500,000 7,413,600 – 7,478,100 0 1
85,500,001 – 86,000,000 11,217,100 – 11,281,600 1 0


Prudential plc
205
Annual Report 2020
Financial
statements
Contents
208 Index to Group IFRS financial statements
302 Parent company financial statements
304 Notes on the parent company financial statements
309 Statement of Directors’ responsibilities
310 Independent auditor’s report to Prudential plc
206 Prudential plc

207
Annual Report 2020
Prudential plc

Index to Group IFRS financial statements
Page
Primary statements
Consolidated income statement 209
Consolidated statement of comprehensive income 210
Consolidated statement of changes in equity 211
Consolidated statement of financial position 213
Consolidated statement of cash flows 214
Section Page Section Page

Notes to the primary statements C4 Intangible assets
A Basis of preparation and accounting policies C4.1 Goodwill 270
A1 Basis of preparation and exchange rates 215 C4.2 Deferred acquisition costs and other 271
A2 New accounting pronouncements in 2020 216 intangible assets
A3 Accounting policies 216 C5 Borrowings 274
A3.1 Critical accounting policies, estimates 216 C5.1 Core structural borrowings of 274
and judgements shareholder‑financed businesses
A3.2 New accounting pronouncements not yet effective 222 C5.2 Operational borrowings 274
C6 Risk and sensitivity analysis
B Earnings performance C6.1 Group overview 275
B1 Analysis of performance by segment C6.2 Sensitivity to equity interest rate risk 276
B1.1 Segment results 226 C6.3 Sensitivity to equity and property price risk 278
B1.2 Short-term fluctuations in investment returns 227 C6.4 Sensitivity to insurance risk 280
on shareholder-backed business C7 Tax assets and liabilities 280
B1.3 Determining operating segments and performance 228 C7.1 Current tax 280
measure of operating segments C7.2 Deferred tax 280
B1.4 Segmental income statement 231 C8 Share capital, share premium and own shares 282
B1.5 Other investment return 233 C9 Provisions 283
B1.6 Additional analysis of performance 233 C10 Capital
by segment components C10.1 Group objectives, policies and processes 283
B2 Acquisition costs and other expenditure 235 for managing capital
B2.1 Staff and employment costs 235 C10.2 Local capital regulations 284
B2.2 Share-based payment 236 C10.3 Transferability of available capital 285
B2.3 Key management remuneration 238 C11 Property, plant and equipment 286
B2.4 Fees payable to the auditor 238
B3 Tax charge 239 D Other information
B3.1 Total tax charge by nature 239 D1 Corporate transactions
B3.2 Reconciliation of shareholder effective tax rate 240 D1.1 Gain (loss) attaching to corporate transactions 287
B4 Earnings per share 241 D1.2 Equity investment by Athene into the US business 287
B5 Dividends 242 D1.3 Discontinued UK and Europe operations 288
D2 Contingencies and related obligations 289
C Financial position D3 Post balance sheet events 289
C1 Group assets and liabilities by business type 243 D4 Related party transactions 289
C1.1 Additional analysis of debt securities 247 D5 Commitments 290
C1.2 Additional analysis of US mortgage loans 250 D6 Investments in subsidiary undertakings,
C2 Fair value measurement 250 joint ventures and associates
C2.1 Determination of fair value 250 D6.1 Basis of consolidation 290
C2.2 Fair value measurement hierarchy of Group 251 D6.2 Dividend restrictions and minimum 292
assets and liabilities capital requirements
C2.3 Additional information on financial instruments 254 D6.3 Investments in joint ventures and associates 292
C3 Policyholder liabilities and unallocated surplus D6.4 Related undertakings 293
C3.1 Group overview 259
C3.2 Asia insurance operations 262
C3.3 US insurance operations 263
C3.4 Products and determining contract liabilities 265
208 Prudential plc

Consolidated income statement
Group overview
Note 2020 $m 2019 $m
Continuing operations:
Gross premiums earned 42,521 45,064
Outward reinsurance premiums B1.4 (32,209) (1,583)
Earned premiums, net of reinsurance B1.4 10,312 43,481
Investment return B1.4 44,991 49,555
Other income B1.4 670 700
Strategic report
Total revenue, net of reinsurance B1.4 55,973 93,736
Benefits and claims C3.1 (82,176) (85,475)
Reinsurers’ share of benefits and claims C3.1 34,409 2,985
Movement in unallocated surplus of with-profits funds C3.1 (438) (1,415)
Benefits and claims and movement in unallocated surplus of with-profits funds, net of reinsurance B1.4 (48,205) (83,905)
Acquisition costs and other expenditure B2 (5,481) (7,283)
Governance
Finance costs: interest on core structural borrowings of shareholder-financed businesses (337) (516)
Loss attaching to corporate transactions D1.1 (48) (142)
Total charges net of reinsurance B1.4 (54,071) (91,846)
Share of profit from joint ventures and associates, net of related tax D6.3 517 397
Profit before tax (being tax attributable to shareholders’ and policyholders’ returns) note 2,419 2,287
Remove tax charge attributable to policyholders’ returns (271) (365)

Profit before tax attributable to shareholders’ returns B1.1 2,148 1,922
Total tax charge attributable to shareholders’ and policyholders’ returns B3.1 (234) (334)
Remove tax charge attributable to policyholders’ returns 271 365
Tax credit attributable to shareholders’ returns B3.1 37 31
Profit from continuing operations 2,185 1,953
Loss from discontinued UK and Europe operations D1.3 – (1,161)
Profit for the year 2,185 792
Attributable to:
Equity holders of the Company
From continuing operations 2,118 1,944
From discontinued operations – (1,161)
Non-controlling interests from continuing operations 67 9
Profit for the year 2,185 792
Earnings per share (in cents) Note 2020 2019
Based on profit attributable to equity holders of the Company: B4

Basic
Based on profit from continuing operations 81.6¢ 75.1¢
Based on (loss) profit from discontinued operations – (44.8)¢
Total 81.6¢ 30.3¢
Diluted
Based on profit from continuing operations 81.6¢ 75.1¢
Based on (loss) profit from discontinued operations – (44.8)¢
Total 81.6¢ 30.3¢
Note
This measure is the formal profit before tax measure under IFRS Standards. It is not the result attributable to shareholders principally because total corporate tax of the Group includes those
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
of the Company under IAS 12. Consequently, the IFRS profit before tax measure is not representative of pre-tax profit attributable to shareholders as it is determined after deducting the cost
of policyholder benefits and movements in the liability for unallocated surplus of with-profits funds after adjusting for tax borne by policyholders.

Prudential plc
Consolidated statement of comprehensive income
Note 2020 $m 2019 $m
Profit for the year 2,185 1,953
Other comprehensive income (loss):
Items that may be reclassified subsequently to profit or loss
Exchange movements on foreign operations and net investment hedges:
Exchange movements arising during the year 233 152
Related tax – (15)
233 137
Valuation movements on available-for-sale debt securities:
Unrealised gains arising in the year:
Net unrealised gains on holdings arising during the year 3,271 4,208
Deduct net gains included in the income statement on disposal and impairment (554) (185)
2,717 4,023
Related change in amortisation of deferred acquisition costs C4.2 (41) (631)
Related tax (581) (713)
2,095 2,679
Impact of Jackson’s reinsurance transaction with Athene:
Gains recycled to the income statement on transfer of debt securities to Athene (2,817) –
Related change in amortisation of deferred acquisition costs C4.2 535 –
Related tax 479 –
(1,803) –
Total valuation movements on available-for-sale debt securities 292 2,679
Total items that may be reclassified subsequently to profit or loss 525 2,816
Items that will not be reclassified to profit or loss
Shareholders’ share of actuarial gains and losses on defined benefit pension schemes:
Net actuarial losses on defined benefit pension schemes – (108)
Related tax – 19
Total items that will not be reclassified to profit or loss – (89)
Total other comprehensive income 525 2,727
Total comprehensive income for the year from continuing operations 2,710 4,680
Total comprehensive income from discontinued UK and Europe operations D1.3 – 1,710
Total comprehensive income for the year 2,710 6,390
Attributable to:
From continuing operations 2,657 4,669
From discontinued operations – 1,710
Non-controlling interests from continuing operations 53 11
Total comprehensive income for the year 2,710 6,390
210 Prudential plc

Consolidated statement of changes in equity
Group overview
Year ended 31 Dec 2020 $m
Available-
for-sale Share- Non-
Share Share Retained Translation securities holders’ controlling Total
Note capital premium earnings reserve reserves equity interests equity
Reserves
Profit for the year – – 2,118 – – 2,118 67 2,185
Other comprehensive income (loss)
Strategic report
Exchange movements on foreign operations
and net investment hedges net of related tax – – – 239 – 239 (6) 233
Net unrealised valuation movements net of
related change in amortisation of deferred
acquisition costs and related tax – – – – 300 300 (8) 292
Total other comprehensive income for the year – – 2,118 239 300 2,657 53 2,710
Dividends – – (814) – – (814) (18) (832)
Governance
B5
Reserve movements in respect of share-based
payments – – 89 – – 89 – 89
Effect of transactions relating to non-controlling
interests D1.2 – – (484) – – (484) 1,014 530
Share capital and share premium
New share capital subscribed C8 1 12 – – – 13 – 13
Treasury shares

Movement in own shares in respect of share‑based
payment plans – – (60) – – (60) – (60)
Net increase in equity 1 12 849 239 300 1,401 1,049 2,450
Balance at 1 Jan 172 2,625 13,575 893 2,212 19,477 192 19,669
Balance at 31 Dec 173 2,637 14,424 1,132 2,512 20,878 1,241 22,119

Prudential plc
Consolidated statement of changes in equity / continued
Year ended 31 Dec 2019 $m

Available-
for-sale Share- Non-
Share Share Retained Translation securities holders’ controlling Total
Note capital premium earnings reserve* reserves equity interests equity
Reserves
Profit from continuing operations – – 1,944 – – 1,944 9 1,953
Other comprehensive income (loss) from
continuing operations:
Exchange movements on foreign operations
and net investment hedges net of related tax – – – 135 – 135 2 137
Net unrealised valuation movements net of
related change in amortisation of deferred
acquisition costs and related tax – – – – 2,679 2,679 – 2,679
Shareholders’ share of actuarial gains and
losses on defined benefit pension schemes
net of related tax – – (89) – – (89) – (89)
Total other comprehensive income (loss) from
continuing operations – – (89) 135 2,679 2,725 2 2,727
Total comprehensive income from continuing
operations – – 1,855 135 2,679 4,669 11 4,680
Total comprehensive income from discontinued
operations* – – (1,098) 2,808 – 1,710 – 1,710
Total comprehensive income for the year – – 757 2,943 2,679 6,379 11 6,390
Demerger dividend in specie of M&G plc B5 – – (7,379) – – (7,379) – (7,379)
Other dividends B5 – – (1,634) – – (1,634) – (1,634)
Reserve movements in respect of share-based
payments – – 64 – – 64 – 64
Effect of transactions relating to non-controlling
interests – – (143) – – (143) 158 15
Share capital and share premium
New share capital subscribed C8 – 22 – – – 22 – 22
Impact of change in presentation currency in
relation to share capital and share premium C8 6 101 – – – 107 – 107
Treasury shares
Movement in own shares in respect of share-
based payment plans – – 38 – – 38 – 38
Movement in Prudential plc shares purchased
by unit trusts consolidated under IFRS – – 55 – – 55 – 55
Net increase (decrease) in equity 6 123 (8,242) 2,943 2,679 (2,491) 169 (2,322)
Balance at 1 Jan 166 2,502 21,817 (2,050) (467) 21,968 23 21,991
Balance at 31 Dec 172 2,625 13,575 893 2,212 19,477 192 19,669
* The $2,808 million movement in translation reserve from discontinued operations was recognised in other comprehensive income and represented an exchange gain of $140 million on translating
the results from discontinued operations during the period of ownership in 2019 and the recycling of the cumulative exchange loss of $2,668 million through the profit or loss upon the demerger.
The Group’s accounting principles on foreign exchange translation are described in note A1.
212 Prudential plc

Consolidated statement of financial position
Group overview
31 Dec 2020 31 Dec 2019
Note $m $m
Assets
Goodwill C4.1 961 969
Deferred acquisition costs and other intangible assets C4.2 20,345 17,476
Property, plant and equipment C11 893 1,065
Reinsurers' share of insurance contract liabilities note (i) C3.1 46,595 13,856
Deferred tax assets C7.2 4,858 4,075
Strategic report
Current tax recoverable C7.1 444 492
Accrued investment income 1,427 1,641
Other debtors 3,171 2,054
Investment properties 23 25
Investments in joint ventures and associates accounted for using the equity method 1,962 1,500
Loans 14,588 16,583
Equity securities and holdings in collective investment schemes note (ii) 278,635 247,281
Governance
Debt securities note (ii) 125,829 134,570
Derivative assets 2,599 1,745
Other investments note (ii) 1,867 1,302
Deposits 3,882 2,615
Cash and cash equivalents 8,018 6,965
Total assets C1 516,097 454,214

Equity
Shareholders' equity 20,878 19,477
Non-controlling interests D1.2 1,241 192
Total equity C1 22,119 19,669
Liabilities
Insurance contract liabilities C3.1 436,787 380,143
Investment contract liabilities with discretionary participation features C3.1 479 633
Investment contract liabilities without discretionary participation features C3.1 3,980 4,902
Unallocated surplus of with-profits funds C3.1 5,217 4,750
Core structural borrowings of shareholder-financed businesses C5.1 6,633 5,594
Operational borrowings C5.2 2,444 2,645
Obligations under funding, securities lending and sale and repurchase agreements 9,768 8,901
Net asset value attributable to unit holders of consolidated investment funds 5,975 5,998
Deferred tax liabilities C7.2 6,075 5,237
Current tax liabilities 280 396
Accruals, deferred income and other creditors 15,508 14,488
Provisions C9 350 466
Derivative liabilities 482 392

Total liabilities C1 493,978 434,545
Total equity and liabilities C1 516,097 454,214
The parent company statement of financial position is presented on page 302.
Notes
(i) At 31 December 2020, reinsurers’ share of insurance contract liabilities included $27.3 billion in respect of the reinsurance of substantially all of Jackson’s in-force fixed and fixed index annuity
liabilities to Athene Life Re Ltd, as discussed in note D1.1.
(ii) Included within equity securities and holdings in collective investment schemes, debt securities and other investments as at 31 December 2020 are $2,007 million of lent securities and assets
subject to repurchase agreements (31 December 2019: $90 million of lent securities only).
The consolidated financial statements on pages 209 to 301 were approved by the Board of Directors on 2 March 2021. They were signed
on its behalf:
Shriti Vadera Mike Wells Mark FitzPatrick

Chair Group Chief Executive Group Chief Financial Officer and Chief Operating Officer

Prudential plc
Consolidated statement of cash flows
Note 2020 $m 2019 $m
Cash flows from operating activities
Profit before tax (being tax attributable to shareholders’ and policyholders’ returns) 2,419 2,287
Adjustments to profit before tax for non-cash movements in operating assets and liabilities:
Investments (19,875) (60,812)
Other non-investment and non-cash assets (35,633) (2,487)
Policyholder liabilities (including unallocated surplus of with-profits funds) 53,593 56,067
Other liabilities (including operational borrowings) 1,372 5,234
Investment income and interest payments included in profit before tax (5,059) (4,803)
Operating cash items:
Interest receipts and payments 4,191 4,277
Dividend receipts 1,297 978
Tax paid (555) (717)
Other non-cash items 216 (96)
Net cash flows from operating activities note (i) 1,966 (72)
Cash flows from investing activities
Purchases of property, plant and equipment C11 (59) (64)
Proceeds from disposal of property, plant and equipment 6 –
Acquisition of business and intangibles note (ii) (1,142) (635)
Disposal of businesses – 375
Net cash flows from investing activities (1,195) (324)
Cash flows from financing activities
Structural borrowings of shareholder-financed operations: note (iii) C5.1
Issuance of debt, net of costs 983 367
Redemption of subordinated debt – (504)
Fees paid to modify terms and conditions of debt issued by the Group – (182)
Interest paid (314) (526)
Payment of principal portion of lease liabilities (138) (137)
Equity capital:
Issues of ordinary share capital 13 22
Non-controlling equity investment by Athene into the US business D1.2 500 –
External dividends:
Dividends paid to the Company’s shareholders B5 (814) (1,634)
Dividends paid to non-controlling interests (18) –
Net cash flows from financing activities 212 (2,594)
Net increase (decrease) in cash and cash equivalents from continuing operations 983 (2,990)
Net cash flows from discontinued operations note (iv) D1.3 – (5,690)
Cash and cash equivalents at 1 Jan 6,965 15,442
Effect of exchange rate changes on cash and cash equivalents note (iv) 70 203
Cash and cash equivalents at 31 Dec 8,018 6,965
Notes
(i) Included in net cash flows from operating activities are dividends from joint ventures and associates of $118 million (2019: $85 million).
(ii) Cash flows arising from the acquisition of business and intangibles includes amounts paid for distribution rights.
(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:
Cash movements $m Non-cash movements $m

Foreign Demerger of
Balance at Issue of Redemption exchange UK and Europe Other Balance at
1 Jan debt of debt movement operations movements 31 Dec
2020 5,594 983 – 42 – 14 6,633

2019 9,761 367 (504) 116 (4,161) 15 5,594
(iv) The 2019 cash flows shown in the statement of cash flow above are presented excluding any transactions between continuing and discontinued operations. The 2019 effect of exchange rate
changes included $78 million from discontinued operations up to demerger. See note D1.3 for details.
214 Prudential plc

A Basis of preparation and accounting policies
Group overview
A1 Basis of preparation and exchange rates
Prudential plc (‘the Company’) together with its subsidiaries (collectively, ‘the Group’ or ‘Prudential’) is an Asia-led portfolio of businesses focused
on structural growth markets. The Group currently has businesses in Asia, Africa and the US and head office functions in London and Hong Kong.
The Group helps individuals get the most out of life through life and health insurance, and retirement and asset management solutions.
Basis of preparation
These consolidated financial statements have been prepared in accordance with IFRS Standards as issued by the IASB, the international
Strategic report
accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. At 31 December 2020, there were no
differences between IFRS Standards as issued by the IASB, the international accounting standards as required by the Companies Act 2006
and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
The Group accounting policies are the same as those applied for the year ended 31 December 2019 with the exception of the adoption
of the new and amended IFRS Standards as described in note A2.
Governance
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 that these 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 it which are described in the Group Chief Risk
and Compliance Officer’s report. The assessment also includes the consideration of the results of a number of stress and scenario testing over the
business plan covering scenarios that reflect the possible impacts of Covid-19. The stress tests included the assessment of the potential impact of
up or down interest rate movements combined with corporate credit spread widening, a rating level downgrade on part of the credit asset portfolio,
falling equity values and insurance stresses (such as changes in policyholder behaviour, including lapses, and increased morbidity in Asia).

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 that these 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 financial statements for the year ended 31 December 2020.
The parent company statement of financial position prepared in accordance with the UK Generally Accepted Accounting Practice (including
Financial Reporting Standard 101 ‘Reduced Disclosure Framework’) is presented on page 302.
Exchange rates
The exchange rates applied for balances and transactions in currencies other than the presentation currency of the Group, US dollars (USD) were:
Closing rate at year end Average rate for the year to date
USD : local currency 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019
Chinese yuan (CNY) 6.54 6.97 6.90 6.91

Hong Kong dollar (HKD) 7.75 7.79 7.76 7.84
Indian rupee (INR) 73.07 71.38 74.12 70.43
Indonesian rupiah (IDR) 14,050.00 13,882.50 14,541.70 14,140.84
Malaysian ringgit (MYR) 4.02 4.09 4.20 4.14
Singapore dollar (SGD) 1.32 1.34 1.38 1.36
Taiwan dollar (TWD) 28.10 29.98 29.44 30.91
Thai baht (THB) 30.02 29.75 31.29 31.05

UK pound sterling (GBP) 0.73 0.75 0.78 0.78
Vietnamese dong (VND) 23,082.50 23,172.50 23,235.84 23,227.64
Foreign exchange translation

In order to present the consolidated financial statements in USD, the results and financial position of entities not using USD as functional currency
(ie the currency of the primary economic environment in which the entity operates) must be translated into USD. The general principle for
converting foreign currency transactions is to translate at the functional currency spot rate prevailing at the date of the transactions. From 2020,
Prudential determines and declares its dividend in USD. All assets and liabilities of entities not operating in USD are converted at closing exchange
rates while all income and expenses are converted at average exchange rates where this is a reasonable approximation of the rates prevailing
on transaction dates. The impact of these currency translations is recorded as a separate component in the statement of comprehensive income.
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 consolidated financial statements. AER are actual historical exchange rates for the specific
accounting year, being the average rates over the year for the income statement and the closing rates at the balance sheet date for the statement
of financial position. CER results are calculated by translating prior year results using the current year foreign exchange rate, ie current year
average rates for the income statement and current year closing rates for the statement of financial position.
The effect of foreign exchange movements from continuing operations arising during the years shown recognised in other comprehensive
income is:
2020 $m 2019 $m
Asia operations 235 194

Unallocated to a segment (2) (42)
233 152

Prudential plc
215
Annual Report 2020
A Basis of preparation and accounting policies / continued
A2 New accounting pronouncements in 2020
The IASB has issued the following new accounting pronouncements to be effective from 1 January 2020:
—— Amendments to IAS 1 and IAS 8 ‘Definition of Material’;
—— Amendment to IFRS 3 ‘Business Combinations’;
—— Amendments to IFRS 7, IFRS 9 and IAS 39 ‘Interest Rate Benchmark Reform’; and
—— Amendments to IFRS 16, ‘Covid-19-Related Rent Concessions’, effective from 1 June 2020.
The adoption of these pronouncements have had no significant impact on the Group financial statements.
A3 Accounting policies
Note A3.1 presents the critical accounting policies, estimates and judgements applied in preparing the Group’s consolidated financial statements.
Other accounting policies, where significant, are presented in the relevant individual notes. All accounting policies are applied consistently for
both years presented and normally are not subject to changes unless new accounting standards, interpretations or amendments are introduced
by the IASB.
A3.1 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 long-term 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 policyholder liabilities and unallocated surplus of with-profits

The measurement basis of policyholder IFRS 4 permits the continued usage of previously applied Generally Accepted Accounting
liabilities is dependent upon the classification Practices (GAAP) for insurance contracts and investment contracts with discretionary
of the contracts under IFRS 4. participating features.
Impacts $462.1 billion of policyholder A modified statutory basis of reporting was adopted by the Group on first time adoption of
liabilities and unallocated surplus of with- IFRS Standards in 2005. This was set out in the Statement of Recommended Practice issued
profits funds including those held by joint by the Association of British Insurers (ABI SORP). The ABI SORP was withdrawn for the
venture and associates. accounting periods beginning in or after 2015. As used in these consolidated financial
statements, the term ‘grandfathered’ ABI SORP refers to the requirements of the
Policyholder liabilities are estimated based
pronouncements prior to its withdrawal.
on a number of actuarial assumptions
(eg mortality, morbidity, policyholder For investment contracts that do not contain discretionary participating features, IAS 39
behaviour and expenses). is applied and, where the contract includes an investment management element, IFRS 15
‘Revenue from Contracts with Customers’ applies.
The Group applies judgement in determining
the actuarial assumptions to be applied to The policies applied in each business unit are noted below. When measuring policyholder
estimate the future amounts due to or from liabilities, a number of assumptions are applied to estimate future amounts due to or from the
the policyholder in the measurement of the policyholder. The nature of assumptions varies by product and among the most significant is
policyholder liabilities. policyholder behaviour, particularly in the US. Additional details of valuation methodologies
and assumptions applied for material product types are discussed in note C3.4.
Measurement of insurance contract liabilities Asia insurance operations
and investment contract liabilities with The policyholder liabilities for businesses in Asia are generally determined in accordance with
discretionary participation features methods prescribed by local GAAP, adjusted to comply with the modified statutory basis where
necessary. Refinements to the local reserving methodology are generally treated as changes in
estimates, dependent on their nature. The UK-style with-profits funds’ liabilities in Hong Kong
are valued under the realistic basis in accordance with the requirements of ‘grandfathered’
FRS 27 ‘Life Assurance’ (issued by the Accounting Standards Board in 2004 and withdrawn
in 2015). The realistic basis requires the value of liabilities to be calculated as the sum of a
with-profits benefits reserve, future policy-related liabilities and the realistic current liabilities
of the fund. In Taiwan and India, US GAAP principles are applied.
The sensitivity of Asia insurance operations to variations in key estimates and assumptions,
including mortality and morbidity, is discussed in note C6.4.
216 Prudential plc

Group overview
Measurement of policyholder liabilities and unallocated surplus of with-profits continued
US insurance operations (Jackson)
The policyholder liabilities for Jackson’s conventional protection-type policies are determined
under US GAAP principles with locked in assumptions for mortality, interest, policy lapses
and expenses along with provisions for adverse deviations. For other policies, the policyholder
liabilities include the policyholder account balance.
Strategic report
For those investment contracts in the US with fixed and guaranteed terms, the Group uses
the amortised cost model to measure the liability. The US has no investment contracts with
discretionary participation features.
The sensitivity of US insurance operations to variations in key estimates and assumptions,
including policyholder behaviour, is discussed in note C6.4.
Measurement of investment contract Investment contracts without discretionary participation features are measured in accordance
Governance
liabilities without discretionary with IAS 39 to reflect the deposit nature of the arrangement, with premiums and claims
participation features reflected as deposits and withdrawals, and taken directly to the statement of financial position
as movements in the financial liability balance.
Investment contracts without fixed and guaranteed terms are classified as financial instruments
and designated as fair value through profit or loss because the resulting liabilities are managed
and their performance is evaluated on a fair value basis. Where the contract includes a surrender
option, its carrying value is subject to a minimum carrying value equal to its surrender value.

Other investment contracts are measured at amortised cost.
Measurement of unallocated surplus Unallocated surplus of with-profits funds represents the excess of assets over policyholder
of with-profits funds liabilities, determined in accordance with the Group’s accounting policies, that have yet to
be appropriated between policyholders and shareholders for the Group’s with-profits funds
in Hong Kong and Malaysia. The unallocated surplus is recorded wholly as a liability with
no allocation to equity. The annual excess or shortfall of income over expenditure of the
with-profits funds, after declaration and attribution of the cost of bonuses to policyholders
and shareholders, is transferred to or from the unallocated surplus each period through a
charge or credit to the income statement. The balance retained in the unallocated surplus
represents cumulative income arising on the with-profits business that has not been allocated
to policyholders or shareholders. The balance of the unallocated surplus is determined after
full provision for deferred tax on unrealised appreciation or depreciation on investments.
Liability adequacy test The Group performs adequacy testing on its insurance liabilities to ensure that the carrying
amounts (net of related deferred acquisition costs) and, where relevant, present value of
acquired in-force business is sufficient to cover current estimates of future cash outflows.
Any deficiency is immediately charged to the income statement.
Jackson’s liabilities for insurance contracts, which include those for separate accounts

(reflecting the value of the related separate account assets), policyholder account values and
guarantees measured as described in note C3.4 and the associated deferred acquisition cost
asset, are measured under US GAAP and liability adequacy testing is performed in this context.
Under US GAAP, most of Jackson’s products are accounted for under Accounting Standards
Codification Topic 944, Financial Services – Insurance of the Financial Accounting Standards
Board (ASC 944) whereby deferred acquisition costs are amortised in line with expected gross
profits. Recoverability of the deferred acquisition costs in the balance sheet is tested against
the projected value of future profit using current estimates and therefore no additional liability
adequacy test is required under IFRS 4. The deferred acquisition cost asset recoverability test
is performed in line with US GAAP requirements, which in practice is at a grouped level of those
contracts managed together.

Prudential plc
217
Annual Report 2020
A3 Accounting policies continued
A3.1 Critical accounting policies, estimates and judgements continued

(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 The total tax charge for the Group reflects tax that, in addition to that relating to shareholders’
statement item. The Group has chosen profit, is also attributable to policyholders through the interest in with-profits or unit-linked
to present a measure of profit before tax funds. Further detail is provided in note B3. Reported IFRS profit before the tax measure is
attributable to shareholders which therefore not representative of pre-tax profit attributable to shareholders. Accordingly, in order
distinguishes between tax borne by to provide a measure of pre-tax profit attributable to shareholders, the Group has chosen to
shareholders and tax attributable to adopt an income statement presentation of the tax charge and pre-tax results that distinguishes
policyholders to support understanding between policyholders’ and shareholders’ returns.
of the performance of the Group.
Profit before tax attributable to shareholders
is $2,148 million and compares to profit before
tax of $2,419 million.
Segmental analysis of results and earnings attributable to shareholders
The Group uses adjusted operating profit The basis of calculation of adjusted operating profit is provided in note B1.3.
as the segmental measure of its results.
For shareholder-backed business, with the exception of debt securities held by Jackson and
Total segmental adjusted operating profit the Group’s treasury company, which are treated as available-for-sale, and assets classified
is $6,463 million and is shown in note B1.1. as loans and receivables at amortised cost, all financial investments and investment properties
are designated as assets at fair value through profit or loss. Short-term fluctuations in fair value
affect the result for the year and the Group 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. The effects of short-term fluctuations include
asymmetric impacts where the measurement bases of the liabilities and associated derivatives
used to manage the Jackson annuity business differ as described in note B1.2.
Short-term fluctuations in investment returns on assets held by with-profits funds in
Hong Kong, Malaysia and Singapore do not affect directly reported shareholder results.
This is because (i) the unallocated surplus of with-profits funds is accounted for as a liability
and (ii) excess or deficit of income and expenditure of the funds over the required surplus for
distribution are transferred to or from policyholder liabilities (including the unallocated surplus).
Measurement and presentation of derivatives and debt securities of US insurance operations (Jackson)
Jackson holds a number of derivative Jackson enters into derivative instruments to mitigate economic exposures. The Group has
instruments and debt securities. The selection considered whether it is appropriate to undertake the necessary operational changes to qualify
of the accounting approach for these items for hedge accounting so as to achieve matching of value movements in hedging instruments
significantly affects the volatility of profit and hedged items in the performance statements. The key factors considered in this
before tax. assessment were the complexity of asset and liability matching in Jackson’s product range
and the difficulty and cost of applying the macro hedge provisions under IAS 39 (which are
$457 million of the US investment return
more suited to banking arrangements) to Jackson’s derivative book.
in the income statement arises from such
derivatives and debt securities. The Group has decided that, except for occasional circumstances, applying hedge accounting
using IAS 39 to derivative instruments held by Jackson would not improve the relevance or
reliability of the financial statements to such an extent that would justify the difficulty and cost
of applying these provisions. As a result of this decision, the total income statement results are
more volatile as the movements in the fair value of Jackson’s derivatives are reflected within it.
This volatility is reflected in the level of short-term fluctuations in investment returns, as shown
in notes B1.1 and B1.2.
Under IAS 39, unless carried at amortised cost (subject to impairment provisions where
appropriate) under the held-to-maturity category, debt securities are carried at fair value.
The Group has chosen not to classify any financial assets as held-to-maturity. Debt securities
of Jackson are designated as available-for-sale with value movements, unless impaired, being
recorded as movements within other comprehensive income. Impairments are recorded
in the income statement, as discussed in note (c) below.
218 Prudential plc

(c) Other items requiring application of critical estimates or judgements
Group overview
Deferred acquisition costs (DAC) for insurance contracts
The Group estimates projected future profits/ Costs of acquiring new insurance business are accounted for in a way that is consistent with the
margins to assess whether adjustments to the principles of the ‘grandfathered’ ABI SORP with deferral and amortisation against margins in
carrying value or amortisation profile of DAC future revenues on the related insurance policies. The Group determines qualifying costs that
asset are necessary. should be capitalised (ie those costs of acquiring new insurance contracts that meet the criteria
Strategic report
under the Group’s accounting policy for DAC). The recoverability of the DAC is measured
Impacts $16.2 billion of DAC as shown
and the DAC asset is deemed impaired if the projected margins (which are estimated based
in note C4.2.
on a number of assumptions similar to those underlying policyholder liabilities) are less than
the carrying value. To the extent that the future margins differ from those anticipated,
an adjustment to the carrying value will be necessary either through a charge to the income
statement (if the projected margins are lower than carrying value) or through a change in the
amortisation profile.
Governance
Asia insurance operations
For those business units applying US GAAP to insurance assets and liabilities, as permitted by
the ‘grandfathered’ ABI SORP, principles similar to those set out in the US insurance operations
paragraph below are applied to the deferral and amortisation of acquisition costs. For other
business units in Asia, the general principles of the ‘grandfathered’ ABI SORP are applied.
In general, deferral of acquisition costs is shown by an explicit carrying value in the balance
sheet. However, in some Asia operations the deferral is implicit through the reserving basis.

US insurance operations
The most material estimates and assumptions applied in the measurement and amortisation
of DAC balances relate to the US insurance operations.
The Group’s US insurance operations apply FASB ASU 2010-26 on ‘Accounting for Costs
Associated with Acquiring or Renewing Insurance Contracts’ and capitalise only those
incremental costs directly relating to successfully acquiring a contract.
For term life business, acquisition costs are deferred and amortised in line with expected
premiums. For annuity and interest-sensitive life business, acquisition costs are deferred and
amortised in line with expected gross profits on the relevant contracts. For fixed and fixed
index annuity and interest-sensitive life business, the key assumption is the long-term spread
between the earned rate on investments and the rate credited to policyholders.
The majority of Jackson’s DAC relates to its variable annuities business. For variable annuity
business, a key assumption is the long-term investment return from the separate accounts,
which for 2020 is 7.15 per cent (2019: 7.4 per cent). The impact of using this return is reflected
in two principal ways, namely:
—— Through the projected expected gross profits that are used to determine the amortisation
of DAC. This is applied through the use of a mean reversion technique which is described

in more detail below; and
—— The required level of provision for claims for guaranteed minimum death, ‘for life’
withdrawal, and income benefits.
The present value of the estimated gross profit is computed using the rate of interest that
accrues to policyholder balances (sometimes referred to as the contract rate).
Estimated gross profits for the fixed interest rate annuities, fixed index annuities and variable
annuities include estimates of the following, each of which will be determined based on the best
estimate of amounts over the life of the book of contracts without provision for adverse deviation:
—— Amounts expected to be assessed against policyholder balances for mortality less benefit
claims in excess of related policyholder balances;
—— Amounts expected to be assessed for contract administration less costs incurred for
contract administration;
—— Amounts expected to be earned from the investment of policyholder balances less interest
credited to policyholder balances;
—— Amounts expected to be assessed against policyholder balances upon termination

of contracts (sometimes referred to as surrender charges);
—— Assumptions for the long-term investment return for the separate accounts;
—— Assumptions for future hedge costs; and
—— Other expected assessments and credits.

Prudential plc
219
Annual Report 2020
A3.1 Critical accounting policies, estimates and judgements continued
Deferred acquisition costs (DAC) for insurance contracts continued

Jackson uses a mean reversion methodology that sets the projected level of return for each
of the next five years such that these returns in combination with the actual rates of return for
the preceding three years (including the current year) average the assumed long-term annual
return (gross of asset management fees and other charges to policyholders, but net of external
fund management fees) over the eight-year period. Projected returns after the mean reversion
period revert back to the long-term investment return. For further details on current balances,
assumptions and sensitivity, refer to note C4.2.
To ensure that the methodology in extreme market movements produces future expected
returns that are realistic, the mean reversion technique has a cap and floor feature whereby
the projected returns in each of the next five years can be no more than 15 per cent per annum
and no less than zero per cent per annum (both gross of asset management fees and other
charges to policyholders, but net of external fund management fees) in each year.
Jackson makes certain adjustments to the DAC assets which are recognised directly in other
comprehensive income (‘shadow accounting’) to match the recognition of unrealised gains or
losses on available-for-sale securities causing the adjustments. More precisely, shadow DAC
adjustments reflect the change in DAC that would have arisen if the assets held in the statement
of financial position had been sold, crystallising unrealised gains or losses, and the proceeds
reinvested at the yields currently available in the market.
Carrying value of distribution rights intangible assets
The Group applies judgement to assess Distribution rights relate to bancassurance partnership arrangements for the distribution of
whether factors such as the financial products for the term of the contractual agreement with the bank partner, for which an asset
performance of the distribution arrangement, is recognised based on fees paid (including fees payable in future years). Distribution rights
changes in relevant legislation and regulatory impairment testing is conducted when there is an indication of impairment.
requirements indicate an impairment
To assess indicators of an impairment, the Group monitors a number of internal and external
of intangible assets representing
factors, including indications that the financial performance of the arrangement is likely to be
distribution rights.
worse than expected and changes in relevant legislation and regulatory requirements that
To determine the impaired value, the Group could impact the Group’s ability to continue to sell new business through the bancassurance
estimates the discounted future expected channel, and then applies judgement to assess whether these factors indicate that an
cash flows arising from distribution rights. impairment has occurred.
Affects $4.0 billion of assets as shown If an impairment has occurred, a charge is recognised in the income statement for the difference
in note C4.2. 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 The Group holds the majority of its financial investments at fair value (either through profit
represent $412.8 billion of the Group’s or loss or available-for-sale). Financial investments held at amortised cost primarily comprise
total assets. loans and deposits.
Financial investments held at amortised Determination of fair value
cost represent $14.6 billion of the Group’s The fair values of the financial instruments for which fair valuation is required under IFRS
total assets. Standards are determined by the use of current market bid prices for exchange-quoted
investments or by using quotations from independent third parties such as brokers and pricing
The Group estimates the fair value of financial
services or by using appropriate valuation techniques.
investments that are not actively traded using
quotations from independent third parties The estimated fair value of derivative financial instruments reflects the estimated amount the
or internally developed pricing models. 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.
Current market bid 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.
220 Prudential plc

Group overview
Financial investments – Valuation continued
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
Strategic report
the measurement date. The valuation techniques include the use of recent arm’s-length
transactions, reference to other instruments that are substantially the same, discounted cash
flow analysis, option-adjusted spread models and, if applicable, enterprise valuation and may
include a number of assumptions relating to variables such as credit risk and interest rates.
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
Governance
a change in the valuation of these items, are presented in note C2.2(ii).
Financial investments – Determining impairment of ‘available-for-sale’ and ‘amortised cost’ assets
The Group applies judgement to assess For financial investments classified as ‘available for sale’ or ‘at amortised cost’, if a loss event
whether factors such as the severity and that will have a detrimental effect on cash flows is identified, an impairment loss is recognised
duration of the decline in fair value, the in the income statement. The loss recognised is determined as the difference between the
financial condition and the prospects of the book cost and the fair value or estimated future cash flows of the relevant impaired assets.

issuer indicate an impairment in value of The loss comprises the effect of the expected loss of contractual cash flows and any additional
financial investments classified as ‘available- market-price driven temporary reductions in values.
for-sale’ or ‘held at amortised cost’.
Available-for-sale securities
If evidence for impairment exists, valuation The Group’s available-for-sale securities are principally held by the US insurance operations.
techniques, including estimates, are then For these securities, the consideration of evidence of impairment requires management’s
applied in determining the impaired value, judgement. In making this determination, a range of market and industry indicators are
which is based on its expectation of considered including the severity and duration of the decline in fair value and the financial
discounted future cash flows. If the impaired condition and prospects of the issuer. The factors reviewed include economic conditions, credit
value is less than book cost, an impairment loss experience, other issuer-specific developments and future cash flows. These assessments
loss is recognised in the income statement. are based on the best available information at the time. Factors such as market liquidity,
the widening of bid/ask spreads and a change in cash flow assumptions can contribute to
Affects $49.3 billion of assets.
future price volatility. If actual experience differs negatively from the assumptions and other
considerations used in the consolidated financial statements, unrealised losses currently
in equity may be recognised in the income statement in future periods.
For US residential mortgage-backed and other asset-backed securities, all of which are
classified as available-for-sale, impairment is estimated using a model of expected future
cash flows. Key assumptions used in the model include assumptions about how much
of the currently delinquent loans will eventually default and assumed loss severity.

Additional details on the methodology and estimates used to determine impairments
of the available-for-sale securities of Jackson are described in note C1.1.
Assets held at amortised cost
When assets held at amortised cost are subject to impairment testing, estimated future cash
flows are compared to the carrying value of the asset. In estimating future cash flows, the Group
looks at the expected cash flows of the assets and applies historical loss experience of assets
with similar credit risks that has been adjusted for conditions in the historical loss experience
which no longer exist, or for conditions that are expected to arise. The estimated future cash
flows are discounted using the financial asset’s original or variable effective interest rate and
exclude credit losses that have not yet been incurred.
Reversal of impairment losses
If, in subsequent periods, an impaired debt security held on an available-for-sale basis or
an impaired loan or receivable recovers in value (in part or in full) and this recovery can be
objectively related to an event occurring after the impairment, then any amount determined
to have been recovered is reversed through the income statement.

Prudential plc
221
Annual Report 2020
A3.2 New accounting pronouncements not yet effective

The following standards, interpretations and amendments have been issued by the IASB but are not yet effective in 2020. For 2021 and beyond,
the Group will prepare financial statements in accordance with UK-adopted international accounting standards and will be reliant on the UK
adoption for the new accounting pronouncements that have not been endorsed by the EU by 31 December 2020.
This is not intended to be a complete list as only those standards, interpretations and amendments that could have a material impact on the
Group’s financial statements are discussed.
IFRS 9 ‘Financial instruments: Classification and measurement’

IFRS 9 became mandatorily effective for the annual periods beginning on or after 1 January 2018, with early application permitted and transitional
rules apply.
The Group met the eligibility criteria for temporary exemption under the Amendments to IFRS 4 from applying IFRS 9 and has accordingly
deferred the adoption of IFRS 9 until the date when IFRS 17 ‘Insurance Contracts’ is expected to be adopted upon its current mandatory effective
date. The Group is eligible as its activities are predominantly to issue insurance contracts based on the criteria as set out in the amendments to
IFRS 4. The required disclosure of the fair value of the Group’s financial assets, showing the amounts for instruments that meet the ‘Solely for
Payment of Principal and Interest’ (SPPI) criteria but do not meet the definition of held for trading and are not managed and evaluated on a fair
value basis separately from all other financial assets, is provided below.
When adopted IFRS 9 replaces the existing IAS 39 ‘Financial Instruments – Recognition and Measurement’ and will affect 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.
Under IAS 39, 88 per cent of the Group’s investments are valued at FVTPL and the Group’s current expectation is that a significant proportion
of its investments will continue to be designated as such under IFRS 9. The Group is currently evaluating whether some of the assets held at
amortised cost today should be designated at FVTPL in conjunction with the required changes in classification to the relevant underlying
liabilities upon adoption of IFRS 17.
The existing IAS 39 amortised cost measurement for financial liabilities is largely maintained under IFRS 9. For financial liabilities designated
at FVTPL IFRS 9 requires changes in fair value due to changes in entity’s own credit risk to be recognised in other comprehensive income.
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 replaces the existing IAS 39 incurred loss impairment model, resulting in
earlier recognition of credit losses compared to IAS 39. This aspect is the most complex area of IFRS 9 to implement and will involve significant
judgements and estimation processes. The Group is currently assessing the scope of assets to which these requirements will apply but as noted
above it is currently expected that the majority of assets will be held at FVTPL to which these requirements will not apply.
The hedge accounting requirements which are more closely aligned with the risk management activities of the Company
No significant change to the Group’s hedge accounting is currently anticipated, but this remains under review.
The Group is assessing the impact of IFRS 9 and implementing this standard in conjunction with IFRS 17 as permitted. Further details
on IFRS 17 are provided below.
The parent company and a number of intermediate holding companies in the UK and non-insurance subsidiaries in Asia adopted IFRS 9
in 2018 in their individual or separate financial statements where these statements are prepared in accordance with IFRS, including the UK
Financial Reporting Standard 101 ‘Reduced Disclosure Framework’. The public availability of the financial statements for these entities varies
according to the local laws and regulations of each jurisdiction. The results for these entities continue to be accounted for on an IAS 39 basis
in these consolidated financial statements.
The fair value of the Group’s directly held financial assets at 31 December 2020 and 2019 are shown below. Financial assets with contractual
terms that give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) as defined by IFRS 9 are shown
separately. This excludes financial assets that meet the definition of held for trading or are managed and evaluated on a fair value basis.
222 Prudential plc

Group overview
Financial assets that pass All other financial assets,
the SPPI test net of derivative liabilities
Movement in Movement in
Fair value at the fair value Fair value at the fair value
31 Dec 2020 during 2020 31 Dec 2020 during 2020
Financial assets, net of derivative liabilities $m $m $m $m
Accrued investment income 1,428 – – –

Other debtors 3,248 – – –
Strategic report
Loans note (1) 11,302 154 3,905 3
Equity securities and holdings in collective investment schemes – – 278,635 33,515
Debt securities note (2) 32,991 3,194 92,837 6,817
Derivative assets, net of derivative liabilities – – 2,117 (3,683)
Other investments – – 1,866 (36)
Deposits 3,882 – – –
Cash and cash equivalents 8,018 – – –
Governance
Total financial assets, net of derivative liabilities 60,869 3,348 379,360 36,616
Financial assets that All other financial assets,

pass the SPPI test net of derivative liabilities
31 Dec 2019 during 2019 31 Dec 2019 during 2019
Financial assets, net of derivative liabilities $m $m $m $m

Accrued investment income 1,641 – – –
Other debtors 2,054 – – –
Loans note (1) 13,484 517 3,614 2
Debt securities note (2) 56,365 4,114 78,205 5,594
Derivative assets, net of derivative liabilities – – 1,353 (5,825)
Other investments – – 1,302 44
Deposits 2,615 – – –
Cash and cash equivalents 6,965 – – –
Total financial assets, net of derivative liabilities 83,124 4,631 331,755 44,065
Notes
(1) The loans that pass the SPPI test in the table above are primarily carried at amortised cost under IAS 39. Further information on these loans is as provided in note C1.
(2) The debt securities that pass the SPPI test in the table above are primarily held by Jackson and are classified as available-for-sale under IAS 39. The credit ratings of these securities, analysed
on the same basis of those disclosed in note C1, are as follows:
31 Dec 2020 31 Dec 2019
Available-for-sale debt securities that pass the SPPI test $m $m
AAA 1,058 1,117

AA+ to AA- 6,830 11,328
A+ to A- 6,904 15,140
BBB+ to BBB- 9,812 17,972

Below BBB- and unrated 8,387 10,808
Total fair value 32,991 56,365 Additional information

Prudential plc
A3.2 New accounting pronouncements not yet effective continued

The underlying financial assets of the Group’s joint ventures and associates accounted for using the equity method are analysed below into those
which meet the SPPI condition of IFRS 9, excluding any financial assets that meet the definition of held for trading or are managed and evaluated
on a fair value basis, and all other financial assets. Fair value information for joint ventures and associates is also set out in the table below:

Financial assets, net of derivative liabilities, held by the Group’s joint ventures and associates 31 Dec 2020 during 2020 31 Dec 2020 during 2020
accounted for using the equity method $m $m $m $m
Accrued investment income 156 – – –

Other debtors 310 – – –
Loans 269 – – –
Debt securities – – 7,741 102
Deposits 777 – – –
Cash and cash equivalents 582 – – –
Total financial assets, net of derivative liabilities 2,094 – 15,690 1,134

Financial assets, net of derivative liabilities, held by the Group’s joint ventures and associates 31 Dec 2019 during 2019 31 Dec 2019 during 2019
accounted for using the equity method $m $m $m $m
Accrued investment income 161 – – –

Other debtors 329 – – –
Loans 197 – – –
Equity securities and holdings in collective investment schemes – – 5,999 444
Debt securities – – 6,080 86
Deposits 521 – – –
Cash and cash equivalents 513 – – –
Total financial assets, net of derivative liabilities 1,721 – 12,079 530
IFRS 17 ‘Insurance Contracts’

In May 2017, the IASB issued IFRS 17 ‘Insurance Contracts’ to replace the existing IFRS 4 ‘Insurance Contracts’. In June 2020, the IASB issued
amendments to IFRS 17, including delaying the effective date to reporting periods on or after 1 January 2023. The standard is subject to
endorsement in the UK via the UK Endorsement Board which is currently being established. The Group intends to adopt the new standard
on its mandatory effective date, alongside the adoption of IFRS 9.
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 for all insurance contracts.
IFRS 17 requires liabilities for insurance contracts to be recognised as the present value of future cash flows, incorporating an explicit risk
adjustment, which is updated at each reporting date to reflect current conditions, and a contractual service margin (CSM) that is initially set
equal and opposite to any day-one gain arising on initial recognition. Losses are recognised directly into the income statement. For measurement
purposes, contracts are grouped together into contracts of similar risk, profitability profile and issue year, with further divisions for contracts
that are managed separately.
Profit for insurance contracts under IFRS 17 is represented by the recognition of the services provided to policyholders in the period
(release of the CSM), release from non-economic risk (release of risk adjustment) and investment profit.
The CSM is released as profit over the coverage period of the insurance contract, reflecting the delivery of services to the policyholder.
For certain contracts with participating features (where a substantial share of the fair value of the related investments and other underlying
items is paid to policyholders), the CSM reflects the variable fee to shareholders. For these contracts, the CSM is adjusted to reflect the changes
in economic experience and assumptions. For all other contracts the CSM is only adjusted for non-economic assumptions.
IFRS 17 introduces a new measure of insurance revenue, based on the delivery of services to policyholders and excluding any premiums
related to the investment elements of policies, which will be significantly different from existing premium revenue measures, currently reported
in the income statement.
In order to transition to IFRS 17, the amount of deferred profit, being the CSM at transition date, needs to be determined. IFRS 17 requires
this CSM to be calculated as if the standard had applied retrospectively. However, if this is not practical an entity is required to choose either
a modified retrospective approach or to determine the CSM by reference to the fair value of the liabilities at the transition date. The approach
for determining the CSM will have a significant impact on both shareholders’ equity and on the amount of profits on in-force business in future
reporting periods.
224 Prudential plc

IFRS 17 implementation programme
Group overview
IFRS 17 is expected to have a significant impact as the requirements of the new standard are complex and requires a fundamental change to
accounting for insurance contracts as well as the application of significant judgement and new estimation techniques. The effect of changes
required to the Group’s accounting policies as a result of implementing these standards, that are expected to alter the timing of IFRS profit
recognition, are currently uncertain, particularly as amendments were issued by the IASB in June 2020 to IFRS 17. The implementation of
this standard will involve significant enhancements to IT, actuarial and finance systems of the Group.
The Group has a Group-wide implementation programme to implement IFRS 17 and IFRS 9. The programme is responsible for setting
Group-wide accounting policies and developing application methodologies, establishing appropriate processes and controls, sourcing
Strategic report
appropriate data and implementing actuarial and finance system changes.
A Group-wide Steering Committee, chaired by the Group Chief Financial Officer and Chief Operating Officer with participation from
the Group Risk function and the Group’s and business units’ senior finance managers, provides oversight and strategic direction to the
implementation programme. A number of sub-committees are also in place to provide governance over the technical interpretation and
accounting policies selected, design and delivery of the programme. During 2020, the Group has made significant progress with the
development of the accounting policies and application methodologies and the build of the actuarial and finance systems. The Group
is also assessing the IASB amendments issued in June 2020 and incorporating the changes into the delivery of the programme.
Governance
Other new accounting pronouncements
In addition to the above, the following new accounting pronouncements have also been issued and are not yet effective but the Group
is not expecting them to have a significant impact on the Group’s financial statements:
—— Amendments to IFRS 9, IAS 39 and IFRS 7 and IFRS 16 ‘Interest rate benchmark reform – phase 2’ issued in August 2020 and effective
from 1 January 2021;
—— Amendments to IAS 16, ‘Property, Plant and Equipment: Proceeds before intended use’ issued in May 2020 and effective from

1 January 2022;
—— Reference to the Conceptual Framework – Amendments to IFRS 3, ‘Business combination’ issued in May 2020 and effective from
1 January 2022;
—— Amendments to IAS 37 ‘Onerous contracts – Cost of fulfilling a contract’ issued in May 2020 and effective from 1 January 2022;
—— Annual Improvements to IFRS Standards 2018–2020 issued in May 2020 and effective from 1 January 2022;
—— Amendments to IAS 1 ‘Classification of liabilities as current or non-current’ issued in January 2020 and effective from 1 January 2023;
—— Amendments to IAS 1 ‘Disclosure of accounting policies’ issued in February 2021 and effective from 1 January 2023; and
—— Amendments to IFRS 8 ‘Definition of Accounting Estimates’ issued in February 2021 and effective from 1 January 2023.

Prudential plc
225
Annual Report 2020
B Earnings performance
B1 Analysis of performance by segment
B1.1 Segment results
2020 $m 2019 $m 2020 vs 2019 %

AER CER AER CER
Note note (i) note (i) note (i) note (i)
Asia
Insurance operations 3,384 2,993 2,978 13% 14%
Asset management 283 283 278 0% 2%
Total Asia 3,667 3,276 3,256 12% 13%
US
Insurance operations 2,787 3,038 3,038 (8)% (8)%
Asset management 9 32 32 (72)% (72)%
Total US 2,796 3,070 3,070 (9)% (9)%
Total segment profit 6,463 6,346 6,326 2% 2%
Other income and expenditure:
Investment return and other income 6 50 50 (88)% (88)%
Interest payable on core structural borrowings (337) (516) (518) 35% 35%
Corporate expenditure note (ii) (417) (460) (463) 9% 10%
Total other income and expenditure (748) (926) (931) 19% 20%
Restructuring and IFRS 17 implementation costs note (iii) (208) (110) (110) (89)% (89)%
Adjusted operating profit B1.3 5,507 5,310 5,285 4% 4%
Short-term fluctuations in investment returns on shareholder-backed
business B1.2 (4,841) (3,203) (3,191) (51)% (52)%
Amortisation of acquisition accounting adjustments note (iv) (39) (43) (43) 9% 9%
Gain (loss) attaching to corporate transactions D1.1 1,521 (142) (143) n/a n/a
Profit before tax attributable to shareholders 2,148 1,922 1,908 12% 13%
Tax credit attributable to shareholders’ returns B3 37 31 36 19% 3%
Profit for the year from continuing operations 2,185 1,953 1,944 12% 12%
Loss for the year from discontinued operations – (1,161) (1,165) n/a n/a
Profit for the year 2,185 792 779 176% 180%
Attributable to:
From continuing operations 2,118 1,944 1,935 9% 9%
From discontinued operations – (1,161) (1,165) n/a n/a
Non-controlling interests from continuing operations 67 9 9 n/a n/a
2,185 792 779 176% 180%

2020 2019 2020 vs 2019 %
AER CER AER CER

Basic earnings per share (in cents) Note note (i) note (i) note (i) note (i)
Based on adjusted operating profit, net of tax, from continuing operations B4 175.5¢ 175.0¢ 174.6¢ 0% 1%
Based on profit for the year from continuing operations B4 81.6¢ 75.1¢ 75.1¢ 9% 9%
Based on profit (loss) for the year from discontinued operations B4 – (44.8)¢ (45.1)¢ n/a n/a
Notes
(i) Segment results are attributed to the shareholders of the Group before deducting the amount attributable to the non-controlling interests. This presentation is applied consistently
throughout the document. For definitions of AER and CER refer to note A1.
(ii) Corporate expenditure as shown above is primarily for head office functions in London and Hong Kong.
(iii) Restructuring and IFRS 17 implementation costs include those incurred in the US operations of $(46) million (2019: $(7) million).
(iv) Amortisation of acquisition accounting adjustments arising on the purchase of business. This comprises principally the charge for the adjustments arising on the purchase of REALIC in 2012.
226 Prudential plc

B1.2 Short-term fluctuations in investment returns on shareholder-backed business
Group overview
2020 $m 2019 $m
Asia operations note (i) (607) 657

US operations note (ii) (4,262) (3,757)
Other operations 28 (103)
Total (4,841) (3,203)
Strategic report
Notes
(i) Asia operations
In Asia, the short-term fluctuations reflect the net value movements on shareholders’ assets and policyholder liabilities (net of reinsurance) arising from market movements in the year. In 2020,
falling interest rates in certain parts of Asia led to lower discount rates on policyholder liabilities under the local reserving basis applied, which were not fully offset by unrealised bond and
equity gains in the year and this led to the overall negative short-term investment fluctuations in Asia.
(ii) US operations
The short-term fluctuations in investment returns in the US are reported net of the related charge for amortisation of deferred acquisition costs (DAC) credit of $812 million as shown in note
C4.2 (2019: credit of $1,248 million) and comprise amounts in respect of the following items:
Governance
2020 $m 2019 $m
Net equity hedge result note (a) (6,334) (4,582)

Other than equity-related derivatives note (b) 1,682 678
Debt securities note (c) 474 156
Equity-type investments: actual less longer-term return (40) 18
Other items (44) (27)
Total net of related DAC amortisation (4,262) (3,757)

Notes
(a) The purpose of the inclusion of the net equity hedge result in short-term fluctuations in investment returns is to segregate the amount included within pre-tax profit that relates to the
accounting effect of market movements on both the value of guarantees in Jackson’s products including variable annuities and on the related derivatives used to manage the exposures
inherent in these guarantees. The level of fees recognised in short-term fluctuations in investment returns is determined by reference to that allowed for within the reserving basis.
The variable annuity guarantees are valued in accordance with either Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures or ASC Topic 944,
Financial Services – Insurance depending on the type of guarantee. Both approaches require an entity to determine the total fee (‘the fee assessment’) that is expected to fund future
projected benefit payments arising using the assumptions applicable for that method. The method under ASC Topic 820 requires this fee assessment to be fixed at the time of issue.
As the fees included within the initial fee assessment are earned, they are included in short-term fluctuations in investment returns to match the corresponding movement in the guarantee
liability. Other guarantee fees are included in adjusted operating profit, which in 2020 were $704 million (2019: $699 million), pre-tax and net of related DAC amortisation. As the Group
applies US GAAP for the measured value of the product guarantees, the net equity hedge result also includes asymmetric impacts where the measurement bases of the liabilities and
associated derivatives used to manage the Jackson annuity business differ.
The net equity hedge result therefore includes significant accounting mismatches and other factors that do not represent the economic result. These other factors include:
– The variable annuity guarantees and fixed index annuity embedded options being only partially fair valued under ‘grandfathered’ US GAAP;
– The interest rate exposure being managed through the other than equity-related derivative programme explained in note (b) below; and
– Jackson’s management of its economic exposures for a number of other factors that are treated differently in the accounting frameworks such as future fees and assumed volatility levels.
The net equity hedge result can be summarised as follows:
2020 $m 2019 $m
Fair value movements on equity hedge instruments* (5,219) (5,314)

Accounting value movements on the variable and fixed index annuity guarantee liabilities* (2,030) (22)
Fee assessments net of claim payments 915 754
Total net of related DAC amortisation (6,334) (4,582)
* The value movements on the variable annuity guarantees and fixed indexed annuity options and the derivative instruments held to manage their equity exposures are discussed
in the Group Chief Financial Officer and Chief Operating Officer’s report.

(b) The fluctuations for other than equity-related derivatives comprise the net effect of:
– Fair value movements on free-standing, other than equity-related derivatives;
– F air value movements on the Guaranteed Minimum Income Benefit (GMIB) reinsurance asset that are not matched by movements in the underlying GMIB liability, which is not fair
valued; and
– Related amortisation of DAC.
The free-standing, other than equity-related derivatives, are held to manage interest rate exposures and durations within the general account and the variable annuity guarantees
and fixed index annuity embedded options described in note (a) above. Accounting mismatches arise because of differences between the measurement basis and presentation of the
derivatives, which are fair valued with movements recorded in the income statement, and the exposures they are intended to manage.

Prudential plc
B Earnings performance / continued
B1 Analysis of performance by segment continued
B1.2 Short-term fluctuations in investment returns on shareholder-backed business continued

(c) Short-term fluctuations related to debt securities is analysed below:
2020 $m 2019 $m
Credits (charges) in the year:

Losses on sales of impaired and deteriorating bonds (148) (28)
Bond write-downs (32) (15)
Recoveries/reversals 1 1
Total credits (charges) in the year (179) (42)
Risk margin allowance deducted from adjusted operating profit* 92 109
(87) 67
Interest-related realised gains (losses):
Gains (losses) arising in the year† 724 220
Amortisation of gains and losses arising in current and prior years to adjusted operating profit (168) (129)
556 91
Related amortisation of DAC 5 (2)
Total short-term fluctuations related to debt securities net of related DAC amortisation 474 156
* The debt securities of Jackson are held in the general account of the business. Realised gains and losses are recorded in the income statement with normalised returns included in adjusted
operating profit with variations from year to year included in the short-term fluctuations category. The risk margin reserve charge for longer-term credit-related losses included in adjusted
operating profit of Jackson for 2020 is based on an average annual risk margin reserve of 18 basis points (2019: 17 basis points) on average book values of $51.7 billion (2019: $62.6 billion)
as shown below:
2020 2019
Average Annual Average Annual
book value RMR expected loss book value RMR expected loss
Moody’s rating category (or equivalent under NAIC ratings
of mortgage-backed securities) $m % $m $m % $m
A3 or higher 32,541 0.10 (31) 38,811 0.10 (38)

Baa1, 2 or 3 17,513 0.24 (42) 22,365 0.24 (53)
Ba1, 2 or 3 1,314 0.75 (10) 1,094 0.85 (9)
B1, 2 or 3 206 2.36 (5) 223 2.56 (6)
Below B3 108 3.36 (4) 75 3.39 (3)
Total 51,682 0.18 (92) 62,568 0.17 (109)
12 19
Related amortisation of deferred acquisition costs
Risk margin reserve charge to adjusted operating profit
(80) (90)
for longer-term credit-related losses†
† Excluding the realised gains that are part of the gain arising in respect of the reinsured Jackson’s in-force fixed and fixed index annuity liabilities to Athene Life Re Ltd, as discussed
in note D1.1.
In addition to the accounting for realised gains and losses described above for Jackson general account debt securities, included within the
statement of other comprehensive income is a pre-tax net unrealised gain of $2,676 million, net of related amortisation of DAC, arising in the
year (2019: $3,392 million) on debt securities classified as available-for-sale, partially offset by the recycling of $2,282 million gains, net of related
amortisation of DAC, to the income statement on transfer of debt securities to Athene (see note D1.1). Temporary market value movements
do not reflect defaults or impairments. Additional details of the movement in the value of the Jackson portfolio are included in note C1.1.
B1.3 Determining operating segments and performance measure of operating segments

Operating segments
The Group’s operating segments for financial reporting purposes are defined and presented in accordance with IFRS 8 ‘Operating Segments’
on the basis of the management reporting structure and its financial management information.
Under the Group’s management and reporting structure, its chief operating decision maker is the Group Executive Committee (GEC). In the
management structure, responsibility is delegated to the Chief Executive Officers of the Group’s Asia and US business units for the day-to-day
management of their business units (within the framework set out in the Group Governance Manual). Financial management information used
by the GEC aligns with these business segments. These operating segments, Asia operations and US operations, derive revenue from both
insurance and asset management activities.
Operations which do not form part of any business unit are reported as ‘Unallocated to a segment’. These include head office costs in London
and Hong Kong. The Group’s Africa operations do not form part of any operating segment under the structure, and their assets and liabilities and
profit or loss before tax are not material to the overall financial position of the Group. The Group’s Africa operations are therefore also reported
as ‘Unallocated to a segment’.
In preparation for the planned separation of Jackson, the management information received by the GEC has been revised in 2021, leading to
a change in the Group’s operating segments which will be presented in the 2021 half year report as discussed in the Group Chief Financial Officer
and Chief Operating Officer’s report.
228 Prudential plc

Performance measure
Group overview
The performance measure of operating segments utilised by the Group is adjusted IFRS operating profit based on longer-term investment
returns (adjusted operating profit), as described below. This measurement basis distinguishes adjusted operating profit from other constituents
of total profit or loss for the year as follows:
—— Short-term fluctuations in investment returns on shareholder-backed business. This includes the impact of short-term market effects
on the carrying value of Jackson’s guarantee liabilities and related derivatives as explained below;
—— Amortisation of acquisition accounting adjustments arising on the purchase of business. This comprises principally the charge for the
Strategic report
adjustments arising on the purchase of REALIC in 2012; and
—— Gain or loss on corporate transactions, such as in 2020 the effect of certain of the Group’s reinsurance arrangements and costs associated
with the work to plan for the separation of Jackson, and in 2019 disposals undertaken and costs connected to the demerger of M&G plc
from Prudential plc.
Determination of adjusted operating profit for investment and liability movements
(a) With-profits business
For Asia’s with-profits business in Hong Kong, Singapore and Malaysia, the adjusted operating profit reflects the shareholders’ share in the
Governance
bonuses declared to policyholders. Value movements in the underlying assets of the with-profits funds only affect the shareholder results
through indirect effects of investment performance on declared policyholder bonuses and therefore, do not affect directly the determination
of adjusted operating profit.
(b) Unit-linked business including the US variable annuity separate accounts

The policyholder unit liabilities are directly reflective of the underlying asset value movements. Accordingly, the adjusted operating profit
reflect the current year value movements in both the unit liabilities and the backing assets.

(c) US general account business
The adjusted operating profit for Jackson included in the Group’s accounts is based on information reviewed by the GEC on an IFRS basis.
This will differ from the financial information that Jackson will report as part of the demerger process, which will be prepared under US GAAP
and will be based on the information local management reviews in preparation for them becoming a standalone entity.
Jackson’s variable and fixed index annuity business has guarantee liabilities which are measured on a combination of fair value and other
US GAAP derived principles. These liabilities are subject to an extensive derivative programme to manage equity and interest rate exposures
whose fair value movements pass through the income statement each year.
The following value movements for Jackson’s variable and fixed index annuity business are excluded from adjusted operating profit.
See note B1.2:
—— Fair value movements for equity-based derivatives;
—— Fair value movements for guaranteed benefit options for the ‘not for life’ portion of Guaranteed Minimum Withdrawal Benefit (GMWB)
and fixed index annuity business, and Guaranteed Minimum Income Benefit (GMIB) reinsurance (see below);
—— Movements in the accounts carrying value of Guaranteed Minimum Death Benefit (GMDB), GMIB and the ‘for life’ portion of GMWB
liabilities, (see below) for which, under the ‘grandfathered’ US GAAP applied under IFRS for Jackson’s insurance assets and liabilities,
the measurement basis gives rise to a muted impact of current year market movements (ie they are relatively insensitive to the effect
of current year equity market and interest rate changes);
—— A portion of the fee assessments as well as claim payments, in respect of guarantee liabilities; and
—— Related amortisation of DAC for each of the above items.

Guaranteed benefit options for the ‘not for life’ portion of GMWB and equity index options for the fixed index annuity business
The ‘not for life’ portion of GMWB guaranteed benefit option liabilities is measured under the US GAAP basis applied for IFRS in a manner
consistent with IAS 39 under which the projected future growth rate of the account balance is based on the greater of US Treasury rates and
current swap rates (rather than expected rates of return) with only a portion of the expected future guarantee fees included. The discount rates
applied in determining the value of these liabilities is actively updated each year based on market observed rates and after allowing for Jackson’s
own credit risk. Reserve value movements on these liabilities are sensitive to changes to levels of equity markets, implied volatility and interest
rates. The equity index option for fixed index annuity business is measured under the US GAAP basis applied for IFRS in a manner consistent
with IAS 39 under which the projected future growth is based on current swap rates.
Guaranteed benefit option for variable annuity guarantee minimum income benefit
The GMIB liability, which is substantially reinsured, subject to a deductible and annual claim limits, is accounted for using ‘grandfathered’
US GAAP. This accounting basis substantially does not recognise the effects of market movements. The corresponding reinsurance asset is
measured under the ‘grandfathered’ US GAAP basis applied for IFRS in a manner consistent with IAS 39 ‘Financial Instruments: Recognition
and Measurement’, and the asset is therefore recognised at fair value. As the GMIB is economically reinsured, the mark-to-market element
of the reinsurance asset is included as a component of short-term fluctuations in investment returns.
(d) Policyholder liabilities that are sensitive to market conditions

Under IFRS, the degree to which the carrying values of liabilities to policyholders are sensitive to current market conditions varies between
business units depending upon the nature of the ‘grandfathered’ measurement basis.
Movements in liabilities for some types of business do require bifurcation between the elements that relate to longer-term market condition
and short-term effects to ensure that at the net level (ie after allocated investment return and charge for policyholder benefits) the adjusted
operating profit reflects longer-term market returns.

Prudential plc
229
Annual Report 2020
B1.3 Determining operating segments and performance measure of operating segments continued

For certain Asia non-participating business, for example in Hong Kong, the economic features are more akin to asset management products
with policyholder liabilities reflecting asset shares over the contract term. Consequently, for these products, the charge for policyholder benefits
in the adjusted operating profit reflects the asset share feature rather than volatile movements that would otherwise be reflected if the local
regulatory basis (as applied for the IFRS balance sheet) was used.
For other types of Asia non-participating business, expected longer-term investment returns and interest rates are used to determine the
movement in policyholder liabilities for determining adjusted operating profit. This ensures assets and liabilities are reflected on a consistent basis.
(e) Assets backing other shareholder-financed long-term insurance business

Except in the case of assets backing liabilities which are directly matched (such as unit-linked business) adjusted operating profit for assets backing
shareholder-financed business is determined on the basis of expected longer-term investment returns. Longer-term investment returns comprise
actual income receivable for the year (interest/dividend income) and for both debt and equity-type securities longer-term capital returns.
Debt securities and loans

As a general principle, for debt securities and loans, the longer-term capital returns comprise two elements:
—— Risk margin reserve based charge for the expected level of defaults for the period, which is determined by reference to the credit quality of
the portfolio. The difference between impairment losses in the reporting period and the risk margin reserve charge to the adjusted operating
profit is reflected in short-term fluctuations in investment returns; and
—— The amortisation of interest-related realised gains and losses to adjusted operating profit to the date when sold bonds would have otherwise
matured.
At 31 December 2020, the level of unamortised interest-related realised gains and losses related to previously sold bonds for the Group’s
insurance operations in Asia and the US was a net gain of $1,725 million (31 December 2019: net gain of $916 million).
For Asia insurance operations, realised gains and losses are principally interest related. Accordingly, all realised gains and losses to date
for these operations are amortised over the period to the date those securities would otherwise have matured, with no explicit risk margin
reserve charge.
For US insurance operations, Jackson has used the ratings by Nationally Recognised Statistical Ratings Organisations (NRSRO) or ratings
resulting from the regulatory ratings detail issued by the National Association of Insurance Commissioners (NAIC) to determine the average
annual risk margin reserve to apply to debt securities held to back general account business. Debt securities held to back separate account
and reinsurance funds withheld are not subject to risk margin reserve charge. Further details of the risk margin reserve charge, as well as the
amortisation of interest-related realised gains and losses, for Jackson are shown in note B1.2.
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 having
regard to past performance, current trends and future expectations. Different rates apply to different categories of equity-type securities.
For Asia insurance operations, investments in equity securities held for non-linked shareholder-backed business amounted to $4,954 million
as at 31 December 2020 (31 December 2019: $3,473 million). The longer-term rates of return applied in 2020 ranged from 5.1 per cent to
16.9 per cent (31 December 2019: 5.0 per cent to 17.6 per cent) with the rates applied varying by business unit. These rates are broadly stable
from year to year but may be different between regions, reflecting, for example, differing expectations of inflation in each local 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. The longer-term investment returns for the Asia insurance
joint ventures and associates accounted for using the equity method are determined on a similar basis as the other Asia insurance operations
described above.
For US insurance operations, as at 31 December 2020, the equity-type securities for non-separate account operations amounted to
$2,128 million (31 December 2019: $1,481 million). For these operations, the longer-term rates of return for income and capital applied in 2020
and 2019, which reflect the combination of the average risk-free rates over the year and appropriate risk premiums are as follows:
2020 2019
Equity-type securities such as common and preferred stock and portfolio holdings in mutual funds 4.8% to 5.8% 5.5% to 6.7%
Other equity-type securities such as investments in limited partnerships and private equity funds 6.8% to 7.8% 7.5% to 8.7%
Derivative value movements

Generally, derivative value movements are excluded from adjusted operating profit. The exception is where the derivative value movements
broadly offset changes in the accounting value of other assets and liabilities included in adjusted operating profit. The principal example of
derivatives whose value movements are excluded from adjusted operating profit arises in Jackson.
Equity-based derivatives held by Jackson are as discussed in section (c) above. Non-equity based derivatives held by Jackson are part of
a broad-based hedging programme for features of Jackson’s bond portfolio (for which value movements are booked in the statement of other
comprehensive income rather than the income statement), product liabilities (for which US GAAP accounting as ‘grandfathered’ under IFRS 4
does not fully reflect the economic features being hedged), and the interest rate exposure attaching to equity-based product options.
230 Prudential plc

(f) Fund management and other non-insurance businesses
Group overview
For these businesses, the determination of adjusted operating profit reflects the underlying economic substance of the arrangements.
Generally, realised gains and losses are included in adjusted operating profit with temporary unrealised gains and losses being included in
short-term fluctuations. In some instances, realised gains and losses on derivatives and other financial instruments are amortised to adjusted
operating profit over a time period that reflects the underlying economic substance of the arrangements.
B1.4 Segmental income statement

Premiums and annuity considerations for conventional and other protection type insurance policies are recognised as revenue when due.
Strategic report
Premiums and annuity considerations for linked policies and other investment type policies are recognised as revenue when received or, in the
case of unitised or unit-linked policies, when units are issued. These amounts exclude premium taxes and similar duties where Prudential collects
and settles taxes borne by the policyholder.
Policy fees charged on linked policies for mortality, morbidity, asset management and policy administration are recognised when related
services are provided.
Claims paid include maturities, annuities, surrenders, deaths and other claim events. Maturity claims are recorded as charges on the policy
maturity date. Annuity claims are recorded when each annuity instalment becomes due for payment. Surrenders are charged to the income
Governance
statement when paid. Death and other claims are generally recorded when notified with additional contract liabilities held, where appropriate,
for ‘incurred but not reported’ (IBNR) claims.
2020 $m
Total Unallocated Group
Asia US segment to a segment total
Gross premiums earned 23,341 19,026 42,367 154 42,521

Outward reinsurance premiums note (i) (1,615) (30,584) (32,199) (10) (32,209)
Earned premiums, net of reinsurance 21,726 (11,558) 10,168 144 10,312
Other income note (ii) 609 55 664 6 670
Total external revenue notes (iii), (iv) 22,335 (11,503) 10,832 150 10,982
Intra-group revenue – 37 37 (37) –
Interest income note (v) 1,961 2,380 4,341 36 4,377
Other investment return note B1.5 11,755 28,849 40,604 10 40,614
Total revenue, net of reinsurance 36,051 19,763 55,814 159 55,973
Benefits and claims and movements in unallocated surplus
of with‑profits funds, net of reinsurance note C3.1 (28,488) (19,617) (48,105) (100) (48,205)
Acquisition costs and other operating expenditure note B2 (3,989) (821) (4,810) (671) (5,481)
Interest on core structural borrowings – (21) (21) (316) (337)
Loss attaching to corporate transactions note D1.1 – (18) (18) (30) (48)
Total charges, net of reinsurance and loss on disposal of businesses (32,477) (20,477) (52,954) (1,117) (54,071)
Share of profit from joint ventures and associates, net of related tax 517 – 517 – 517
Profit (loss) before tax (being tax attributable to shareholders’
and policyholders’ returns) 4,091 (714) 3,377 (958) 2,419

Tax charge attributable to policyholders’ returns (271) – (271) – (271)
Profit (loss) before tax attributable to shareholders’ returns 3,820 (714) 3,106 (958) 2,148
Analysis of profit (loss) before tax attributable to shareholders’

returns:
Adjusted operating profit (loss) 3,667 2,796 6,463 (956) 5,507
business (607) (4,262) (4,869) 28 (4,841)
Amortisation of acquisition accounting adjustments (5) (34) (39) – (39)
Gain (loss) attaching to corporate transactions note D1.1 765 786 1,551 (30) 1,521
3,820 (714) 3,106 (958) 2,148

Prudential plc
231
Annual Report 2020
B1.4 Segmental income statement continued
2019 $m
Total Unallocated Group
Asia US segment to a segment total
Gross premiums earned 23,757 21,209 44,966 98 45,064

Outward reinsurance premiums (1,108) (467) (1,575) (8) (1,583)
Earned premiums, net of reinsurance 22,649 20,742 43,391 90 43,481
Other income note (ii) 548 61 609 91 700
Total external revenue notes (iii),(iv) 23,197 20,803 44,000 181 44,181
Intra-group revenue – 34 34 (34) –
Interest income note (v) 1,569 2,971 4,540 67 4,607
Other investment return note B1.5 13,406 31,623 45,029 (81) 44,948
Total revenue, net of reinsurance 38,172 55,431 93,603 133 93,736
of with‑profits funds, net of reinsurance note C3.1 (29,119) (54,734) (83,853) (52) (83,905)
Acquisition costs and other operating expenditure note B2 (5,157) (1,402) (6,559) (724) (7,283)
Interest on core structural borrowings – (20) (20) (496) (516)
Gain (loss) attaching to corporate transactions note D1.1 265 – 265 (407) (142)
Total charges, net of reinsurance and gain on disposal of business (34,011) (56,156) (90,167) (1,679) (91,846)
Share of profit from joint ventures and associates, net of related tax 397 – 397 – 397
Profit (loss) before tax (being tax attributable to shareholders’
and policyholders’ returns) 4,558 (725) 3,833 (1,546) 2,287
Tax charge attributable to policyholders’ returns (365) – (365) – (365)
Profit (loss) before tax attributable to shareholders’ returns
from continuing operations 4,193 (725) 3,468 (1,546) 1,922
Analysis of profit (loss) before tax attributable to shareholders’

returns from continuing operations:
Adjusted operating profit (loss) 3,276 3,070 6,346 (1,036) 5,310
business 657 (3,757) (3,100) (103) (3,203)
Amortisation of acquisition accounting adjustments (5) (38) (43) – (43)
Gain (loss) attaching to corporate transactions note D1.1 265 – 265 (407) (142)
4,193 (725) 3,468 (1,546) 1,922

Notes
(i) In 2020, outward reinsurance premiums include $(30,156) million in respect of the reinsurance of substantially all of Jackson’s in-force fixed and fixed index annuity liabilities to Athene Life
Re Ltd.
(ii) Included within other income is revenue from the Group’s continuing asset management business of $505 million (2019: $453 million). The remaining other income consists primarily of policy
fee income from external customers.
(iii) In Asia, external revenue from no one individual market exceeds 10 per cent of the Group total, excluding Athene’s reinsurance premium of $30,156 million, except for Hong Kong and
Singapore in both 2020 and 2019. Total external revenue of Hong Kong is $9,232 million (2019: $9,821 million) and Singapore is $5,505 million (2019: $4,401 million).
(iv) Due to the nature of the business of the Group, there is no reliance on any major customers.
(v) Interest income includes $2,197 million (2019: $2,817 million) in respect of financial assets not at fair value through profit and loss, of which $1 million (2019: $4 million) is accrued in respect
of impaired securities.
232 Prudential plc

B1.5 Other investment return
Group overview
Investment return included in the income statement principally comprises interest income, dividends, investment appreciation and depreciation
(realised and unrealised gains and losses) on investments designated as fair value through profit or loss, and realised gains and losses (including
impairment losses) on items held at amortised cost and Jackson’s debt securities designated as available-for-sale. Movements in unrealised
appreciation or depreciation of debt securities designated as available-for-sale are recorded in other comprehensive income. Interest income is
recognised as it accrues, taking into account the effective yield on investments. Dividends on equity securities are recognised on the ex-dividend
date and rental income is recognised on an accrual basis.
Strategic report
2020 $m 2019 $m
Realised and unrealised gains (losses) on securities at fair value through profit or loss 40,070 49,809
Realised and unrealised (losses) gains on derivatives at fair value through profit or loss (3,691) (5,825)
Realised gains on available-for-sale securities, including impairment previously recognised in other
comprehensive income* 3,371 185
Realised gains (losses) on loans 43 (3)
Dividends 1,249 1,000
Governance
Other investment (loss) income (428) (218)
Other investment return 40,614 44,948
* Included in realised gains on available-for-sale securities is $2,817 million arising upon derecognition of debt securities held by Jackson related to the reinsurance of fixed and fixed index annuities
to Athene. These gains are excluded from adjusted operating profit and are recognised in the results of the corporate transaction as discussed in note D1.1.
Realised gains and losses on the Group’s investments for 2020 recognised in the income statement amounted to a net gain of $2.8 billion
(2019: a net loss of $2.0 billion).

B1.6 Additional analysis of performance by segment components
(a) Asia
2020 $m 2019 $m
Asset
Insurance management Eliminations Total Total
Earned premiums, net of reinsurance 21,726 – – 21,726 22,649

Other income 192 417 – 609 548
Total external revenue 21,918 417 – 22,335 23,197
Intra-group revenue 1 164 (165) – –
Interest income 1,956 5 – 1,961 1,569
Other investment return 11,729 26 – 11,755 13,406
Total revenue, net of reinsurance 35,604 612 (165) 36,051 38,172
of with‑profits funds, net of reinsurance (28,488) – – (28,488) (29,119)
Acquisition costs and other expenditure note B2 (3,708) (446) 165 (3,989) (5,157)
Gain (loss) attaching to corporate transactions note D1.1 – – – – 265

Total charges, net of reinsurance and gain (loss) attaching
to corporate transactions (32,196) (446) 165 (32,477) (34,011)
Share of profit from joint ventures and associates, net of related tax 400 117 – 517 397
Profit before tax (being tax attributable to shareholders’
and policyholders’ returns) 3,808 283 – 4,091 4,558
Tax charge attributable to policyholders’ returns (271) – – (271) (365)
Profit before tax attributable to shareholders' returns 3,537 283 – 3,820 4,193
Analysis of profit before tax:

Adjusted operating profit (loss) 3,384 283 – 3,667 3,276
business (607) – – (607) 657
Amortisation of acquisition accounting adjustments (5) – – (5) (5)
Gain (loss) attaching to corporate transactions note D1.1 765 – – 765 265
3,537 283 – 3,820 4,193

Prudential plc
B1.6 Additional analysis of performance by segment components continued

(b) US
2020 $m 2019 $m
Asset
Insurance management Eliminations Total Total
Earned premiums, net of reinsurance (11,558) – – (11,558) 20,742

Other income 4 51 – 55 61
Total external revenue (11,554) 51 – (11,503) 20,803
Intra-group revenue – 115 (78) 37 34
Interest income 2,380 – – 2,380 2,971
Other investment return 28,848 1 – 28,849 31,623
Total revenue, net of reinsurance 19,674 167 (78) 19,763 55,431
Benefits and claims net of reinsurance (19,617) – – (19,617) (54,734)
Acquisition costs and other operating expenditure (741) (158) 78 (821) (1,402)
Interest on core structural borrowings (21) – – (21) (20)
Loss attaching to corporate transactions note D1.1 (18) – – (18) –
Total charges, net of reinsurance and loss on disposal of businesses (20,397) (158) 78 (20,477) (56,156)
(Loss) profit before tax (723) 9 – (714) (725)
Analysis of profit (loss) before tax:

Adjusted operating profit (loss) 2,787 9 – 2,796 3,070
business (4,262) – – (4,262) (3,757)
Amortisation of acquisition accounting adjustments (34) – – (34) (38)
Gain (loss) attaching to corporate transactions note D1.1 786 – – 786 –
(723) 9 – (714) (725)
234 Prudential plc

Group overview
B2 Acquisition costs and other expenditure
2020 $m 2019 $m
Acquisition costs incurred for insurance policies note (v) (3,070) (4,177)
Acquisition costs deferred note C4.2 1,357 1,422
Amortisation of acquisition costs notes (i),(v) 81 694
Recoveries for expenses associated with Jackson’s business ceded to Athene note (ii) 1,203 –
Strategic report
Administration costs and other expenditure (net of other reinsurance commission) notes (iii),(iv),(v) (4,609) (5,019)
Movements in amounts attributable to external unit holders of consolidated investment funds (443) (203)
Total acquisition costs and other expenditure (5,481) (7,283)
Notes
(i) The credit of $81 million in 2020 reflects $389 million arising in the US which is offset by a charge of $308 million in Asia as set out in note C4.2. The credit of $389 million in the US includes
$1,576 million (2019: $1,248 million) recorded in short-term fluctuations in investment returns largely as a result of the losses arising from market effects on variable annuity guarantee
Governance
liabilities and associated hedging. This is offset by a charge of $(764) million for the write-off of the DAC held for the in-force fixed and fixed index annuity liabilities reinsured to Athene
and a charge of $(423) million (2019: $(297) million) for amortisation of acquisition costs recorded in adjusted operating profit.
(ii) As part of the reinsurance transaction with Athene Life Re Ltd discussed in note D1.1, Jackson received $1,203 million of ceding commission (including post-closing adjustments) as a recovery
for past acquisition expenses associated with the business ceded.
(iii) Included in total administration costs and other expenditure is depreciation of property, plant and equipment of $(218) million (2019: $(227) million), of which $(145) million (2019:
$(141) million) relates to the right-of-use assets recognised under IFRS 16 and interest on the IFRS 16 lease liabilities of $16 million (2019: $20 million). The 2020 amount also includes a credit
of $770 million for the commission arising from the reinsurance transaction entered into by the Hong Kong business during the year as discussed in note D1.1. Administration costs and other
expenditure includes $1 million (2019: $3 million) relating to the fee income on financial instruments that are not held at fair value through profit or loss.
(iv) During 2019, the Group paid $182 million of upfront fees to modify the terms and conditions of two subordinated debt instruments, which were expensed to the income statement as,
in accordance with IAS 39, the transaction was treated as extinguishment of old debt and the issuance of new at fair value. Other fee expenses relating to financial liabilities held at amortised

cost in 2020 and 2019 are part of the determination of the effective interest rate. All such amounts are included in ‘Administration costs and other expenditure’.
(v) Total depreciation and amortisation expense is included in ‘Acquisition costs incurred for insurance policies’, ‘Administration costs and other expenditure’ and ‘Amortisation of acquisition
costs’ and relates primarily to amortisation of DAC of insurance contracts and asset management contracts. The segmental analysis of interest expense (included in ‘Administration costs
and other expenditure’), other than interest expense in core structural borrowings (included separately in finance costs), and depreciation and amortisation (included within ‘Total acquisition
costs and other expenditure’) is shown below. Interest expense on financial liabilities not at fair value through profit and loss for 2020 was $564 million (2019: $802 million).
Other interest expense Depreciation and amortisation

2020 $m 2019 $m 2020 $m 2019 $m
Asia operations:
Insurance (12) (13) (669) (641)
Asset management (1) – (16) (14)
US operations:
Insurance (220) (264) 346 901
Asset management (1) (2) (4) (4)
Total segment (234) (279) (343) 242
Unallocated to a segment (other operations) (18) (27) (40) (30)
Total continuing operations (252) (306) (383) 212
B2.1 Staff and employment costs

The average number of staff employed by the Group, for both continuing and discontinued operations, during the years shown was:

2020 2019
Asia and Africa operations* 12,949 14,206

US operations 3,650 4,014
Head office function† 657 784
Total continuing operations 17,256 19,004
Discontinued UK and Europe operations‡ – 5,672
Total Group 17,256 24,676
* The Asia and Africa operations staff numbers above exclude 502 commission based sales staff (2019: 346) who have an employment contract with the Company.
† The ‘Head office function’ staff numbers include staff based in London and Hong Kong.
‡ Average staff numbers of the discontinued UK and Europe operations were for the period up to the demerger in October 2019.

Prudential plc
B2 Acquisition costs and other expenditure continued
B2.1 Staff and employment costs continued

The costs of employment, for both continuing and discontinued operations, were:
2020 $m 2019 $m
Group total Continuing Discontinued Group total
Wages and salaries 1,536 1,435 573 2,008

Social security costs 67 53 68 121
Defined benefit schemes* – (91) (5) (96)
Defined contribution schemes 76 69 41 110
Total Group† 1,679 1,466 677 2,143
* The credit incorporated the effect of actuarial gains and losses. Post-demerger of the UK and Europe operations in October 2019, the Group’s defined benefit schemes costs are negligible.
† Total costs of employment in the table above include staff costs of the discontinued UK and Europe operations for the period up to the demerger in October 2019.
B2.2 Share-based payment
The Group offers discretionary share awards to certain key employees and all-employee share plans in the UK and a number of Asian locations.
The compensation expense charged to the income statement is primarily based upon the fair value of the awards granted, the vesting period
and the vesting conditions. The Company has established trusts to facilitate the delivery of Prudential plc shares under some of these plans.
The cost to the Company of acquiring these newly issued shares held in trusts is shown as a deduction from shareholders’ equity.
(a) Description of the plans

The Group operates a number of share award plans that provides Prudential plc shares, or ADRs, to participants upon vesting. The plans
in operation include the Prudential Long Term Incentive Plan, the Prudential Annual Incentive Plan, savings-related share option schemes,
share purchase plans and deferred bonus plans. Where Executive Directors participate in these plans, details are provided in the Directors’
remuneration report. In addition, the following information is provided.
Share scheme Description
Prudential Corporation Asia Long-Term The PCA LTIP provides eligible employees with conditional awards. Awards are discretionary and
Incentive Plan (PCA LTIP) vest after three years subject to the employee being in employment. Vesting of awards may also
be subject to performance conditions. All awards are generally made in Prudential shares, or ADRs.
In countries where share awards are not feasible due to securities and/or tax considerations,
awards will be replaced by the cash value of the shares that would otherwise have vested.
Prudential Agency Long-Term Certain agents in Asia are eligible to be granted awards in Prudential shares under the Prudential
Incentive Plan (LTIP) Agency LTIP. These awards are structured in a similar way to the PCA LTIP described above.
Restricted Share Plan 2015 (RSP) The Company operates the RSP for certain employees. Awards under this plan are discretionary,
and the vesting of awards may be subject to performance conditions. All awards are made in
Prudential shares or ADRs.
Deferred bonus plans The Company operates a number of deferred bonus plans including the Group Deferred Bonus
Plan (GDBP) and the Prudential Corporation Asia Deferred Bonus Plan (PCA DBP). There are
no performance conditions attached to deferred share awards made under these arrangements.
Savings-related share option schemes* Employees and eligible agents in a number of geographies are eligible for plans similar to the
HMRC-approved Save As You Earn (SAYE) share option scheme in the UK. During the
year ended 31 December 2020, eligible agents based in certain regions of Asia can participate
in the International Savings-Related Share Option Scheme for Non-Employees.
Share purchase plans Eligible employees outside the UK are invited to participate in arrangements similar to the
Company’s HMRC-approved UK SIP, which allows the purchase of Prudential plc shares.
Staff based in Asia are eligible to participate in the Prudential Corporation Asia All Employee
Share Purchase Plan.
* The total numbers of securities available for issue under the scheme is disclosed in note I(viii) in additional financial information.

236 Prudential plc

(b) Outstanding options and awards
Group overview
The following table shows the movement in outstanding options and awards under the Group’s share-based compensation plans:
Options outstanding under Awards outstanding under

SAYE schemes incentive plans
2020 2019 2020 2019
Weighted Weighted
Number average Number of average
Strategic report
of options exercise price options exercise price Number of awards
millions £ millions £ millions
Balance at beginning of year: 3.8 12.38 4.9 12.10 33.0 32.8

Granted 0.4 9.64 0.6 11.13 20.2 13.4
Modification – – 0.3 11.95 – 4.3
Exercised (0.9) 11.44 (1.7) 10.87 (10.3) (9.8)
Forfeited – 14.27 – 12.87 (1.5) (2.5)
Cancelled (0.1) 12.55 (0.1) 12.82 (0.1) (0.7)
Governance
Lapsed/Expired (0.9) 13.28 (0.1) 12.93 (0.7) (1.0)
M&G plc awards derecognised on demerger * – – (0.1) 13.37 – (3.5)
Balance at end of year 2.3 11.86 3.8 12.38 40.6 33.0
Options immediately exercisable at end of year 0.5 12.64 0.9 11.33

* Prior to the demerger in October 2019, employees of M&G plc were granted replacement awards over M&G plc shares, in exchange for existing Prudential Group awards outstanding under

incentive plans. As designated replacement awards were granted, no cancellation was recognised in respect of the original awards. As the replacement awards are an obligation of M&G plc,
these awards were derecognised by the Group on demerger. M&G plc employees with outstanding SAYE options on demerger were treated as ‘good leavers’, with both the vesting period and
number of options exercisable curtailed on demerger.
The weighted average share price of Prudential plc for 2020 was £11.64 (2019: £15.05).
The following table provides a summary of the range of exercise prices for Prudential plc options outstanding at 31 December:
Outstanding Exercisable
Weighted average
remaining Weighted average Weighted average
Number outstanding contractual life exercise prices Number exercisable exercise prices
(years)*
(millions) £ (millions) £
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Between £9 and £10 0.4 – 4.2 – 9.64 – – – – –

Between £11 and £12 1.2 2.4 2.2 2.0 11.11 11.19 0.3 0.9 11.11 11.33
Between £13 and £14 0.3 0.3 2.2 3.2 13.94 13.94 – – – –
Between £14 and £15 0.4 1.1 1.3 2.0 14.55 14.55 0.2 – 14.55 –
Weighted average 2.3 3.8 2.4 2.1 11.86 12.38 0.5 0.9 12.64 11.33
* The years shown above for weighted average remaining contractual life include the time period from end of vesting period to expiration of contract.

(c) Fair value of options and awards
The fair value amounts estimated on the date of grant relating to all options and awards were determined by using the following assumptions:
2020 2019
SAYE options
Granted in Granted in
Prudential SAYE Other Prudential October November Other
LTIP (TSR) options awards LTIP (TSR) 2019 2019 awards
Dividend yield (%) – 3.45 – – 3.66 2.10 –

Expected volatility (%) 41.08 27.55 – 22.14 25.58 23.92 –
Risk-free interest rate (%) 0.39 0.27 – 0.97 0.31 1.60 –
Expected option life (years) – 3.92 – – 3.96 3.47 –
Weighted average exercise price (£) – 10.74 – – 11.12 11.18 –
Weighted average share price at grant date (£) 10.49 9.64 – 16.07 13.94 13.77 –
Weighted average fair value at grant date (£) 4.93 1.95 10.54 6.32 2.90 3.35 15.39
The compensation costs for all awards and options are recognised in net income over the plans’ respective vesting periods. The Group uses the
Black-Scholes model to value all options, and financial equivalence to value all awards other than those which have TSR performance conditions
attached (some Prudential LTIP and RSP awards) for which the Group uses a Monte Carlo model in order to allow for the impact of these
conditions. These models are used to calculate fair values for share options and awards at the grant date based on the quoted market price of
the stock at the measurement date, the amount, if any, that the employees are required to pay, the dividend yield, expected volatility, risk-free
interest rates and exercise prices.

Prudential plc
B2 Acquisition costs and other expenditure continued
B2.2 Share-based payment continued

For all options and awards, the expected volatility is based on the market implied volatilities as quoted on Bloomberg. The Prudential specific
at-the-money implied volatilities are adjusted to allow for the different terms and discounted exercise price on SAYE options by using information
on the volatility surface of the FTSE 100.
Risk-free interest rates are taken from swap spot rates with projection terms matching the corresponding vesting periods. For awards with
a TSR condition, volatilities and correlations between Prudential and a basket of 12 competitor companies is required. For grants in 2020,
the average volatility for the basket of competitors was 41.40 per cent (2019: 23.10 per cent). Correlations for the basket are calculated for each
pairing from the log of daily TSR returns for the three years prior to the valuation date. Market implied volatilities are used for both Prudential
and the basket of competitors. Changes to the subjective input assumptions could materially affect the fair value estimate.
(d) Share-based payment expense charged to the income statement

Total expense recognised in 2020 in the consolidated financial statements relating to share-based compensation is $171 million (2019: $181 million),
of which $166 million is accounted for as equity-settled.
The Group had $32 million of liabilities at 31 December 2020 (31 December 2019: nil) relating to share-based payment awards accounted
for as cash settled.
B2.3 Key management remuneration

Key management constitutes the Directors of Prudential plc as they have authority and responsibility for planning, directing and controlling
the activities of the Group and following reorganisations during 2019, key management also includes other non-director members of the Group
Executive Committee from August 2019.
Total key management remuneration is analysed in the following table:
2020 $m 2019 $m
Salaries and short-term benefits 20.0 25.2

Post-employment benefits 1.2 1.5
Share-based payments 14.6 13.1
35.8 39.8
The share-based payments charge comprises $10.7 million (2019: $8.4 million), which is determined in accordance with IFRS 2 ‘Share-based
Payment’ (see note B2.2) and $3.9 million (2019: $4.8 million) of deferred share awards.
B2.4 Fees payable to the auditor
2020 $m 2019 $m
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts 2.3 2.2
Fees payable to the Company’s auditor and its associates for other services:
Audit of subsidiaries pursuant to legislation 9.2 9.5
Audit-related assurance services note (1) 3.5 5.7
Other assurance services 0.7 5.7
Services relating to corporate finance transactions 0.3 7.3
Total fees paid to the auditor 16.0 30.4
Analysed into:
Fees payable to the auditor attributable to the continuing operations:
Non-audit services associated with the demerger of the UK and Europe operations note (2) – 11.7
Other audit and non-audit services 16.0 15.3
16.0 27.0
Fees payable to the auditor attributable to the discontinued UK and Europe operations – 3.4
16.0 30.4
Notes
(1) Of the audit-related assurance service fees of $3.5 million in 2020 (2019: $5.7 million), $0.7 million (2019: $1.1 million) relates to services that are required by law.
(2) Of the $11.7 million one-off non-audit services fees in 2019 associated with the demerger of the UK and Europe operations, $4.4 million was for other assurance services required
by regulation and $7.3 million was for services relating to corporate finance transactions.
In addition, in 2019 there were fees incurred by pension schemes of $0.1 million for audit services. These pension schemes were transferred
to the discontinued UK and Europe operations (M&G plc) in 2019 as part of the demerger.
238 Prudential plc

Group overview
B3 Tax charge
Prudential is subject to tax in numerous jurisdictions and the calculation of the total tax charge inherently involves a degree of estimation and
judgement. Current tax expense is charged or credited based upon amounts estimated to be payable or recoverable as a result of taxable
amounts for the current year and adjustments made in relation to prior years. The positions taken in tax returns where applicable tax regulation
is subject to interpretation are recognised in full in the determination of the tax charge in the financial statements if the Group considers that it is
probable that the taxation authority will accept those positions. Otherwise, provisions are established based on management’s estimate and
judgement of the likely amount of the liability, or recovery, by providing for the single best estimate of the most likely outcome or the weighted
Strategic report
average expected value where there are multiple outcomes.
The total tax charge includes tax expense attributable to both policyholders and shareholders. The tax expense attributable to policyholders
comprises the tax on the income of the consolidated with-profits and unit-linked funds. In certain jurisdictions, life insurance companies are taxed
on both their shareholders’ profits and on their policyholders’ insurance and investment returns on certain insurance and investment products.
Although both types of tax are included in the total tax charge in the Group’s consolidated income statement, they are presented separately in the
consolidated income statement to provide the most relevant information about tax that the Group pays on its profits.
Deferred taxes are provided under the liability method for all relevant temporary differences. IAS 12 ‘Income Taxes’ does not require all
Governance
temporary differences to be provided for, in particular, the Group does not provide for deferred tax on undistributed earnings of subsidiaries
where the Group is able to control the timing of the distribution and the temporary difference created is not expected to reverse in the foreseeable
future. Deferred tax assets are only recognised when it is more likely than not that future taxable profits will be available against which these
losses can be utilised.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability settled, based on
tax rates (and laws) that have been enacted or are substantively enacted at the end of the reporting period.

B3.1 Total tax charge by nature
The total tax (charge) credit in the income statement is as follows:
2020 $m 2019 $m
Tax charge Current tax Deferred tax Total Total
Attributable to shareholders:
Asia operations (229) (209) (438) (468)
US operations 59 408 467 345
Other operations 8 – 8 154
Tax (charge) credit attributable to shareholders’ returns (162) 199 37 31
Attributable to policyholders:
Asia operations (152) (119) (271) (365)
Total tax (charge) credit (314) 80 (234) (334)
The tax credit attributable to shareholders’ returns of $37 million is consistent with the tax credit arising in 2019 ($31 million), reflecting the tax
credit on US derivative losses largely offsetting the tax charge on Asia profits.
The reconciliation of the expected to actual tax charge attributable to shareholders is provided in B3.2 below. The tax charge attributable to
policyholders of $271 million above is equal to the profit before tax attributable to policyholders of $271 million. This is the result of accounting

for policyholder income after the deduction of expenses and movement on unallocated surpluses on an after-tax basis.
The total tax (charge) credit comprises:
2020 $m 2019 $m
Current tax expense:

Corporation tax (445) (589)
Adjustments in respect of prior years 131 28
Total current tax charge (314) (561)
Deferred tax arising from:

Origination and reversal of temporary differences 33 235
Impact of changes in local statutory tax rates (1) 7
Credit in respect of a previously unrecognised tax loss, tax credit or temporary difference from a prior period 48 (15)
Total deferred tax credit 80 227
Total tax charge (234) (334)
The $131 million of adjustments in respect of prior years primarily relates to US operations from the true up of the 2019 tax provision following
finalisation and submission of the 2019 corporate income tax return during 2020 and the carry back of losses under the CARES Act.
In 2020, a tax charge of $102 million (2019: charge of $709 million) has been taken through other comprehensive income. The tax charge
principally relates to an increase in the market value on securities of US insurance operations classified as available-for-sale partially offset
by a tax credit arising on the recycling of gains to the income statement arising on the transaction with Athene.

Prudential plc
239
Annual Report 2020
B3 Tax charge continued
B3.2 Reconciliation of shareholder effective tax rate

In the reconciliation below, the expected tax rates reflect the corporation tax rates that are expected to apply to the taxable profit or loss of
the relevant business. Where there are profits or losses of more than one jurisdiction, the expected tax rates reflect the corporation tax rates
weighted by reference to the amount of profit or loss contributing to the aggregate business result.
2020 2019
Total Total
attributable Percentage attributable Percentage
Asia US Other to share- impact on to share- impact on
operations operations operations holders ETR holders ETR
$m $m $m $m % $m %
Adjusted operating profit (loss) 3,667 2,796 (956) 5,507 5,310

Non-operating profit (loss)* 153 (3,510) (2) (3,359) (3,388)
Profit (loss) before tax 3,820 (714) (958) 2,148 1,922
Expected tax rate: 20% 21% 18% 21%
Tax at the expected rate 764 (150) (172) 442 20.6% 393 20.4%
Effects of recurring tax reconciliation items:
Income not taxable or taxable at concessionary
rates note (i) (102) (45) – (147) (6.8)% (126) (6.6)%
Deductions not allowable for tax purposes 32 11 – 43 2.0% 55 2.9%
Items related to taxation of life insurance
businesses note (ii) (152) (106) – (258) (12.0)% (317) (16.5)%
Deferred tax adjustments 26 – – 26 1.2% (33) (1.7)%
Unrecognised tax losses note (iii) – – 146 146 6.8% 46 2.4%
Effect of results of joint ventures and associates note (iv) (123) – (6) (129) (6.0)% (100) (5.2)%
Irrecoverable withholding taxes 1 – 34 35 1.6% 59 3.1%
Other (10) (3) (7) (20) (1.0)% 13 0.7%
Total (328) (143) 167 (304) (14.2)% (403) (20.9)%
Effects of non-recurring tax reconciliation items:
Adjustments to tax charge in relation
to prior years note (v) 21 (158) 4 (133) (6.2)% (67) (3.5)%
Movements in provisions for open tax matters note (vi) (20) – (13) (33) (1.5)% (1) (0.1)%
M&G demerger related activities – – – – 0.0% 76 4.0%
Impact of carry back of US losses under the
CARES Act – (16) – (16) (0.7)% – –
Impact of changes in local statutory tax rates 1 – – 1 0.0% – –
Adjustments in relation to business disposals
and corporate transactions – – 6 6 0.3% (29) (1.5)%
Total 2 (174) (3) (175) (8.1)% (21) (1.1)%
Total actual tax charge (credit) 438 (467) (8) (37) (1.7)% (31) (1.6)%
Analysed into:
Tax charge (credit) on adjusted operating profit (loss) 495 313 (8) 800 773
Tax credit on non-operating profit (loss)* (57) (780) – (837) (804)
Actual tax rate on:
Adjusted operating profit (loss):
Including non-recurring tax reconciling items 13% 11% 1% 15% 15% note (vii)
Excluding non-recurring tax reconciling items 13% 16% 0% 17% 15%
Total profit (loss) 11% 65% 1% (2)% (2)% note (vii)
* ‘Non-operating profit (loss)’ is used to refer to items excluded from adjusted operating profit and includes short-term investment fluctuations in investment returns on shareholder-backed business,
corporate transactions and amortisation of acquisition accounting adjustments.
240 Prudential plc

Notes
Group overview
(i) The $102 million in Asia operations primarily relates to non-taxable investment income in Taiwan, Singapore and Malaysia.
(ii) The principal reason for the decrease in the Asia operations reconciling items from $192 million in 2019 to $152 million in 2020 is due to a decrease in investment gains in Indonesia and
Philippines which are subject to a lower rate of taxation under local legislation. The $106 million (2019: $125 million) reconciling item in US operations reflects the impact of the dividend
received deduction on the taxation of profits from variable annuity business.
(iii) The $146 million (2019: $46 million) adverse reconciling item in unrecognised tax losses reflects losses arising where it is unlikely that relief for the losses will be available in future periods.
(iv) Profit before tax includes Prudential’s share of profit after tax from the joint ventures and associates. Therefore, the actual tax charge does not include tax arising from profit or loss of joint
ventures and associates and is reflected as a reconciling item.
(v) The $158 million prior year adjustment in US operations comprises the truing up from the 2019 tax provision computed in the 2019 accounts to the submitted 2019 tax return and a number
of one-off adjustments to prior year deferred tax balances.
Strategic report
(vi) The complexity of the tax laws and regulations that relate to our businesses means that from time to time we may disagree with tax authorities on the technical interpretation of a particular area
of tax law. This uncertainty means that in the normal course of business the Group will have matters where, upon ultimate resolution of the uncertainty, the amount of profit subject to tax may
be greater than the amounts reflected in the Group’s submitted tax returns. The statement of financial position contains the following provisions in relation to open tax matters.
2020 $m
Balance at 1 Jan 198

Movements in the current year included in tax charge attributable to shareholders (33)
Provisions utilised in the year (34)
Other movements* (18)
Governance
Balance at 31 Dec 113
*Other movements include interest arising on open tax matters and amounts included in the Group’s share of profits from joint ventures and associates, net of related tax.
(vii) The 2019 actual tax rates of the relevant business operations are shown below:
2019
Total
Asia US Other attributable to
operations operations operations shareholders

Tax rate on adjusted operating profit (loss) 13% 14% 10% 15%
Tax rate on profit (loss) before tax 11% 48% 10% (2)%
B4 Earnings per share
2020
Net of tax
Non- and non- Basic Diluted
Before controlling controlling earnings earnings
tax Tax interests interests per share per share
$m $m $m $m cents cents
Note B1.1 B3
Based on adjusted operating profit 5,507 (800) (148) 4,559 175.5¢ 175.5¢
Short-term fluctuations in investment returns
on shareholder-backed business (4,841) 987 75 (3,779) (145.5)¢ (145.5)¢
Amortisation of acquisition accounting adjustments (39) 7 2 (30) (1.1)¢ (1.1)¢
Gain (loss) attaching to corporate transactions 1,521 (157) 4 1,368 52.7¢ 52.7¢
Based on profit for the year 2,148 37 (67) 2,118 81.6¢ 81.6¢

2019
Net of tax
Non- and non- Basic Diluted
Before controlling controlling earnings earnings
tax Tax interests interests per share per share
$m $m $m $m cents cents
Note B1.1 B3
Based on adjusted operating profit 5,310 (773) (9) 4,528 175.0¢ 175.0¢
Short-term fluctuations in investment returns
on shareholder-backed business (3,203) 772 – (2,431) (94.0)¢ (94.0)¢
Amortisation of acquisition accounting adjustments (43) 8 – (35) (1.3)¢ (1.3)¢
Loss attaching to corporate transactions (142) 24 – (118) (4.6)¢ (4.6)¢
Based on profit for the year from continuing operations 1,922 31 (9) 1,944 75.1¢ 75.1¢
Based on loss for the year from discontinued operations (1,161) (44.8)¢ (44.8)¢
Based on profit for the year 783 30.3¢ 30.3¢


Prudential plc
B4 Earnings per share continued
Basic earnings per share are calculated based on earnings attributable to ordinary shareholders, after related tax and non-controlling interests,
by the weighted average number of ordinary shares outstanding during the year, excluding those held in employee share trusts and consolidated
investment funds, 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 Company’s ordinary shares during the year.
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 in 2020 is set out as below:
Number of shares (in millions) 2020 2019
Weighted average number of shares for calculation of basic earnings per share 2,597 2,587
Shares under option at end of year 2 4
Shares that would have been issued at fair value on assumed option price at end of year (2) (4)
Weighted average number of shares for calculation of diluted earnings per share 2,597 2,587
B5 Dividends
2020 2019
Cents per share $m Cents per share $m
Dividends relating to reporting year:

First interim ordinary dividend 5.37¢ 140 20.29¢ 528
Second interim ordinary dividend 10.73¢ 280 25.97¢ 675
Total 16.10¢ 420 46.26¢ 1,203
Dividends paid in reporting year:
Current year first interim ordinary dividend 5.37¢ 140 20.29¢ 526
Second interim ordinary dividend for prior year 25.97¢ 674 42.89¢ 1,108
Total 31.34¢ 814 63.18¢ 1,634
First and second interim dividends are recorded in the period in which they are paid. In addition to the dividends shown in the table above,
on 21 October 2019, following approval by the Group’s shareholders, Prudential plc demerged its UK and Europe operations (M&G plc)
via a dividend in specie of $7,379 million.
Dividend per share

The 2020 first interim ordinary dividend of 5.37 cents per ordinary share was paid to eligible shareholders on 28 September 2020.
The second interim ordinary dividend for the year ended 31 December 2020 of 10.73 cents per ordinary share will be paid on 14 May 2021
to shareholders included on the UK and HK registers respectively, on 26 March 2021 (Record Date) and to the Holders of US American
Depositary Receipts as at 26 March 2021. The second interim ordinary dividend will be paid on or about 21 May 2021 to shareholders with
shares standing to the credit of their securities accounts with The Central Depository (Pte) Limited (CDP) on the Record Date.
Shareholders holding shares on the UK or Hong Kong share registers will continue to receive their dividend payments in either GBP or HKD
respectively, unless they elect otherwise. Shareholders holding shares on the UK or Hong Kong registers may elect to receive dividend payments
in USD. Elections must be made through the relevant UK or Hong Kong share registrar on or before 23 April 2021. The corresponding amount
per share in GBP and HKD is expected to be announced on or about 5 May 2021. 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 American Depositary
Receipts (ADRs) will continue to receive their dividend payments in USD. Shareholders holding an interest in Prudential shares through The Central
Depository (Pte) Limited (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.
242 Prudential plc

C Financial position
Group overview
C1 Group assets and liabilities by business type
The analysis below is structured to show the investments and other assets and liabilities of the Group by reference to the differing degrees
of policyholder and shareholder economic interest of the different types of business.
The Group has revised its disclosures relating to the investments, other assets and liabilities of the Group in these consolidated financial
statements, including combining various disclosures into a single section and giving further analysis of the categories of debt securities. The 2019
comparative information, in particular that relating to investments, has been re-presented from previously published information to conform to
the current year format and the altered approach to credit ratings analysis described below.
Strategic report
Debt securities are analysed below according to the issuing government for sovereign debt and to credit ratings for the rest of the securities.
From half year 2020, to align more closely with the internal risk management analysis, the Group altered the compilation of its credit ratings
analysis to use the middle of the Standard & Poor’s, Moody’s and Fitch ratings, where available. Where ratings are not available from these rating
agencies, NAIC ratings (for the US), local external rating agencies’ ratings and lastly internal ratings have been used. Securities with none of the
ratings listed above are classified as unrated and included under the ‘below BBB- and unrated’ category. The total securities (excluding sovereign
debt) that were unrated at 31 December 2020 were $780 million (31 December 2019: $648 million). Previously, Standard & Poor’s ratings were
used where available and if not, Moody’s and then Fitch were used as alternatives. Additionally, government debt is shown separately from the
Governance
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-.


Prudential plc
243
Annual Report 2020
C Financial position / continued
C1 Group assets and liabilities by business type continued
31 Dec 2020 $m
Asia insurance Elimina-
tion
of intra-
Unit- Asia Unallo- group
With- linked Asset cated debtors
profits assets and Other manage- Elimina- Total to a and Group
business liabilities business ment tions Asia US segment creditors total
note (i) note (ii)
Debt securities note (iii), note C1.1
Sovereign debt
Indonesia 385 658 564 12 – 1,619 – – – 1,619
Singapore 3,939 551 979 117 – 5,586 – – – 5,586
Thailand – – 1,999 11 – 2,010 – – – 2,010
United Kingdom – 7 – – – 7 – – – 7
United States 24,396 21 2,551 – – 26,968 5,126 – – 32,094
Vietnam – 11 2,881 – – 2,892 – – – 2,892
Other (predominantly Asia) 1,322 700 3,508 19 – 5,549 30 173 – 5,752
Subtotal 30,042 1,948 12,482 159 – 44,631 5,156 173 – 49,960
Other government bonds
AAA 1,420 96 405 – – 1,921 377 – – 2,298
AA+ to AA- 129 2 28 – – 159 522 – – 681
A+ to A- 811 131 339 – – 1,281 188 – – 1,469
BBB+ to BBB- 452 16 196 – – 664 3 – – 667
Below BBB- and unrated 631 9 450 – – 1,090 – 1 – 1,091
Subtotal 3,443 254 1,418 – – 5,115 1,090 1 – 6,206
Corporate bonds
AAA 1,228 221 540 – – 1,989 265 – – 2,254
AA+ to AA- 1,943 476 1,871 – – 4,290 869 – – 5,159
A+ to A- 7,289 695 5,194 1 – 13,179 10,759 – – 23,938
BBB+ to BBB- 9,005 1,299 4,785 – – 15,089 12,686 – – 27,775
Below BBB- and unrated 2,814 849 1,477 2 – 5,142 1,975 6 – 7,123
Subtotal 22,279 3,540 13,867 3 – 39,689 26,554 6 – 66,249
Asset-backed securities
AAA 74 9 24 – – 107 2,110 – – 2,217
AA+ to AA- 2 1 – – – 3 171 – – 174
A+ to A- 15 – 16 – – 31 741 – – 772
BBB+ to BBB- 12 – 9 – – 21 163 – – 184
Below BBB- and unrated 9 2 8 – – 19 48 – – 67
Subtotal 112 12 57 – – 181 3,233 – – 3,414
Total debt securities 55,876 5,754 27,824 162 – 89,616 36,033 180 – 125,829
Loans
Mortgage loans note C1.2 – – 158 – – 158 7,833 – – 7,991
Policy loans 1,231 – 341 – – 1,572 4,507 10 – 6,089
Other loans 492 – 16 – – 508 – – – 508
Total loans 1,723 – 515 – – 2,238 12,340 10 – 14,588
Equity securities and holdings in collective
investment schemes
Direct equities 15,668 13,064 3,321 71 – 32,124 253 4 – 32,381
Collective investment schemes 18,125 7,392 1,633 10 – 27,160 25 7 – 27,192
US separate account assets note (ii) – – – – – – 219,062 – – 219,062
Total equity securities and holdings
in collective investment schemes 33,793 20,456 4,954 81 – 59,284 219,340 11 – 278,635
Other financial investments note (iv) 1,566 405 2,139 97 – 4,207 4,094 47 – 8,348
Total financial investments note (vi) 92,958 26,615 35,432 340 – 155,345 271,807 248 – 427,400
Investment properties – – 6 – – 6 7 10 – 23
Investments in joint ventures and associates
accounted for using the equity method – – 1,689 273 – 1,962 – – – 1,962
Cash and cash equivalents note (vii) 1,049 587 1,317 156 – 3,109 1,621 3,288 – 8,018
Reinsurers’ share of insurance
contract liabilities note (v) 257 – 11,102 – – 11,359 35,232 4 – 46,595
Other assets note (viii) 1,538 252 9,254 839 (62) 11,821 19,813 3,788 (3,323) 32,099
Total assets 95,802 27,454 58,800 1,608 (62) 183,602 328,480 7,338 (3,323) 516,097
Shareholders’ equity – – 12,785 1,102 – 13,887 8,511 (1,520) – 20,878

Non-controlling interests – – 2 144 – 146 1,063 32 – 1,241
Total equity – – 12,787 1,246 – 14,033 9,574 (1,488) – 22,119
Contract liabilities and unallocated surplus

of with-profits funds note (ii) 86,410 25,433 37,845 – – 149,688 296,513 262 – 446,463
Core structural borrowings – – – – – – 250 6,383 – 6,633
Operational borrowings 194 – 99 23 – 316 1,498 630 – 2,444
Other liabilities note (ix) 9,198 2,021 8,069 339 (62) 19,565 20,645 1,551 (3,323) 38,438
Total liabilities 95,802 27,454 46,013 362 (62) 169,569 318,906 8,826 (3,323) 493,978
Total equity and liabilities 95,802 27,454 58,800 1,608 (62) 183,602 328,480 7,338 (3,323) 516,097
244 Prudential plc

Group overview
31 Dec 2019 $m
Asia insurance Elimina-
tion
of intra-
Unit- Asia Unallo- group
With- linked Asset cated debtors
profits assets and Other manage- Elimina- Total to a and Group
business liabilities business ment tions Asia US segment creditors total
note (i) note (ii)
Debt securities note (iii), note C1.1
Strategic report
Sovereign debt
Indonesia 222 610 488 – – 1,320 – – – 1,320
Singapore 3,514 554 708 94 – 4,870 – – – 4,870
Thailand – – 1,398 19 – 1,417 – – – 1,417
United Kingdom – 7 – – – 7 – 615 – 622
United States 20,479 113 2,827 – – 23,419 6,160 597 – 30,176
Vietnam 1 15 2,900 – – 2,916 – – – 2,916
Other (predominantly Asia) 1,745 665 2,809 13 – 5,232 9 116 – 5,357
Subtotal 25,961 1,964 11,130 126 – 39,181 6,169 1,328 – 46,678
Governance
Other government bonds
AAA 1,752 81 538 – – 2,371 977 – – 3,348
AA+ to AA- 135 8 78 – – 221 495 – – 716
A+ to A- 890 159 389 – – 1,438 245 – – 1,683
BBB+ to BBB- 356 88 201 – – 645 4 – – 649
Below BBB- and unrated 31 9 381 – – 421 – 2 – 423
Subtotal 3,164 345 1,587 – – 5,096 1,721 2 – 6,819
Corporate bonds

AAA 732 384 516 – – 1,632 341 – – 1,973
AA+ to AA- 1,574 441 1,908 – – 3,923 1,566 – – 5,489
A+ to A- 5,428 542 5,063 – – 11,033 17,784 – – 28,817
BBB+ to BBB- 5,443 883 3,497 – – 9,823 22,775 – – 32,598
Below BBB- and unrated 2,111 569 781 3 – 3,464 2,157 2 – 5,623
Subtotal 15,288 2,819 11,765 3 – 29,875 44,623 2 – 74,500
Asset-backed securities
AAA 236 19 104 – – 359 3,658 – – 4,017
AA+ to AA- 132 6 46 – – 184 780 – – 964
A+ to A- 1 – 14 – – 15 1,006 – – 1,021
BBB+ to BBB- – – – – – – 359 – – 359
Below BBB- and unrated – – – – – – 212 – – 212
Subtotal 369 25 164 – – 558 6,015 – – 6,573
Total debt securities 44,782 5,153 24,646 129 – 74,710 58,528 1,332 – 134,570
Loans
Mortgage loans note C1.2 – – 165 – – 165 9,904 – – 10,069
Policy loans 1,089 – 316 – – 1,405 4,707 9 – 6,121
Other loans 374 – 19 – – 393 – – – 393
Total loans 1,463 – 500 – – 1,963 14,611 9 – 16,583
investment schemes
Direct equities 14,143 12,440 1,793 59 – 28,435 150 4 – 28,589
Collective investment schemes 15,230 6,652 1,680 14 – 23,576 40 6 – 23,622

US separate account assets note (ii) – – – – – – 195,070 – – 195,070
Total equity securities and holdings
in collective investment schemes 29,373 19,092 3,473 73 – 52,011 195,260 10 – 247,281
Other financial investments note (iv) 963 383 1,363 106 – 2,815 2,791 56 – 5,662
Total financial investments note (vi) 76,581 24,628 29,982 308 – 131,499 271,190 1,407 – 404,096
Investment properties – – 7 – – 7 7 11 – 25
Investments in joint ventures and associates
accounted for using the equity method – – 1,263 237 – 1,500 – – – 1,500
Cash and cash equivalents note (vii) 963 356 1,015 156 – 2,490 1,960 2,515 – 6,965
Reinsurers' share of insurance contract
liabilities note (v) 152 – 5,306 – – 5,458 8,394 4 – 13,856
Other assets note (viii) 1,277 237 6,983 826 (35) 9,288 17,696 3,440 (2,652) 27,772
Total assets 78,973 25,221 44,556 1,527 (35) 150,242 299,247 7,377 (2,652) 454,214
Shareholders' equity – – 9,801 1,065 – 10,866 8,929 (318) – 19,477

Non-controlling interests – – 2 153 – 155 – 37 – 192
Total equity – – 9,803 1,218 – 11,021 8,929 (281) – 19,669
Contract liabilities and unallocated surplus

of with-profits funds note (ii) 70,308 23,571 26,814 – – 120,693 269,549 186 – 390,428
Core structural borrowings – – – – – – 250 5,344 – 5,594
Operational borrowings 303 21 122 27 – 473 1,501 671 – 2,645
Other liabilities note (ix) 8,362 1,629 7,817 282 (35) 18,055 19,018 1,457 (2,652) 35,878
Total liabilities 78,973 25,221 34,753 309 (35) 139,221 290,318 7,658 (2,652) 434,545
Total equity and liabilities 78,973 25,221 44,556 1,527 (35) 150,242 299,247 7,377 (2,652) 454,214

Prudential plc
Notes
(i) The with-profits business of Asia comprises the with-profits assets and liabilities of the Hong Kong, Malaysia and Singapore operations. ‘Other business’ includes assets and liabilities of other
participating businesses and other non-linked shareholder-backed business.
(ii) Further analysis of the shareholders’ equity by business type of the US operations is provided below:
31 Dec 2020 $m 31 Dec 2019 $m
Asset
Insurance management Total Total
Shareholders’ equity 8,506 5 8,511 8,929

The US separate account assets comprise investments in mutual funds attaching to the variable annuity business that are held in the separate account. The related liabilities are reported
in contract liabilities at an amount equal to the separate account assets.
(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.
(iv) Other financial investments comprise derivative assets, other investments and deposits.
(v) Reinsurers’ share of contract liabilities includes the reinsurance ceded in respect of the acquired REALIC business by the Group’s US insurance operations and at 31 December 2020
also includes amounts ceded in respect of the reinsurance of substantially all of Jackson’s in-force fixed and fixed index annuity liabilities to Athene Life Re Ltd, as discussed in note D1.1.
(vi) Of the total financial investments of $427,400 million as at 31 December 2020 (31 December 2019: $404,096 million), $288,310 million (31 December 2019: $260,896 million) are due
to be recovered within one year.
(vii) Cash and cash equivalents consist of cash at bank and in hand, deposits held at call with banks, treasury bills and other short-term highly liquid investments with less than 90 days maturity
from the date of acquisition and are analysed as follows:
31 Dec 2020 31 Dec 2019
$m $m
Cash 2,492 2,071

Cash equivalents 5,526 4,894
Total cash and cash equivalents* 8,018 6,965
Analysed as:
Held by the Group’s holding and non-regulated entities and available for general use 3,250 2,491
Other funds not available for general use by the Group, including funds held for the benefit of policyholders 4,768 4,474
Total cash and cash equivalents 8,018 6,965
* The Group’s cash and cash equivalents are held in the following currencies as at 31 December 2020: USD 59 per cent, GBP 15 per cent, HKD 3 per cent, SGD 3 per cent, MYR 8 per cent
and other currencies 12 per cent (31 December 2019: USD 59 per cent, GBP 13 per cent, HKD 8 per cent, SGD 3 per cent, MYR 5 per cent and other currencies 12 per cent).
(viii) Of total ‘Other assets’ at 31 December 2020, there are:

– Property, plant and equipment (PPE) of $893 million (31 December 2019: $1,065 million). Movements in the PPE including right-of-use assets are provided in note C11; and
– Accrued investment income and other debtors, which are analysed as follows:
31 Dec 2020 31 Dec 2019
$m $m
Interest receivable 1,008 1,064

Other accrued income 419 577
Total accrued investment income 1,427 1,641
Amounts receivable due from:
Policyholders 757 574
Intermediaries 2 4
Reinsurers 920 216
Other sundry debtors 1,492 1,260
Total other debtors 3,171 2,054
Total accrued investment income and other debtors 4,598 3,695
Analysed as:
Expected to be settled within one year 4,151 3,191
Expected to be settled beyond one year 447 504
4,598 3,695
(ix) Within ‘Other liabilities’ are accruals, deferred income and other liabilities of $15,508 million (31 December 2019: $14,488 million), which are analysed as follows (detailed maturity analysis
is provided in note C2):
31 Dec 2020 31 Dec 2019
$m $m
Accruals and deferred income 702 582

Creditors arising from direct insurance and reinsurance operations 2,296 2,831
Interest payable 74 68
Funds withheld under reinsurance agreements 4,628 3,760
Other creditors 7,808 7,247
Total accruals, deferred income and other creditors 15,508 14,488
246 Prudential plc

C1.1 Additional analysis of debt securities
Group overview
This note provides additional analysis of the Group’s debt securities. With the exception of certain debt securities classified as ‘available-for-sale’
under IAS 39, which primarily relate to US insurance operations as disclosed below, the Group’s debt securities are carried at fair value through
profit or loss.
(a) Holdings by consolidated investment funds of the Group

Of the $125,829 million of Group’s debt securities at 31 December 2020 (31 December 2019: $134,570 million), the following amounts were held
by consolidated investment funds:
Strategic report
31 Dec 2020 $m 31 Dec 2019 $m
Asia US Total Total
Debt securities held by consolidated investment funds 15,928 1,145 17,073 22,113
(b) Additional analysis of US debt securities
Governance
Debt securities for US operations included in the statement of financial position comprise:

31 Dec 2020 31 Dec 2019
$m $m
Available-for-sale 34,650 57,091

Fair value through profit and loss 1,383 1,437
Total US debt securities 36,033 58,528

The corporate bonds held by the US insurance operations comprise:
31 Dec 2020 31 Dec 2019

$m $m
Publicly traded and SEC Rule 144A securities* 17,870 34,781

Non-SEC Rule 144A securities 8,684 9,842
Total US corporate bonds 26,554 44,623
* A 1990 SEC rule that facilitates the resale of privately placed securities under Rule 144A that are without SEC registration to qualified institutional investors. The rule was designed to develop a more
liquid and efficient institutional resale market for unregistered securities.
(c) Movements in unrealised gains and losses on Jackson available-for-sale debt securities

The movement in the statement of financial position value for debt securities classified as available-for-sale from a net unrealised gain
of $3,496 million at 31 December 2019 to a net unrealised gain of $3,396 million at 31 December 2020 is analysed in the table below.
Changes in unrealised appreciation (depreciation)

reflected in other comprehensive income
Gains recycled
to income

statement on Unrealised
transfer of gains (losses)
debt securities arising in
31 Dec 2020 to Athene the year 31 Dec 2019
$m $m $m $m
note D1.1
Assets fair valued at below book value

Book value 5,111 3,121
Unrealised loss (144) (117) (27)
Fair value (as included in statement of financial position) 4,967 3,094
Assets fair valued at or above book value
Book value 26,143 50,474
Unrealised gain 3,540 (2,817) 2,834 3,523
Fair value (as included in statement of financial position) 29,683 53,997
Total
Book value 31,254 53,595
Net unrealised gain (loss) 3,396 (2,817) 2,717 3,496

Fair value (as included in the statement of financial position) 34,650 57,091

Prudential plc
C1.1 Additional analysis of debt securities continued

Book value represents cost or amortised cost of the debt securities. Jackson available-for-sale debt securities fair valued at below book value
(in an unrealised loss position) is analysed further below.
(i) Fair value as a percentage of book value

The following table shows the fair value of the Jackson available-for-sale debt securities in a gross unrealised loss position for various percentages
of book value:
31 Dec 2020 $m 31 Dec 2019 $m

Fair Unrealised Fair Unrealised
value loss value loss
Between 90% and 100% 4,902 (128) 3,083 (25)

Between 80% and 90% 13 (2) 11 (2)
Below 80% 52 (14) – –
Total 4,967 (144) 3,094 (27)
(ii) Unrealised losses by maturity of security
31 Dec 2020 31 Dec 2019

$m $m
1 year to 5 years (12) (1)

5 years to 10 years (15) (12)
More than 10 years (115) (7)
Mortgage-backed and other debt securities (2) (7)
Total (144) (27)
(iii) Age analysis of unrealised losses for the years indicated

The following table shows the age analysis of all the unrealised losses in the portfolio by reference to the length of time the securities have been
in an unrealised loss position:
31 Dec 2020 $m 31 Dec 2019 $m

Non- Non-
investment Investment investment Investment
Age analysis grade grade* Total grade grade* Total
Less than 6 months (15) (118) (133) (1) (20) (21)

6 months to 1 year (4) (7) (11) (1) (1) (2)
1 year to 2 years – – – – (1) (1)
2 years to 3 years – – – – (1) (1)
More than 3 years – – – – (2) (2)
Total (19) (125) (144) (2) (25) (27)
* For Standard & Poor’s, Moody’s and Fitch rated debt securities, those with ratings range from AAA to BBB- are designated as investment grade. For NAIC rated debt securities, those with ratings
1 or 2 are designated as investment grade.
Further, the following table shows the age analysis of the securities at 31 December 2020 whose fair values were below 80 per cent of the book
value by reference to the length of time the securities have been in an unrealised loss position (31 December 2019: nil):
31 Dec 2020 $m
Fair Unrealised
Age analysis value loss
Less than 3 months – –

3 months to 6 months 51 (14)
More than 6 months 1 –
Total below 80% 52 (14)
248 Prudential plc

(d) Asset-backed securities
Group overview
The Group’s holdings in asset-backed securities (ABS) comprise residential mortgage-backed securities (RMBS), commercial mortgage-backed
securities (CMBS), collateralised debt obligations (CDO) funds and other asset-backed securities.
The US operations’ exposure to asset-backed securities comprises:
31 Dec 2020 31 Dec 2019

$m $m
RMBS
Strategic report
Sub-prime (31 Dec 2020: 1% AAA) 29 93
Alt-A (31 Dec 2020: 30% AAA, 41% A) 12 116
Prime including agency (31 Dec 2020: 90% AAA, 1% AA, 5% A) 224 862
CMBS (31 Dec 2020: 87% AAA, 5% AA, 4% A) 1,588 3,080
CDO funds (31 Dec 2020: 78% AAA, 8% AA, 14% A), $nil exposure to sub-prime 524 696
Other ABS (31 Dec 2020: 14% AAA, 6% AA, 68% A), $27 million exposure to sub-prime 856 1,168
Total US asset-backed securities 3,233 6,015
Governance
(e) Group bank debt exposure
The Group exposures held by the shareholder-backed business and with-profits funds in bank debt securities are analysed below. The table
excludes assets held to cover linked liabilities and those of the consolidated investment funds.
Exposure to bank debt securities

31 Dec 2020 $m 31 Dec 2019 $m
Senior debt Subordinated debt
Group Group
Shareholder-backed business Total Tier 1 Tier 2 Total total total
Asia 902 175 242 417 1,319 993

Eurozone 223 4 12 16 239 337
United Kingdom 360 6 79 85 445 723
United States 1,464 7 81 88 1,552 3,134
Other 189 2 41 43 232 647
Total 3,138 194 455 649 3,787 5,834
With-profits funds
Asia 402 557 437 994 1,396 1,130
Eurozone 41 21 10 31 72 131
United Kingdom 198 11 106 117 315 155
United States 1,028 14 82 96 1,124 34
Other 186 8 204 212 398 284
Total 1,855 611 839 1,450 3,305 1,734
(f) Impairment of US available-for-sale debt securities and other financial assets European Embedded Value (EEV) basis results
In accordance with the Group’s accounting policy set out in note A3.1, impairment reviews were performed for available-for-sale securities
and loans and receivables.
During the year ended 31 December 2020, a charge for impairment net of recoveries of $62 million (2019: charge of $17 million) was
recognised for available-for-sale securities and loans and receivables held by Jackson.
Jackson, with the support of internal credit analysts, regularly monitors and reports on the credit quality of its holdings of debt securities.
In addition, there is a periodic review of its investments on a case-by-case basis to determine whether any decline in fair value represents an
impairment. Investments in structured securities are subject to a review of their future estimated cash flows, including expected and stress case
scenarios, to identify potential shortfalls in contractual payments (both interest and principal). Impairment charges are recorded on structured
securities when the Company forecasts a contractual payment shortfall. Situations where such a shortfall would not lead to a recognition of a loss
are rare. The impairment loss reflects the difference between the fair value and book value.
In 2020, the Group realised gross losses on sales of available-for-sale securities of $193 million (2019: $70 million) with 69 per cent (2019: 51 per cent)
of these losses related to the disposal of fixed maturity securities of the top 10 individual issuers, which were disposed of to limit future credit loss
exposure. Of the $193 million (2019: $70 million), $148 million (2019: $28 million) relates to losses on sales of impaired and deteriorating securities.
The effect of changes in the key assumptions that underpin the assessment of whether impairment has taken place depends on the factors
described in note A3.1. A key indicator of whether such impairment may arise in future, and the potential amounts at risk, is the profile of gross
unrealised losses for fixed maturity securities accounted for on an available-for-sale basis by reference to the time periods by which the securities
have been held continuously in an unrealised loss position and by reference to the maturity date of the securities concerned.
For 2020, the amount of gross unrealised losses for fixed maturity securities classified as available-for-sale under IFRS in an unrealised loss
position was $144 million (2019: $27 million). Note B1.2 provides further details on the impairment charges and unrealised losses of Jackson’s
available-for-sale securities.

Prudential plc
249
Annual Report 2020
C1.2 Additional analysis of US mortgage loans

In the US, mortgage loans of $7,833 million at 31 December 2020 (31 December 2019: $9,904 million) are all commercial mortgage loans that are
secured by the following property types: industrial, multi-family residential, suburban office, retail or hotel. The average loan size is $18.5 million
(31 December 2019: $19.3 million). The portfolio has a current estimated average loan to value of 54 per cent (31 December 2019: 54 per cent).
At 31 December 2020, Jackson had mortgage loans with a carrying value of $493 million (31 December 2019: nil) where the contractual terms
of the agreements had been restructured to grant forbearance for a period of six to fourteen months. Under IAS 39, restructured loans are
reviewed for impairment with an impairment recorded if the expected cash flows under the newly restructured terms discounted at the original
yield (the pre-structured interest rate) are below the carrying value of the loan. No impairment is recorded for these loans in 2020 as the expected
cash flows and interest rate did not materially change under the restructured terms.
C2 Fair value measurement
The Group holds financial investments in accordance with IAS 39, whereby subject to specific criteria, financial instruments are required to be
accounted for under one of the following categories:
—— Financial assets and liabilities at fair value through profit or loss – this comprises assets and liabilities designated by management as fair value
through profit or loss on inception and derivatives. This includes instruments that are managed and the performance evaluated on a fair value
basis and includes liabilities related to net assets attributable to unit holders of consolidated investment funds and, in Asia, policyholder
liabilities for investment contracts without discretionary participation features. All investments within this category are measured at fair value
with all changes thereon being recognised in investment return in the income statement;
—— Financial investments on an available-for-sale basis – this comprises assets that are designated by management as available-for-sale and/or do
not fall into any of the other categories. These assets are initially recognised at fair value plus attributable transaction costs. Available-for-sale
assets are subsequently measured at fair value. Interest income is recognised on an effective interest basis in the income statement. The
effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument or,
when appropriate, a shorter period to the net carrying amount of the financial asset. Except for foreign exchange gains and losses on the
amortised cost of the debt securities, which are included in the income statement, unrealised gains and losses are recognised in other
comprehensive income. Upon disposal or impairment, accumulated unrealised gains and losses are transferred from other comprehensive
income to the income statement as realised gains or losses; and
—— Loans and receivables – except for those designated as fair value through profit or loss or available-for-sale, these instruments comprise
non-quoted investments that have fixed or determinable payments. These instruments include loans collateralised by mortgages, deposits,
loans to policyholders and other unsecured loans and receivables. These investments are initially recognised at fair value plus transaction
costs. Subsequently, these instruments are carried at amortised cost using the effective interest method.
The Group uses the trade date method to account for regular purchases and sales of financial assets.
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 current market
bid 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.
Other than the loans which have been designated at fair value through profit or loss, the carrying value of loans and receivables is presented
net of provisions for impairment. The fair value of loans is estimated from discounted cash flows expected to be received. The discount rate used
is updated for the market rate of interest where applicable.
The fair value of the subordinated and senior debt issued by the parent company is determined using quoted prices from independent third
parties.
The fair value of financial liabilities (other than subordinated debt, senior debt and derivative financial instruments) is determined using
discounted cash flows of the amounts expected to be paid.
Valuation approach for level 2 fair valued assets and liabilities

A significant proportion of the Group’s level 2 assets are corporate bonds, structured securities and other non-national government debt
securities. These assets, in line with market practice, are generally valued using a designated independent pricing service or quote from
third-party brokers. These valuations are subject to a number of monitoring controls, such as comparison to multiple pricing sources where
available, monthly price variances, stale price reviews and variance analysis on prices achieved on subsequent trades.
When prices are not available from pricing services, quotes are sourced directly from brokers. Prudential seeks to obtain a number of quotes
from different brokers so as to obtain the most comprehensive information available on their executability. Where quotes are sourced directly
from brokers, the price used in the valuation is normally selected from one of the quotes based on a number of factors, including the timeliness
and regularity of the quotes and the accuracy of the quotes considering the spreads provided. The selected quote is the one which best
represents an executable quote for the security at the measurement date.
250 Prudential plc

Generally, no adjustment is made to the prices obtained from independent third parties. Adjustment is made in only limited circumstances,
Group overview
where it is determined that the third-party valuations obtained do not reflect fair value (eg either because the value is stale and/or the values
are extremely diverse in range). These are usually securities which are distressed or that could be subject to a debt restructure or where reliable
market prices are no longer available due to an inactive market or market dislocation. In these instances, prices are derived using internal
valuation techniques including those as described below in this note with the objective of arriving at a fair value measurement that reflects the
price at which an orderly transaction would take place between market participants on the measurement date. The techniques used require a
number of assumptions relating to variables such as credit risk and interest rates. Examples of such variables include an average credit spread
based on the corporate bond universe and the relevant duration of the asset being valued. Prudential determines the input assumptions based
Strategic report
on the best available information at the measurement dates. Securities valued in such manner are classified as level 3 where these significant
inputs are not based on observable market data.
Valuation approach for level 3 fair valued assets and liabilities

Investments valued using valuation techniques include financial investments which by their nature do not have an externally quoted price based
on regular trades, and financial investments for which markets are no longer active as a result of market conditions, eg market illiquidity. The
valuation techniques used include comparison to recent arm’s-length transactions, reference to other instruments that are substantially the same,
Governance
discounted cash flow analysis, option-adjusted spread models and, if applicable, enterprise valuation.
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 undertaking these activities, the Group makes use of the
extensive expertise of its asset management functions. 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
(i) 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, except for $34,650 million (31 December 2019:
$58,302 million) of debt securities classified as available-for-sale, principally in the US operations. All assets and liabilities held at fair value are
measured on a recurring basis. As of 31 December 2020, the Group did not have any financial instruments that are measured at fair value on a
non-recurring basis.
Financial instruments at fair value
31 Dec 2020 $m
Level 1 Level 2 Level 3
Valuation Valuation
Quoted prices based on based on
(unadjusted) significant significant
in active unobservable observable
markets market inputs market inputs Total
note (i) note (ii)
Loans – 416 3,461 3,877

Equity securities and holdings in collective investment schemes 272,863 5,224 548 278,635
Debt securities 75,998 49,769 62 125,829
Other investments (including derivative assets) 123 2,477 1,866 4,466
Derivative liabilities (298) (184) – (482)
Total financial investments, net of derivative liabilities 348,686 57,702 5,937 412,325
Investment contract liabilities without discretionary participation features
held at fair value – (792) – (792)
Net asset value attributable to unit holders of consolidated investment funds (5,464) (17) (494) (5,975)
Other financial liabilities held at fair value – – (3,589) (3,589)
Total financial instruments at fair value 343,222 56,893 1,854 401,969
Percentage of total (%) 86% 14% 0% 100%
Analysed by business type:

Financial investments, net of derivative liabilities at fair value:
With-profits 78,203 11,481 395 90,079

Unit-linked and variable annuity separate account 244,206 1,075 – 245,281
Non-linked shareholder-backed business 26,277 45,146 5,542 76,965
Total financial investments, net of derivative liabilities at fair value 348,686 57,702 5,937 412,325
Other financial liabilities at fair value (5,464) (809) (4,083) (10,356)
Group total financial instruments at fair value 343,222 56,893 1,854 401,969

Prudential plc
C2 Fair value measurement continued
C2.2 Fair value measurement hierarchy of Group assets and liabilities continued
31 Dec 2019 $m
Level 1 Level 2 Level 3
Valuation Valuation
Quoted prices based on based on
(unadjusted) significant significant
in active unobservable observable
markets market inputs market inputs Total
note (i) note (ii)
Loans – – 3,587 3,587

Equity securities and holdings in collective investment schemes 243,285 3,720 276 247,281
Debt securities 67,927 66,637 6 134,570
Other investments (including derivative assets) 70 1,676 1,301 3,047
Derivative liabilities (185) (207) – (392)
Total financial investments, net of derivative liabilities 311,097 71,826 5,170 388,093
Investment contract liabilities without discretionary participation features
held at fair value – (1,011) – (1,011)
Net asset value attributable to unit holders of consolidated investment funds (5,973) (23) (2) (5,998)
Other financial liabilities held at fair value – – (3,760) (3,760)
Total financial instruments at fair value 305,124 70,792 1,408 377,324
Percentage of total (%) 81% 19% 0% 100%
Analysed by business type:

Financial investments, net of derivative liabilities at fair value:
With-profits 66,061 7,762 260 74,083
Unit-linked and variable annuity separate account 217,838 1,486 – 219,324
Non-linked shareholder-backed business 27,198 62,578 4,910 94,686
Total financial investments, net of derivative liabilities at fair value 311,097 71,826 5,170 388,093
Other financial liabilities at fair value (5,973) (1,034) (3,762) (10,769)
Group total financial instruments at fair value 305,124 70,792 1,408 377,324
Notes
(i) Of the total level 2 debt securities of $49,769 million at 31 December 2020 (31 December 2019: $66,637 million), $7,676 million (31 December 2019: $8,915 million) are valued internally.
The majority of such securities are valued using matrix pricing, which is based on assessing the credit quality of the underlying borrower to derive a suitable discount rate relative to
government securities of a comparable duration. Under matrix pricing, the debt securities are priced taking the credit spreads on comparable quoted public debt securities and applying
these to the equivalent debt instruments factoring in a specified liquidity premium. The majority of the parameters used in this valuation technique are readily observable in the market and,
therefore, are not subject to interpretation.
(ii) At 31 December 2020, the Group held $1,854 million (31 December 2019: $1,408 million) of net financial instruments at fair value within level 3. This represents less than 1 per cent (2019: less
than 1 per cent) of the total fair valued financial assets net of financial liabilities.
Included within these net assets and liabilities are policy loans of $3,455 million (31 December 2019: $3,587 million) measured as the loan outstanding balance, plus accrued investment
income, attached to acquired REALIC business and held to back the liabilities for funds withheld under reinsurance arrangements. The funds withheld liability of $3,609 million (31 December
2019: $3,760 million) is also classified within level 3. The fair value of the liabilities is equal to the fair value of the underlying assets held as collateral, which primarily consist of policy loans
and debt securities. The assets and liabilities offset and therefore their movements have no impact on shareholders’ profit and equity.
Excluding the loans and funds withheld liability under Jackson’s REALIC reinsurance arrangements as described above, which amounted to a net liability of $(154) million (31 December 2019:
$(173) million), the level 3 fair valued financial assets net of financial liabilities were a net asset of $2,008 million (31 December 2019: $1,581 million). Of this amount, equity securities of
$3 million (31 December 2019: nil) are internally valued, representing less than 0.2 per cent of the total fair valued financial assets net of financial liabilities. Internal valuations are inherently
more subjective than external valuations. The $2,008 million referred to above includes the following items:
–P rivate equity investments in both equity securities and limited partnerships within other financial investments of $1,970 million (31 December 2019: $1,301 million) consisting of
investments held by Jackson which are primarily externally valued in accordance with International Private Equity and Venture Capital Association guidelines using the proportion of the
company’s investment in each fund as shown in external valuation reports;
– E quity securities and holdings in collective investment schemes of $445 million (31 December 2019: $276 million) consisting primarily of property and infrastructure funds held by the Asia
participating funds, which are externally valued using the net asset value of the invested entities;
– L iabilities of $(494) million (31 December 2019: $(2) million) for the net asset value attributable to external unit holders in respect of consolidated investment funds, which are non-recourse
to the Group. These liabilities are valued by reference to the underlying assets; and
–O ther sundry individual financial instruments of a net asset of $87 million (31 December 2019: net asset of $4 million).
Of the net asset of $2,008 million (31 December 2019: $1,581 million) referred to above:
–A net assets of $395 million (31 December 2019: $258 million) is held by the Group’s Asia participating funds and therefore shareholders’ profit and equity are not impacted by movements
in the valuation of these financial instruments; and
–A net asset of $1,613 million (31 December 2019: $1,323 million) is held to support non-linked shareholder-backed business, all of which are externally valued and are therefore inherently
less subjective than internal valuations. These instruments consist primarily of private equity investments held by Jackson as described above. If the value of all these level 3 financial
instruments decreased by 20 per cent, the change in valuation would be $(319) million (31 December 2019: $(264) million), which would reduce shareholders’ equity by this amount before
tax. All of this amount would pass through the income statement substantially as part of short-term fluctuations in investment returns outside of adjusted operating profit.
252 Prudential plc

(ii) Transfers into and out of levels
Group overview
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 2020, the transfers between levels within the Group’s portfolio, were primarily transfers from level 1 to level 2 of $3,927 million
(2019: $678 million) and transfers from level 2 to level 1 of $1,631 million (2019: $1,121 million). These transfers which relate to equity securities
and debt securities arose to reflect the change in the observed valuation inputs and in certain cases, the change in the level of trading activities
of the securities. There were transfers into level 3 of $53 million in the year (2019: nil).
Strategic report
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 1 January 2020 to that presented at 31 December 2020.
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 includes unrealised gains and losses on debt securities held as available-for-
Governance
sale principally within Jackson and foreign exchange movements arising from the retranslation of the Group’s overseas subsidiaries and branches.
2020 $m
Net asset
value
Equity attributable
securities Other to unit
Reconciliation of movements and holdings investments holders of
in level 3 assets and liabilities in collective (including consolidated Other

investment Debt derivative investment financial
measured at fair value Loans schemes securities assets) funds liabilities Total
Balance at 1 Jan 3,587 276 6 1,301 (2) (3,760) 1,408

Total gains (losses) in income statement note (2) 4 (5) (37) 15 (1) (26)
Total gains (losses) recorded in other
comprehensive income – 9 – – (1) (1) 7
Purchases and other additions – 428 10 700 (520) – 618
Sales – (169) (2) (98) 14 – (255)
Issues 277 – – – – (475) (198)
Settlements (401) – – – – 648 247
Transfers into level 3 – – 53 – – – 53
Balance at 31 Dec 3,461 548 62 1,866 (494) (3,589) 1,854
2019 $m
Net asset
Equity value
securities attributable
and Other Borrowings to unit
Reconciliation of movements holdings in investments attributable holders of
in level 3 assets and liabilities collective (including to with- consolidated Other
investment Debt derivative Derivative profits investment financial
measured at fair value Loans schemes securities assets) liabilities businesses funds liabilities Total

Balance at 1 Jan 6,054 656 1,505 6,714 (539) (2,045) (1,258) (4,335) 6,752
Removal of discontinued UK
and Europe operations (2,509) (440) (1,498) (5,513) – 2,045 1,258 451 (6,206)
Total gains (losses) in income
statement note 1 (11) 6 30 539 – – (28) 537
Total gains (losses) recorded in
other comprehensive income – 3 – (6) – – – (11) (14)
Purchases – 69 – 269 – – (2) – 336
Sales – (1) (7) (193) – – – – (201)
Issues 275 – – – – – – (143) 132
Settlements (234) – – – – – – 306 72
Balance at 31 Dec 3,587 276 6 1,301 – – (2) (3,760) 1,408
Note
Of the total net gains and (losses) in the income statement of $(26) million in 2020 (2019: $537 million), $(46) million (2019: $19 million) relates to net unrealised gains and losses of financial
instruments still held at the end of the year, which can be analysed as follows:
2020 $m 2019 $m
Equity securities and holdings in collective investment schemes (34) (11)

Debt securities 1 –
Other investments (26) 34
Net asset value attributable to unit holders of consolidated investment funds 13 –
Other financial liabilities – (4)
Total (46) 19

Prudential plc
C2.2 Fair value measurement hierarchy of Group assets and liabilities continued

(iii) 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.
Cash deposits, accrued income, other debtors, accruals, deferred income and other liabilities are excluded from the analysis below, as these
are carried at amortised cost, which approximates fair value.
31 Dec 2020 $m 31 Dec 2019 $m

Level 2 Level 3 Level 2 Level 3
Valuation Valuation Valuation Valuation
based on based on based on based on
significant significant significant significant
observable unobservable observable unobservable
market market Fair Carrying market market Fair Carrying
inputs inputs value value inputs inputs value value
Assets
Loans 2,027 9,303 11,330 10,711 1,865 11,646 13,511 12,996
Liabilities – – – –
Investment contract liabilities without
discretionary participation features – (3,218) (3,218) (3,188) – (3,957) (3,957) (3,891)
Core structural borrowings of shareholder-
financed businesses (7,518) – (7,518) (6,633) (6,227) – (6,227) (5,594)
Operational borrowings (excluding lease
liabilities) (1,948) – (1,948) (1,948) (2,015) – (2,015) (2,015)
Obligations under funding, securities lending
and sale and repurchase agreements (1,344) (8,702) (10,046) (9,768) (48) (9,087) (9,135) (8,901)
Total (8,783) (2,617) (11,400) (10,826) (6,425) (1,398) (7,823) (7,405)
The fair value of the assets and liabilities in the table above, with the exception of the subordinated and senior debt issued by the parent company,
has been estimated from the discounted cash flows expected to be received or paid. Where appropriate, the observable market interest rate
has been used and the assets and liabilities are classified within level 2. Otherwise, they are included as level 3 assets or liabilities. The fair value
included for the subordinated and senior debt issued by the parent company is determined using quoted prices from independent third parties.
These are presented as level 2 liabilities.
C2.3 Additional information on financial instruments

(i) Financial risk
Liquidity analysis
Contractual maturities of financial liabilities on an undiscounted cash flow basis
The following table sets out the contractual maturities for applicable classes of financial liabilities, excluding derivative liabilities and investment
contracts that are separately presented. The financial liabilities are included in the column relating to the contractual maturities of the
undiscounted cash flows (including contractual interest payments) due to be paid assuming conditions are consistent with those of year end.
31 Dec 2020 $m
Contractual maturity profile for financial liabilities
Total After 1 After 5 After 10 After 15 Total undis-
carrying 1 year year to years to years to years to Over No stated counted
Financial liabilities value or less 5 years 10 years 15 years 20 years 20 years maturity cash flows

financed businesses C5.1 6,633 139 1,261 2,000 631 – – 3,725 7,756
Lease liabilities under IFRS 16 496 142 317 84 20 – 1 – 564
Other operational borrowings 1,948 909 108 473 691 – – – 2,181
and sale and repurchase agreements 9,768 3,983 4,461 1,764 147 – – – 10,355
Accruals, deferred income and other liabilities 15,508 9,877 290 36 218 – – 5,087 15,508
Net asset value attributable to unit holders of
consolidated unit trusts and similar funds 5,975 5,975 – – – – – – 5,975
Total 40,328 21,025 6,437 4,357 1,707 – 1 8,812 42,339
254 Prudential plc

Group overview
31 Dec 2019 $m
Contractual maturity profile for financial liabilities
carrying 1 year year to years to years to years to Over No stated counted
Financial liabilities value or less 5 years 10 years 15 years 20 years 20 years maturity cash flows

financed businesses C5.1 5,594 105 1,146 888 648 – – 3,725 6,512
Lease liabilities under IFRS 16 630 145 388 113 37 18 1 – 702
Strategic report
Operational borrowings 2,015 941 188 232 1,132 2 – – 2,495
and sale and repurchase agreements 8,901 2,067 5,476 1,902 278 – – – 9,723
Accruals, deferred income and other liabilities 14,488 9,172 636 1 – 248 – 4,431 14,488
Net asset value attributable to unit holders of
consolidated unit trusts and similar funds 5,998 5,998 – – – – – – 5,998
Governance
Total 37,626 18,428 7,834 3,136 2,095 268 1 8,156 39,918
Maturity analysis of derivatives

The following table shows the carrying value of the gross and net derivative positions.

Carrying value of net derivatives $m
Net

Derivative Derivative derivative
assets liabilities position
31 Dec 2020 2,599 (482) 2,117

31 Dec 2019 1,745 (392) 1,353
All net derivatives of $2,117 million (31 December 2019: $1,353 million) have been included at fair value due within one year or less, representing
the basis on which they are managed (ie to manage principally asset or liability value exposures). The Group has no cash flow hedges and, in
general, contractual maturities are not considered essential for an understanding of the timing of the cash flows for these instruments.
Maturity analysis of investment contracts
The table below shows the maturity profile for investment contracts based on undiscounted cash flow projections of expected benefit payments.
Maturity profile for investment contracts $m

carrying 1 year year to years to years to years to Over counted
value or less 5 years 10 years 15 years 20 years 20 years cash flows
31 Dec 2020 3,658 519 1,713 215 575 710 17 3,749

31 Dec 2019 4,366 600 2,015 534 350 961 12 4,472

The undiscounted cash flows in the maturity profile shown above excludes contracts which have no stated maturity but which are repayable
on demand. 2019 cash flows have been adjusted to show them on a consistent basis.
Most investment contracts have options to surrender early, often subject to surrender or other penalties. Therefore, most contracts can
be said to have a contractual maturity of less than one year, but the additional charges and term of the contracts mean these are unlikely to be
exercised in practice and the more useful information is to present information on expected payment.
The vast majority of the Group’s financial assets are held to back the Group’s policyholder liabilities. Although asset/liability matching is an
important component of managing policyholder liabilities (both those classified as insurance and those classified as investments), this profile
is mainly relevant for managing market risk rather than liquidity risk. Within each business unit, this asset/liability matching is performed on
a portfolio-by-portfolio basis.
In terms of liquidity risk, a large proportion of the policyholder liabilities contain discretionary surrender values or surrender charges, meaning
that many of the Group’s liabilities are expected to be held for the long term. Much of the Group’s investment portfolios are in marketable
securities, which can therefore be converted quickly to liquid assets.
For the reasons provided above, an analysis of the Group’s assets by contractual maturity is not considered meaningful to evaluate the nature
and extent of the Group’s liquidity risk.

Prudential plc
C2.3 Additional information on financial instruments continued

Credit risk
The Group’s maximum exposure to credit risk of financial instruments before any allowance for collateral or allocation of losses to policyholders
is represented by the carrying value of financial instruments on the balance sheet that have exposures to credit risk comprising cash and cash
equivalents, deposits, debt securities, loans and derivative assets, accrued investment income and other debtors, the carrying value of which are
disclosed at the start of this note and note (ii) below for derivative assets. The collateral in place in relation to derivatives is described in note (iii)
below. Note C1.2 describes the security for the loans held by the Group. The Group’s exposure to credit risk is further discussed in note C6 below.
Of the total loans and receivables held, $8 million (31 December 2019: $7 million) are past their due date but are not impaired. Of the total past
due but not impaired, $1 million are less than one year past their due date (31 December 2019: $1 million). The Group expects full recovery of
these loans and receivables.
There are no financial assets that would have been past due or impaired had the terms not been renegotiated in both years.
In addition, the Group did not take possession of any other collateral held as security in both years.
Further details of collateral in place in relation to derivatives, securities lending, repurchase agreements and other transactions are provided
in note (iii) below.
Foreign exchange risk

As at 31 December 2020, the Group held 9 per cent (31 December 2019: 8 per cent) of its financial assets and 30 per cent (31 December 2019:
25 per cent) of its financial liabilities in currencies, mainly USD, other than the functional currency of the relevant business units or the currency
to which the functional currency is pegged (eg financial assets and liabilities of USD denominated business in Hong Kong). The exchange risks
inherent in these exposures are mitigated through the use of derivatives, mainly forward currency contracts and currency swaps as described
in note (ii) below.
The amount of exchange loss recognised in the income statement in 2020, except for those arising on financial instruments measured at fair
value through profit or loss, is $33 million (2019: $72 million).
(ii) Derivatives and hedging

Derivative financial instruments are used to reduce or manage investment, interest rate and currency exposures, to facilitate efficient portfolio
management and for investment purposes.
The Group does not regularly seek to apply fair value or cash flow hedging treatment under IAS 39. The Group has no fair value and cash flows
hedges under IAS 39 at 31 December 2020 and 2019. All derivatives that are not designated as hedging instruments are carried at fair value,
with movements in fair value being recorded in the income statement.
Embedded derivatives are embedded within other non-derivative host financial instruments and insurance contracts to create hybrid
instruments. Embedded derivatives meeting the definition of an insurance contract are accounted for under IFRS 4. Where economic
characteristics and risks of the embedded derivatives are not closely related to the economic characteristics and risks of the host instrument,
and where the hybrid instrument is not measured at fair value with the changes in fair value recognised in the income statement, the embedded
derivative is bifurcated and carried at fair value as a derivative measured in accordance with IAS 39.
In addition, the Group applies the option under IFRS 4 to not separate and fair value surrender options embedded in host contracts and
with-profits investment contracts whose strike price is either a fixed amount or a fixed amount plus interest.
Derivatives held and their purpose

The Group enters into a variety of exchange traded and over-the-counter derivative financial instruments, including futures, options, forward
contracts, swaps and swaptions.
All over-the-counter derivative transactions, with the exception of transactions in some Asia operations, are conducted under standardised
ISDA (International Swaps and Derivatives Association Inc) master agreements and the Group has collateral agreements between the individual
Group entities and relevant counterparties in place under each of these market master agreements.
The majority of the Group’s derivatives are held by Jackson. Derivatives are used for efficient portfolio management to obtain cost effective
and management of exposure to various markets in accordance with the Group’s investment strategies and to manage exposure to interest rate,
currency, credit and other business risks. The Group also uses interest rate derivatives to reduce exposure to interest rate volatility. In particular:
—— US operations hold large amounts of interest-rate sensitive investments that contain credit risks on which a certain level of defaults is
expected. These businesses have purchased some swaptions to manage the default risk on certain underlying assets and hence reduce the
amount of regulatory capital held to support the assets; and
—— Some products, especially in the US, have guarantee features linked to equity indices. A mismatch between guaranteed product liabilities
and the performance of the underlying assets exposes the Group to equity index risk. In order to mitigate this risk, the relevant business units
purchase swaptions, equity options and futures to better match asset performance with liabilities under equity-indexed products.
256 Prudential plc

Additional information on Jackson derivative programme
Group overview
Jackson enters into financial derivative transactions, including those noted below, to reduce and manage business risks. These transactions
manage the risk of a change in the value, yield, price, cash flows or quantity of, or a degree of exposure, with respect to assets, liabilities or future
cash flows, which Jackson has acquired or incurred.
Jackson uses free-standing derivative instruments for hedging purposes. Additionally, certain liabilities, primarily trust instruments supported
by funding agreements, fixed index annuities, certain variable annuity guaranteed benefit features and reinsured Guaranteed Minimum Income
Benefit variable annuity features are similar to derivatives. Jackson does not account for such items as either fair value or cash flow hedges as
might be permitted if the specific hedge documentation requirements of IAS 39 were followed. Financial derivatives are carried at fair value,
Strategic report
including derivatives embedded in certain host liabilities where these are required to be valued separately.
The principal types of derivatives used by Jackson and their purpose are as follows:
Derivative Purpose
Interest rate swaps These generally involve the exchange of fixed and floating payments over the period for which Jackson holds the
instrument without an exchange of the underlying principal amount. These agreements are used to hedge Jackson’s
exposure to movements in interest rates.
Governance
Swaption contracts These contracts provide the purchaser with the right, but not the obligation, to require the writer to pay the present
value of a long-duration interest rate swap at future exercise dates. Jackson both purchases and writes swaptions
in order to hedge against significant movements in interest rates.
Treasury futures These derivatives are used to hedge Jackson’s exposure to movements in interest rates.
contracts

Equity index futures These derivatives (including various call and put options and options contingent on interest rates and currency exchange
contracts and equity rates) are used to hedge Jackson’s obligations associated with its issuance of certain VA guarantees. Some of these
index options annuities and guarantees contain embedded options that are fair valued for financial reporting purposes.
Cross-currency Cross-currency swaps, which embody spot and forward currency swaps and additionally, in some cases, interest rate
swaps swaps and equity index swaps, are entered into for the purpose of hedging Jackson’s foreign currency denominated
funding agreements supporting trust instrument obligations.
Credit default swaps These swaps represent agreements under which the buyer has purchased default protection on certain underlying
corporate bonds held in its portfolio. These contracts allow Jackson to sell the protected bonds at par value to the
counterparty if a default event occurs in exchange for periodic payments made by Jackson for the life of the agreement.
Hedging
Up to 31 December 2019, the Group had designated perpetual subordinated capital securities totalling $3.7 billion as a net investment hedge
under IAS 39 to hedge the currency risks related to the net investment in Jackson. This net investment hedge was 100 per cent effective in 2019.
The Group had no net investment, cash flow or fair value hedges in place during 2020.
(iii) Derecognition, collateral and offsetting

Derecognition of financial assets and liabilities
The Group’s policy is to derecognise financial assets when it is deemed that substantially all the risks and rewards of ownership have been

transferred.
The Group derecognises financial liabilities only when the obligation specified in the contract is discharged, cancelled or has expired.
Reverse repurchase agreements

The Group is party to various reverse repurchase agreements under which securities are purchased from third parties with an obligation to resell
the securities. The securities are not recognised as investments in the statement of financial position but the right to receive the cash paid is
recognised as deposits.
The Group has entered into reverse repurchase transactions under which it purchased securities and had taken on the obligation to resell
the securities. At 31 December 2020, the fair value of the collateral held in respect of these transactions, which is represented by the purchased
securities, was $603 million (31 December 2019: $1,011 million).
Securities lending and repurchase agreements

The Group is also party to various securities lending agreements (including repurchase agreements) under which securities are loaned to
third parties on a short-term basis. The loaned securities are not derecognised; rather, they continue to be recognised within the appropriate
investment classification. To the extent cash collateral is received it is recognised on the statement of financial position with the obligation to
repay the cash paid recognised as a liability. Other collateral is not recognised.
At 31 December 2020, the Group had $2,007 million (31 December 2019: $90 million) of lent securities and assets subject to repurchase
agreements. The cash and securities collateral held or pledged under such agreements were $2,047 million (31 December 2019: $95 million).

Prudential plc
257
Annual Report 2020
C2.3 Additional information on financial instruments continued

Collateral and pledges under derivative transactions
At 31 December 2020, the Group had pledged $2,422 million (31 December 2019: $1,301 million) for liabilities and held collateral of
$2,306 million (31 December 2019: $1,883 million) in respect of over-the-counter derivative transactions. These transactions are conducted
under terms that are usual and customary to collateralised transactions including, where relevant, standard securities lending and repurchase
agreements.
The Group has entered into collateral arrangements in relation to over-the-counter derivative transactions, which permit sale or re-pledging
of underlying collateral. The Group has not sold any collateral held or re-pledged any collateral. All over-the-counter derivative transactions,
with the exception of transactions in some Asia operations, are conducted under standardised International Swaps and Derivatives Association
(ISDA) master agreements. The collateral management for these transactions is conducted under the usual and customary terms and conditions
set out in the Credit Support Annex to the ISDA master agreement.
Other collateral
At 31 December 2020, the Group had pledged collateral of $2,614 million (31 December 2019: $3,299 million) in respect of other transactions.
This principally arises from Jackson’s membership of the Federal Home Loan Bank of Indianapolis (FHLBI) primarily for the purpose of
participating in the bank’s collateralised loan advance programme with short-term and long-term funding facilities. The membership requires
Jackson to purchase and hold a minimum amount of FHLBI capital stock, plus additional stock based on outstanding advances in the form of
either short-term or long-term notes or funding agreements issued to FHLBI.
Offsetting assets and liabilities

The Group’s derivative instruments, repurchase agreements and securities lending agreements are subject to master netting arrangements and
collateral arrangements. A master netting arrangement with a counterparty creates a right of offset for amounts due to and due from that same
counterparty that is enforceable in the event of a default or bankruptcy. The Group recognises amounts subject to master netting arrangements
on a gross basis within the consolidated balance sheets.
The following tables present the gross and net information about the Group’s financial instruments subject to master netting arrangements:
31 Dec 2020 $m
Related amounts not offset in the
balance sheet
Gross amount
included in the Financial Cash Securities Net
balance sheet instruments collateral collateral amount
note (i) note (ii) note (iii) note (iv)
Financial assets:
Derivative assets 2,523 (122) (1,249) (890) 262
Reverse repurchase agreements 588 – – (588) –
Total financial assets 3,111 (122) (1,249) (1,478) 262
Financial liabilities:
Derivative liabilities (203) 122 69 – (12)
Securities lending and repurchase agreements (1,384) – 244 1,140 –
Total financial liabilities (1,587) 122 313 1,140 (12)
31 Dec 2019 $m
Related amounts not offset in the
balance sheet
Gross amount
included in the Financial Cash Securities Net
balance sheet instruments collateral collateral amount
note (i) note (ii) note (iii) note (iv)
Financial assets:
Derivative assets 1,708 (115) (901) (618) 74
Reverse repurchase agreements 953 – – (953) –
Total financial assets 2,661 (115) (901) (1,571) 74
Financial liabilities:
Derivative liabilities (216) 115 86 – (15)
Securities lending and repurchase agreements (48) – 48 – –
Total financial liabilities (264) 115 134 – (15)
Notes
(i) The Group has not offset any of the amounts included in the balance sheet.
(ii) Represents the amount that could be offset under master netting or similar arrangements where the Group does not satisfy the full criteria to offset in the balance sheet.
(iii) Excludes initial margin amounts for exchange-traded derivatives.
(iv) In the tables above, the amounts of assets or liabilities included in the balance sheet would be offset first by financial instruments that have the right of offset under master netting or similar
arrangements with any remaining amount reduced by the amount of cash and securities collateral. The actual amount of collateral may be greater than amounts presented in the tables.
258 Prudential plc

Group overview
C3 Policyholder liabilities and unallocated surplus
C3.1 Group overview
(i) Analysis of movements in policyholder liabilities and unallocated surplus of with-profits funds
Discontinued
UK and
Europe
Asia US operations Total
Strategic report
$m $m $m $m
note C3.2 note C3.3
Balance at 1 Jan 2019 note (a) 105,408 236,380 210,002 551,790

Comprising: note (b)
– Policyholder liabilities on the consolidated statement of financial position
(excludes $50 million classified as unallocated to a segment) 91,836 236,380 193,020 521,236
– Unallocated surplus of with-profits funds on the consolidated statement
Governance
of financial position 3,198 – 16,982 20,180
– Group’s share of policyholder liabilities of joint ventures and associates note (c) 10,374 – – 10,374
Removal of discontinued UK and Europe operations – – (210,002) (210,002)
Net flows: note (d)
Premiums 20,094 20,976 – 41,070
Surrenders (4,156) (17,342) – (21,498)
Maturities/deaths/other claim events (2,800) (3,387) – (6,187)

Net flows 13,138 247 – 13,385
Shareholders’ transfers post-tax (99) – – (99)
Investment-related items and other movements 12,824 32,922 – 45,746
Foreign exchange translation differences 1,299 – – 1,299
Balance at 31 Dec 2019/1 Jan 2020 132,570 269,549 – 402,119
Comprising:
(excludes $186 million classified as unallocated to a segment) 115,943 269,549 – 385,492
of financial position 4,750 – – 4,750
Net flows: note (d)
Premiums 20,760 18,671 – 39,431
Surrenders (4,730) (15,832) – (20,562)
Net flows 13,465 (869) – 12,596

Balance at 31 Dec 2020 165,293 296,513 – 461,806
Comprising:
Average policyholder liability balances note (e)
2020 143,948 283,031 – 426,979
2019 115,015 252,965 – 367,980
Notes
(a) The 1 January 2019 policyholder liabilities of the Asia insurance operations were after deducting the intra-group reinsurance liabilities ceded by the discontinued UK and Europe operations
(M&G plc) to the Hong Kong with-profits business, which were recaptured in October 2019 upon demerger.
(b) The items above represent the amount attributable to changes in policyholder liabilities and unallocated surplus of with-profits funds as a result of each of the components listed.
The policyholder liabilities shown include investment contracts without discretionary participation features (as defined in IFRS 4) and their full movement in the year but exclude liabilities
that have not been allocated to a reporting segment. The items above are shown gross of external reinsurance.
(c) Including net flows of the Group’s insurance joint ventures and associates. The Group’s investment in joint ventures and associates are accounted for on an equity method basis in the
Group’s statement of financial position. The Group’s share of the policyholder liabilities as shown above relates to life businesses of the China JV, India and the Takaful business in Malaysia.
(d) The analysis includes the impact of movements in premiums, claims and investment-related items on policyholders’ liabilities. The amount does not represent actual premiums, claims
and investment movements in the year recognised in the income statement. For example, premiums shown above exclude any deductions for fees/charges; claims (surrenders, maturities,
deaths and other claim events) shown above represent the release of technical provision for policyholder liabilities rather than the actual claims amount paid to the policyholder.
(e) Average policyholder liabilities have been based on opening and closing balances, adjusted for acquisitions, disposals and other relevant corporate transactions arising in the year,
and exclude unallocated surplus of with-profits funds.

Prudential plc
C3 Policyholder liabilities and unallocated surplus continued
C3.1 Group overview continued

(ii) Analysis of movements in policyholder liabilities for shareholder-backed business
Discontinued
UK and
Europe
Asia US operations Total
$m $m $m $m
Balance at 1 Jan 2019 51,705 236,380 51,911 339,996

Removal of discontinued UK and Europe operations – – (51,911) (51,911)
Net flows:
Premiums 10,372 20,976 – 31,348
Surrenders (3,610) (17,342) – (20,952)
Net flows note 5,594 247 – 5,841
Foreign exchange translation differences 777 – – 777
Balance at 31 Dec 2019/1 Jan 2020 62,262 269,549 – 331,811
Comprising:
– Group’s share of policyholder liabilities relating to joint ventures and associates 11,877 – – 11,877
Net flows:
Premiums 11,028 18,671 – 29,699
Surrenders (3,933) (15,832) – (19,765)
Maturities/deaths/other claim events (970) (3,708) – (4,678)
Net flows note 6,125 (869) – 5,256
Balance at 31 Dec 2020 78,883 296,513 – 375,396
Comprising:
– Group’s share of policyholder liabilities relating to joint ventures and associates 15,605 – – 15,605
Note
Including net flows of the Group’s insurance joint ventures and associates.
(iii) Movement in insurance contract liabilities and unallocated surplus of with-profits funds

Further analysis of the movement in the year of the Group’s gross contract liabilities, reinsurer’s share of insurance contract liabilities
and unallocated surplus of with-profits funds (excluding those held by joint ventures and associates) is provided below:
Reinsurer’s
Gross share of Unallocated
insurance insurance Investment surplus of
contract contract contract with-profits
liabilities liabilities liabilities funds
$m $m $m $m
note (e) note (a),(e) note (b)
Balance at 1 Jan 2019 (410,947) 14,193 (110,339) (20,180)

Removal of discontinued UK and Europe operations 87,824 (2,169) 105,196 16,982
Income and expense included in the income statement for continuing operations note (c) (55,579) 1,795 (311) (1,415)
Other movements note (d) – – (63) (112)
Foreign exchange translation differences (1,441) 37 (18) (25)
Balance at 31 Dec 2019/1 Jan 2020 (380,143) 13,856 (5,535) (4,750)
Income and expense included in the income statement note (c) (55,034) 32,723 349 (438)
Other movements note (d) – – 765 –
Foreign exchange translation differences (1,610) 16 (38) (29)
Balance at 31 Dec 2020 (436,787) 46,595 (4,459) (5,217)
260 Prudential plc

Notes
Group overview
(a) Includes reinsurers’ share of claims outstanding of $1,527 million (31 December 2019: $1,094 million). The increase in reinsurers’ share of insurance contract liabilities in 2020 includes
$27.3 billion in respect of the reinsurance of substantially all of Jackson’s in-force fixed and fixed index annuity liabilities to Athene Life Re Ltd.
(b) This comprises investment contracts with discretionary participation features of $479 million at 31 December 2020 (31 December 2019: $633 million) and investment contracts without
discretionary participation features of $3,980 million at 31 December 2020 (31 December 2019: $4,902 million).
(c) The total charge for benefits and claims in 2020 shown in the income statement comprises the amounts shown as ‘Income and expense included in the income statement’ in the table
above of $(22,400) million (2019: $(55,510) million) together with claims paid of $(27,491) million (2019: $(29,585) million), net of amounts attributable to reinsurers of $1,686 million
(2019: $1,190 million).
(d) Other movements include premiums received and claims paid on investment contracts without discretionary participating features, which are taken directly to the balance sheet in
accordance with IAS 39. In 2019, the changes in the unallocated surplus of with-profits funds also resulted from the recapture of the intra-group reinsurance agreement between the
Strategic report
discontinued UK and Europe operations and Asia insurance operations prior to the demerger, which was eliminated in the income statement.
(e) The movement in the gross contract liabilities and the reinsurer’s share of insurance contract liabilities during 2020 includes the impact of a change to the calculation of the valuation interest
rate (VIR) used to value long-term insurance liabilities in Hong Kong. The effect of the change to the VIR was such that the implicit duration of liabilities is reduced and closer to best estimate
expectations. The change reduced policyholder liabilities (net of reinsurance) of the Hong Kong’s shareholder-backed business at 31 December 2020 by $907 million. The resulting benefit
is included within short-term fluctuations in investment returns.
(iv) Reinsurers’ share of insurance contract liabilities

The measurement of reinsurance assets is consistent with the measurement of the underlying direct insurance contracts. The treatment of
any gains or losses arising on the purchase of reinsurance contracts is dependent on the underlying accounting basis of the entity concerned.
Governance
31 Dec 2020 $m 31 Dec 2019 $m
Unallocated
Asia US to a segment Total Total
note (b) note (c)
Insurance contract liabilities note (a) 11,186 33,881 1 45,068 12,762

Claims outstanding 173 1,351 3 1,527 1,094

Total 11,359 35,232 4 46,595 13,856
Notes
(a) The increase in the reinsurers’ share of insurance contract liabilities in 2020 compared to 2019 primarily relates to the reinsurance of substantially all of Jackson’s in-force fixed and fixed index
annuity liabilities to Athene Life Re Ltd.
(b) The reinsurers’ share of insurance contract liabilities for Asia primarily relates to protection business written in Hong Kong.
(c) The reinsurers’ share of insurance contract liabilities for Jackson as shown in the table above primarily relates to the reinsurance of substantially all of Jackson’s in-force fixed and fixed
index annuity liabilities to Athene Life Re Ltd and certain fully collateralised former REALIC business retained by Swiss Re through 100 per cent reinsurance agreements. Apart from
these reinsurance transactions, the principal reinsurance ceded by Jackson outside the Group is on term-life insurance, direct and assumed accident and health business and GMIB variable
annuity guarantees.
The Group cedes certain business to other insurance companies. Although the ceding of insurance does not relieve the Group from its liability
to its policyholders, the Group participates in such agreements largely for the purpose of managing its loss exposure. The Group evaluates the
financial condition of its reinsurers and monitors concentration of credit risk from similar geographic regions, activities or economic
characteristics of the reinsurers to minimise its exposure from reinsurer insolvencies. Of the reinsurers’ share of insurance contract liabilities
balance of $46,595 million at 31 December 2020 (31 December 2019: $13,856 million), 99 per cent (31 December 2019: 97 per cent) was from
reinsurers with rating A- and above by Standard & Poor’s or other external rating agencies.
During 2020, net commissions received on ceded business for Asia totalled $1,005 million (2019: $355 million) and claims incurred ceded
to external reinsurers totalled $432 million (2019: $552 million). The 2020 net commissions received includes $770 million in respect of the
reinsurance transaction entered into by the Hong Kong business as discussed in note D1.1. There was $1 million (2019: nil) of deferred gains
in the year.

Net commissions received on ceded business for Jackson totalled $1,223 million (2019: $20 million) and claims incurred ceded to external
reinsurers totalled $1,663 million (2019: $630 million). The 2020 net commissions received includes $1,203 million in respect of the Athene
reinsurance transaction entered into by Jackson as discussed in note D1.1. There was no deferred gains in the year (2019: nil).

Prudential plc
C3.2 Asia insurance operations

(i) Analysis of movements in policyholder liabilities and unallocated surplus of with-profits funds
Shareholder-backed business
With-profits Unit-linked Other
business liabilities business Total
$m $m $m $m
Balance at 1 Jan 2019 53,703 25,704 26,001 105,408

Comprising:
– Policyholder liabilities on the consolidated statement of financial position 50,505 20,846 20,485 91,836
– Group’s share of policyholder liabilities relating to joint ventures
and associates note (a) – 4,858 5,516 10,374
Premiums
New business 1,611 1,837 2,419 5,867
In-force 8,111 2,361 3,755 14,227
9,722 4,198 6,174 20,094
Surrenders note (b) (546) (2,929) (681) (4,156)
Maturities/deaths/other claim events (1,632) (149) (1,019) (2,800)
Net flows 7,544 1,120 4,474 13,138
Investment-related items and other movements 8,638 1,663 2,523 12,824
Foreign exchange translation differences note (d) 522 363 414 1,299
Balance at 31 Dec 2019/1 Jan 2020 70,308 28,850 33,412 132,570
Comprising:
Premiums
New business 1,338 1,851 2,063 5,252
In-force 8,393 2,358 4,757 15,508
9,731 4,209 6,820 20,760
Surrenders note (b) (797) (2,982) (951) (4,730)
Maturities/deaths/other claim events (1,595) (196) (774) (2,565)
Net flows 7,339 1,031 5,095 13,465
Investment-related items and other movements note (c) 8,127 2,107 7,035 17,269
Foreign exchange translation differences note (d) 752 518 835 2,105
Balance at 31 Dec 2020 86,410 32,506 46,377 165,293
Comprising:
Average policyholder liability balances note (e)
2020 73,375 30,678 39,895 143,948
2019 58,032 27,277 29,706 115,015
Notes
(a) The Group’s investment in joint ventures and associates are accounted for on an equity method and the Group’s share of the policyholder liabilities as shown above relate to the life business
of the China JV, India and the Takaful business in Malaysia.
(b) The rate of surrenders for shareholder-backed business (expressed as a percentage of opening policyholder liabilities) is 6.3 per cent in 2020 (2019: 7.0 per cent).
(c) Investment-related items and other movements in 2020 primarily represents equity market gains as well as fixed income asset gains and lower discount rates due to falling interest rates.
(d) Movements in the year have been translated at the average exchange rates for the year ended 31 December 2020 and 2019. The closing balance has been translated at the closing spot rates
as at 31 December 2020 and 2019. Differences upon retranslation are included in foreign exchange translation differences.
(e) Average policyholder liabilities have been based on opening and closing balances, adjusted for any acquisitions, disposals and other relevant corporate transactions arising in the year,
and exclude unallocated surplus of with-profits funds.
262 Prudential plc

(ii) Duration of policyholder liabilities
Group overview
The table below shows the carrying value of policyholder liabilities and the maturity profile of the cash flows on a discounted basis,
taking account of expected future premiums and investment returns:
31 Dec 2020 31 Dec 2019

$m $m
Policyholder liabilities 144,471 115,943
Strategic report
31 Dec 2020 31 Dec 2019
Expected maturity: % %
0 to 5 years 20 18
5 to 10 years 19 18
10 to 15 years 15 15
15 to 20 years 12 13
20 to 25 years 10 11
Governance
Over 25 years 24 25
(iii) Policyholder liabilities and unallocated surplus by business unit

The table below shows the policyholder liabilities and unallocated surplus, excluding joint ventures and associates and net of external
reinsurance by business unit:
31 Dec 2020 31 Dec 2019

$m $m
Hong Kong 73,338 58,800

Indonesia 4,617 4,933
Malaysia 8,756 7,725
Singapore 32,264 27,427
Taiwan 8,178 6,801
Other Asia insurance operations 11,176 9,549
Total Asia 138,329 115,235
C3.3 US insurance operations
(i) Analysis of movements in policyholder liabilities
Variable
annuity General
separate account
account and other
liabilities business Total
$m $m $m
Balance at 1 Jan 2019 163,301 73,079 236,380

Premiums 12,776 8,200 20,976

Surrenders (12,767) (4,575) (17,342)
Maturities/deaths/other claim events (1,564) (1,823) (3,387)
Net flows note (a) (1,555) 1,802 247
Transfers from general to separate account 951 (951) –
Investment-related items and other movements note (b) 32,373 549 32,922
Balance at 31 Dec 2019/1 Jan 2020 195,070 74,479 269,549
Premiums 14,990 3,681 18,671
Surrenders (11,300) (4,532) (15,832)
Maturities/deaths/other claim events (1,854) (1,854) (3,708)
Net flows note (a) 1,836 (2,705) (869)
Transfers from separate to general account (2,190) 2,190 –
Investment-related items and other movements note (b) 24,346 3,487 27,833
Balance at 31 Dec 2020 219,062 77,451 296,513
Average policyholder liability balances note (c)
2020 207,066 75,965 283,031

2019 179,186 73,779 252,965

Prudential plc
263
Annual Report 2020
C3.3 US insurance operations continued

Notes
(a) Net outflows in 2020 were $(869) million (2019 inflows: $247 million) with surrenders and withdrawals from general account and other business exceeding new inflows on this business given
lower volumes of institutional and fixed and fixed-index annuities sales in the year, partially offset by net inflows into the variable annuity separate accounts. This is discussed further in the
Group Chief Financial Officer and Chief Operating Officer’s report.
(b) Positive investment-related items and other movements in variable annuity separate account liabilities of $24,346 million for 2020 largely represent positive separate account return following
the increase in the US equity market growth in the year and asset gains arising from declining bond yields.
(c) Average policyholder liabilities have been based on opening and closing balances, adjusted for any acquisitions, disposals and other corporate transactions arising in the year. Included within
the policyholder liabilities for the general account and other business of $77,451 million at 31 December 2020 are $27.3 billion in respect of the reinsured Jackson’s in-force fixed and fixed
index annuity liabilities to Athene Life Re Ltd, as discussed in note D1.1.
(ii) Duration of policyholder liabilities

The table below shows the carrying value of policyholder liabilities and maturity profile of the cash flows on a discounted basis at the balance
sheet date:
31 Dec 2020 31 Dec 2019

Variable Variable
annuity General annuity General
separate account separate account
account and other account and other
liabilities business Total liabilities business Total
$m $m $m $m $m $m
Policyholder liabilities 219,062 77,451 296,513 195,070 74,479 269,549
Expected maturity: % % % % % %
0 to 5 years 39 36 39 41 45 42
5 to 10 years 27 22 26 27 27 27
10 to 15 years 16 17 16 16 13 15
15 to 20 years 9 11 10 9 8 9
20 to 25 years 5 6 5 4 4 4
Over 25 years 4 8 4 3 3 3
(iii) Aggregate account values

The table below shows the distribution of account values for fixed annuities (fixed interest rate and fixed index), the fixed account portion
of variable annuities, and interest-sensitive life business within the range of minimum guaranteed interest rates as described in note C3.4(b).
The table below excludes, in 2020, the liabilities that were fully reinsured to Athene in June 2020. As at 31 December 2020, approximately
90 per cent (31 December 2019: 87 per cent) of Jackson’s fixed annuities, variable annuity fixed account options and interest-sensitive life
business account values have a current crediting rate that is at the lowest level allowed for under the terms of the policy.
Fixed annuities and the

fixed account portion of
variable annuities Interest-sensitive life business
31 Dec 2020* 31 Dec 2019 31 Dec 2020 31 Dec 2019
Minimum guaranteed interest rate $m $m $m $m
> 0% – 1.0% 6,758 6,952 – –

> 1.0% – 2.0% 302 12,994 – –
> 2.0% – 3.0% 4,709 13,701 270 270
> 3.0% – 4.0% 623 1,561 2,819 3,018
> 4.0% – 5.0% 280 2,236 2,488 2,597
> 5.0% – 6.0% 73 278 2,045 2,031
Total 12,745 37,722 7,622 7,916
* The decrease in 2020 compared to 2019 primarily relates to the reinsurance of substantially all of Jackson’s in-force fixed and fixed index annuity liabilities to Athene Life Re Ltd as discussed
in note D1.1.
264 Prudential plc

C3.4 Products and determining contract liabilities
Group overview
Classification of insurance and investment contracts
IFRS 4 requires contracts written Contracts that transfer significant insurance risk to the Group are classified as insurance
by insurers to be classified as either contracts. This judgement is applied in considering whether the material features of a contract
‘insurance’ contracts or ‘investment’ gives rise to the transfer of significant insurance risk, which is made at the point of contract
contracts. The classification of the inception and not revisited.
Strategic report
contract determines its accounting.
For the majority of the Group’s contracts, classification is based on a readily identifiable scenario
that demonstrates a significant difference in cash flows if the covered event occurs (as opposed
to does not occur) reducing the level of judgement involved.
Contracts that transfer financial risk to the Group but not significant insurance risk are classified
as investment contracts. Insurance contracts and investment contracts with discretionary
participation features are accounted for under IFRS 4. Investment contracts without such
discretionary participation features are accounted for as financial instruments under IAS 39.
Governance
Insurance Insurance contracts and Investment contracts without
business units investment contracts with discretionary participation features
discretionary participation features
Asia —— With-profits contracts —— Minor amounts for a number
—— Unit-linked policies of small categories of business
—— Health and protection

policies
—— Non-participating term
contracts
—— Whole life contracts
US —— Variable annuity contracts —— Guaranteed investment contracts
—— Fixed annuity contracts (GICs)
—— Fixed index annuity —— Minor amounts of ‘annuity certain’
contracts contracts
—— Group pay-out annuity
contracts
—— Life insurance contracts
C3.4(a) Asia
Contract type Description and material features Determination of liabilities
With-profits Provides savings and/or protection where the basic sum As explained in note A3.1, with-profits contracts are
and participating assured can be enhanced by a profit share (or bonus) predominantly sold in Hong Kong, Malaysia and Singapore.
contracts from the underlying fund as determined at the discretion The total value of the with-profits funds is driven by the
of the local business unit. underlying asset valuation with movements reflected

principally in the accounting value of policyholder liabilities
Participating products often offer a guaranteed maturity
and unallocated surplus.
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.
Unit-linked Combines savings with protection, the cash value of the The attaching liabilities largely reflect the unit value
policy primarily depends on the value of the underlying obligation driven by the value of the investments of the unit
unitised funds. fund. Additional contract liabilities are held for guaranteed
benefits beyond the unit fund value, generally using a gross
premium valuation method, as discussed below for health
and protection business. These additional provisions are
recognised as a component of other business liabilities.

Prudential plc
265
Annual Report 2020
C3.4 Products and determining contract liabilities continued
C3.4(a) Asia continued
Health and Health and protection features are offered as The approach to determine the contract liabilities is
protection supplements to the products listed above or sold generally driven by the local solvency basis. The discount
as standalone products. Protection covers mortality rates used to determine the contract liabilities are derived
and/or morbidity benefits including health, disability, in line with the measurement basis applied in each local
critical illness and accident coverage. business unit and are generally based on the risk-free
rates applicable to the underlying contacts, including
appropriate margins.
A gross premium valuation (GPV) method is typically
used in those local businesses where a risk-based capital
framework is adopted for local solvency. Under the GPV
method, all cash flows are valued explicitly using best
estimate assumptions with a suitable margin for prudence.
This is achieved either through adding an explicit allowance
above best estimate to the assumptions, or by applying an
overlay constraint such that on day one no negative reserves
(ie where future premium inflows are expected to exceed
future claims and outflows) are derived at an individual
policyholder level, or at a product/fund level, or a
combination of both. The margin for prudence is released
to profit over the life of the contract.
The Hong Kong business unit applies a net premium
valuation method (NPV) to determine the future
policyholder benefit provisions, subject to minimum
floors at the policyholder’s asset share or guaranteed
cash surrender value as appropriate.
For India and Taiwan, US GAAP is applied for measuring
insurance liabilities. For these businesses, the future
policyholder benefit provisions for non-linked business
are determined using the net level premium method,
with an allowance for surrenders, maintenance and
claims expenses.
In Vietnam, an estimation basis to determine the contract
liabilities is aligned substantially to that used by the local
business units applying the GPV method.
Non-participating Non-participating savings and/or protection where The approach to determining the contract liabilities is
term contracts, the benefits are guaranteed, determined by a set of generally driven by the local solvency basis, as discussed
whole life and defined market-related parameters, or determined at for health and protection business above.
endowment the discretion of the local business unit. These products
assurance 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.
266 Prudential plc

Group overview
C3.4(b) US
Variable annuities Variable annuities are deferred annuity products that As explained in note A3.1, all of Jackson’s insurance
are used for asset accumulation in retirement planning liabilities are based on US GAAP.
At 31 December
and for providing income in retirement, and have certain
2020, variable Capitalised acquisition costs and deferred income for
tax advantages.
annuities accounted these contracts are amortised over the life of the book
Strategic report
for 80 per cent The rate of return depends upon the performance of the of contracts, are also explained in note A3.1.
(31 December 2019: selected fund portfolio. Policyholders may allocate their
For the variable annuities business, the policyholder
78 per cent) of investment to either the fixed account or a selection of
liabilities are based on the value of the separate account
Jackson’s policy and variable accounts. Most variable annuities are subject
(which is directly reflective of the underlying asset value
contract liabilities. to early surrender charges for up to the first nine years
movements), the value of the fixed account and provision
of the contract. Jackson offers some fully liquid variable
for benefit guarantees in the general account which are
annuity products that have no surrender charges.
Governance
measured on a combination of fair value and other US GAAP
Subject to benefit guarantees, investment risk on the
derived principles.
variable account is borne by the policyholder, while
investment risk on the fixed account is borne by Jackson For the fixed account allocations, the principles for fixed
through guaranteed minimum fixed rates of interest. annuity and fixed index annuity below also apply to variable
At 31 December 2020, 5 per cent (31 December 2019: annuities.
4 per cent) of variable annuity funds were in fixed
The benefit guarantee types are further set out below:
accounts, with an average guaranteed rate of 1.7 percent

(31 December 2019: 2.2 per cent). Benefits that are payable in the event of death
(guaranteed minimum death benefit (GMDB))
Jackson offers a choice of guaranteed benefit options
The liability for GMDBs is determined by estimating the
within its variable annuity product portfolio, which can
expected value of benefits in excess of the projected
be elected for additional fees. These guaranteed benefits
account balance and recognising the excess rateably over
might be expressed as the return of either: (a) total
the life of the contract based on total expected assessments.
deposits made to the contract adjusted for any partial
At 31 December 2020, these liabilities were valued using
withdrawals, (b) total deposits made to the contract
a series of stochastic investment performance scenarios,
adjusted for any partial withdrawals, plus a minimum
a mean investment return of 7.15 per cent (31 December
return, or (c) the highest contract value on a specified
2019: 7.4 per cent) net of external fund management fees,
anniversary date adjusted for any withdrawals following
and assumptions for policyholder behaviour, mortality
that contract anniversary.
and expense.
Benefits that are payable upon the depletion of funds
(guaranteed minimum withdrawal benefit (GMWB))
The liability for the GMWB ‘for life’ portion is determined
similarly to GMDB above.
Provisions for benefits under GMWB ‘not for life’ features
are recognised at fair value under US GAAP.

Non-performance risk is incorporated into the fair value
calculation through the use of discount rates that allow for
estimates of Jackson’s own credit risk based on observable
market data.
The value of future fees to offset payments made under the
guarantees are established so that no gain arises on day one.
Benefits that are payable at annuitisation (guaranteed
minimum income benefit (GMIB))
This feature is no longer offered and existing coverage is
substantially reinsured, subject to deductibles and annual
claim limits.
Benefits that are payable at the end of a specified period
(guaranteed minimum accumulation benefit (GMAB))
This feature is no longer offered. Provisions for GMAB are
recognised at fair value under US GAAP. Volatility and

non-performance risk is considered as per GMWB above.

Prudential plc
267
Annual Report 2020
C3.4 Products and determining contract liabilities continued
C3.4(b) US continued
Fixed interest rate Fixed interest rate and fixed index annuities are primarily With minor exceptions, the following is applied to most
and fixed index deferred annuity products that are used for asset of Jackson’s contracts. Contracts are accounted for as
annuities accumulation in retirement planning and for providing investment contracts as defined for US GAAP purposes
income in retirement. by applying a retrospective deposit method to determine
At 31 December
the liability for policyholder benefits.
2020, fixed interest Under a fixed interest rate annuity contract, the
rate and fixed index policyholder’s account is periodically credited with a This is then augmented by:
annuities accounted certain interest rate, generally set at Jackson’s discretion
—— Any amounts that have been assessed to compensate
for 10 per cent subject to a guaranteed minimum in line with state
the insurer for services to be performed over future
(31 December 2019: regulations. When the annuity matures, Jackson either
periods (ie deferred income);
11 per cent) of pays the contract holder the account value or a series of
—— Any amounts previously assessed against policyholders
Jackson’s policy and payments in the form of an immediate annuity product.
that are refundable on termination of the contract; and
contract liabilities.
Fixed index annuities vary in structure and generally —— Any probable future loss on the contract (ie premium
Following the enable policyholders to obtain a portion of an deficiency).
reinsurance equity‑linked return (based on participation rates,
The liability for policyholder benefits that represent the
transaction with caps and spreads), and provide a guaranteed minimum
guaranteed minimum return is determined similarly to
Athene Life Re Ltd return. Jackson offers an optional lifetime income rider,
the general principles for the liabilities of the variable
in June 2020, which can be elected for an additional fee. Jackson
annuities above.
these contracts are also offers fixed interest accounts on some fixed index
substantially fully annuity products. The interest guarantees are not explicitly valued but
reinsured as at are reflected as they are earned in the current account
31 December 2020. liability value.
The equity-linked return option within the fixed index
annuity contract is treated as an embedded derivative
liability under US GAAP and therefore this element of
the liability is recognised at fair value.
The liability for the lifetime income rider on the fixed index
annuity contract is determined each period end by
estimating the expected value of benefits in excess of the
projected account balance and recognising the excess on
a prorated basis over the life of the contract, based on total
expected assessments.
Group pay-out Group pay-out annuities consist of a block of defined The liability for future benefits is determined under
annuities benefit annuity plans assumed from John Hancock USA US GAAP methodology for limited-payment contracts,
and John Hancock New York. A single premium payment using assumptions at the acquisition date for mortality
At 31 December
from an employer (contract holder) funds the pension and expense, plus provisions for adverse deviation.
2020, group pay-out
benefits for its employees (participants). The contracts
annuities accounted
provide annuity payments that meet the requirements
for 2 per cent
of the specific pension plan being covered, including
(31 December 2019:
pre-retirement death and/or withdrawal benefits,
2 per cent) of
pre-retirement surviving spouse benefits, and/or
Jackson’s policy and
subsidised early retirement benefits in some cases.
contract liabilities.
This is a closed block of business from two standpoints:
(1) John Hancock USA and John Hancock New York are
no longer selling new contracts, and (2) contract holders
(companies) are no longer adding additional participants
to these defined benefit pension plans.
268 Prudential plc

Group overview
Life insurance Jackson discontinued new sales of life insurance For term and traditional life insurance contracts, provisions
products in 2012. for future policy benefits are determined under US GAAP
At 31 December
using the net level premium method and assumptions at the
2020, life insurance Life products include term life, traditional life and
issue or acquisition date for mortality, interest, policy lapses
products accounted interest-sensitive life (universal life and variable
and expenses, plus provisions for adverse deviation.
for 6 per cent universal life).
Strategic report
(31 December 2019: For universal life and variable universal life a retrospective
—— Term life provides protection for a defined period
7 per cent) of deposit method is used to determine the liability for
and a benefit that is payable to a designated
Jackson’s policy and policyholder benefits. This is then augmented by additional
beneficiary upon death of the insured.
contract liabilities. liabilities to account for no-lapse guarantees, profits
—— Traditional life provides protection for either a
followed by losses, contract features such as persistency
defined period or until a stated age and includes
bonuses, and cost of interest rate guarantees.
a predetermined cash value.
—— Universal life provides permanent individual life
Governance
insurance for the life of the insured and includes
a savings element.
—— Variable universal life is a type of life insurance policy
that combines death benefit protection with the
ability for the policyholder to be invested in separate
account funds.
Excluding the business that is subject to the retrocession

treaties at 31 December 2020, Jackson had interest-
sensitive life business in force with total account value
of $7.6 billion (31 December 2019: $7.9 billion), with
a 4.7 per cent average guaranteed rate (31 December
2019: 4.7 per cent).
Institutional Institutional products are: guaranteed investment Institutional products are classified as investment contracts,
products contracts (GICs), funding agreements (including and are accounted for as financial liabilities at amortised
agreements issued in conjunction with Jackson’s cost. The currency risk on contracts that represent
At 31 December
participation in the US Federal Home Loan Bank currency obligations other than USD are hedged using
2020, institutional
programme) and Medium Term Note funding cross-currency swaps.
products accounted
agreements.
for 1 per cent
(31 December 2019: GICs feature a lump sum policyholder deposit
1 per cent) of on which interest is paid at a rate fixed at inception.
Jackson’s policy and Market value adjustments are made to the value
contract liabilities. of any early withdrawals.
Funding agreements feature either lump sum or periodic
policyholder deposits. Interest is paid at a fixed or index

linked rate. Funding agreements have a duration of
between one and 30 years. In 2020 and 2019, there were
no funding agreements terminable by the policyholder
with less than 90 days’ notice.

Prudential plc
269
Annual Report 2020
C4 Intangible assets
C4.1 Goodwill
Business combination
Business acquisitions are accounted for by applying the purchase method of accounting, which adjusts the net assets of the acquired company
to fair value at the date of purchase. The excess of the acquisition consideration over the fair value of the assets and liabilities of the acquired
business is recorded as goodwill. The Group chooses the full goodwill method or the partial goodwill method to calculate goodwill on an
acquisition by acquisition basis. Expenses related to acquiring new subsidiaries are charged to the income statement in the period in which
they are incurred and not included in goodwill. Income and expenses of acquired businesses are included in the income statement from the
date of acquisition.
Where the Group writes a put option, which if exercised triggers the purchase of non-controlling interests as part of its business acquisition,
the put option is recognised as a financial liability at the acquisition date. Where risks and rewards remain with the non-controlling interests,
a corresponding amount is deducted from equity. Any subsequent changes to the carrying amount of the put option liability are also
recognised within equity.
Goodwill
Goodwill is capitalised and carried on the Group consolidated statement of financial position as an intangible asset at initial value less any
accumulated impairment losses. Goodwill impairment testing is conducted annually and when there is an indication of impairment.
Goodwill shown on the consolidated statement of financial position represents amounts attributable to shareholders and are allocated
to businesses in Asia and Africa in respect of both acquired asset management and life businesses. There has been no impairment as at
31 December 2020 and 2019.
2020 $m 2019 $m
Carrying value at 1 Jan 969 2,365

Removal of discontinued UK and Europe operations – (1,731)
Additions in the year – 299
Exchange differences (8) 36
Carrying value at 31 Dec 961 969
Impairment testing
Goodwill does not generate cash flows independently of other groups of assets and thus is assigned to cash-generating units for the purposes of
impairment testing. These cash-generating units (CGUs) are based upon how management monitors the business and represent the lowest level
to which goodwill can be allocated on a reasonable basis. Of the carrying value at 31 December 2020, $513 million relates to asset management
business in Thailand. Other goodwill amounts are allocated across CGUs in Asia and Africa operations, which are not individually material.
Goodwill is tested for impairment by comparing the CGU’s carrying amount, including any goodwill, with its recoverable amount.
The Group’s methodology of assessing whether goodwill may be impaired for acquired life and asset management operations is discussed below.
For acquired life businesses, the Group routinely compares the aggregate of net asset value and acquired goodwill on an IFRS basis of the
acquired life business with the value of the current in-force business as determined using the EEV methodology. Any excess of IFRS value over
EEV carrying value is then compared with EEV basis value of current and projected future new business to determine whether there is any
indication that the goodwill in the IFRS statement of financial position may be impaired. The methodology and assumptions underpinning
the Group’s EEV basis of reporting are included in the EEV basis supplementary information in this Annual Report.
The goodwill in respect of asset management businesses comprises mainly the goodwill arising from the acquisition of Thanachart Fund
Management Co., Ltd (TFund) in 2019 and TMB Asset Management Co., Ltd (TMBAM) in Thailand in 2018. At 31 December 2020, the
recoverable amount of these businesses has been determined by calculating the value in use of combined business given the business units
are planned to be merged and future forecasts prepared by management assume the combination has been completed, and hence have been
prepared as a single CGU. The value in use for Thailand asset management businesses has been calculated using a discounted cash flow
valuation.
For the combined Thailand asset management business, the valuation is based on a number of key assumptions as follows:
—— Cash flow projections based on the latest five-year business plan/forecast;
—— A constant growth rate of 2.3 per cent on forecast cash flows beyond the terminal year of the cash flow projection period
(31 December 2019: 2.3 per cent);
—— The risk discount rate applied in accordance with the nature of the businesses. The pre-tax discount rate applied
at 31 December 2020 is 9 per cent (31 December 2019: 9 per cent); and
—— The continuation of asset management contracts on similar terms.
Management believes that any reasonable change in the key assumptions would not cause the recoverable amount of the asset management
businesses acquired to fall below its carrying amount.
270 Prudential plc

C4.2 Deferred acquisition costs and other intangible assets
Group overview
Intangible assets acquired on the purchase of a subsidiary or portfolio of contracts are measured at fair value on acquisition. DAC are accounted
for as described in note A3.1(c). Other intangible assets, such as distribution rights and software, are valued initially at the price paid to acquire
them and are subsequently carried at cost less amortisation and any accumulated impairment losses. For intangibles other than DAC, amortisation
follows the pattern in which the future economic benefits are expected to be consumed. If the pattern cannot be determined reliably, a straight-
line method is applied. For software, the amortisation generally represents the licence period of the software acquired. Amortisation of intangible
assets is charged to the ‘acquisition costs and other expenditure’ line in the consolidated income statement. Impairment testing is conducted
when there is an indication of impairment.
Strategic report
31 Dec 2020 31 Dec 2019
$m $m
DAC and other intangible assets attributable to shareholders 20,275 17,409

Other intangible assets, including computer software, attributable to with-profits funds 70 67
Total of DAC and other intangible assets 20,345 17,476
Governance
(i) DAC and other intangible assets attributable to shareholders
The DAC and other intangible assets attributable to shareholders comprise:
31 Dec 2020 31 Dec 2019

$m $m
DAC related to insurance contracts as classified under IFRS 4 16,182 14,206

DAC related to investment management contracts, including life assurance contracts classified as financial

instruments and investment management contracts under IFRS 4 34 33
DAC related to insurance and investment contracts note (ii) 16,216 14,239
Present value of acquired in-force policies for insurance contracts as classified under IFRS 4 (PVIF) 34 38
Distribution rights and other intangibles 4,025 3,132
Present value of acquired in-force (PVIF) and other intangibles attributable to shareholders note (iii) 4,059 3,170
Total of DAC and other intangible assets note (a) 20,275 17,409
Notes
(a) Total DAC and other intangible assets attributable to shareholders can be further analysed by business operations as follows:
2020 $m 2019 $m
DAC PVIF and
other
Asia US* intangibles† Total Total
note (b) note (iii)
Balance at 1 Jan 1,999 12,240 3,170 17,409 15,008

Removal of discontinued UK and Europe operations – – – – (143)
Additions‡ 617 740 1,114 2,471 2,601
Amortisation to the income statement: note (c)

Adjusted operating profit (308) (423) (220) (951) (792)
Non-operating profit (loss)** – 812 (5) 807 1,243
(308) 389 (225) (144) 451
Disposals and transfers – – (12) (12) (11)
Exchange differences and other movements 45 – 12 57 134
Amortisation of DAC related to net unrealised valuation movements on the US
insurance operation’s available-for-sale securities recognised within other
comprehensive income – 494 – 494 (631)
Balance at 31 Dec 2,353 13,863 4,059 20,275 17,409
* Under the Group’s application of IFRS 4, US GAAP is used for measuring the insurance assets and liabilities of its US and certain Asia operations. Under US GAAP, most of the US insurance
operation’s products are accounted for under Accounting Standard no. 97 of the Financial Accounting Standards Board (FAS 97) whereby DAC are amortised in line with the emergence
of actual and expected gross profits which are determined using an assumption for long-term investment returns for the separate account of 7.15 per cent (2019: 7.4 per cent) gross of asset
management fees and other charges to policyholders, but net of external fund management fees. The other assumptions impacting expected gross profits include mortality assumptions,
lapses, assumed unit costs and future hedge costs. The amounts included in the income statement and other comprehensive income affect the pattern of profit emergence and thus the DAC
amortisation attaching. DAC amortisation is allocated to the operating and short-term investment fluctuations in investment returns of the Group’s supplementary analysis of profit and other
comprehensive income by reference to the underlying items. The gain of $389 million in 2020 in the US operations includes $(764) million for the write-off of the DAC in respect of the
reinsured Jackson’s in-force fixed and fixed index annuity liabilities to Athene Life Re Ltd. The US DAC amortisation charge within adjusted operating profit of $(423) million increased from
the 2019 corresponding amount of $(297) million largely as a result of changes to the longer-term economic assumptions underpinning the amortisation calculation following an expectation
of lower interest rates in the future, partially offset by the benefits of increases in DAC amortisation deceleration in the year described in note (c) below.
** ‘Non-operating profit (loss)’ is used to refer to items excluded from adjusted operating profit and includes short-term investment fluctuations in investment returns on shareholder-backed
business, corporate transactions and amortisation of acquisition accounting adjustments.
† PVIF and other intangibles comprise present value of acquired in-force (PVIF), distribution rights and other intangibles such as software rights. 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 bancassurance partnership arrangements in Asia. These agreements allow for bank
distribution of Prudential’s insurance products for a fixed period of time. Software rights include additions of $54 million, amortisation of $(34) million, disposals of $(6) million, foreign
exchange of $3 million and closing balance at 31 December 2020 of $102 million (31 December 2019: $85 million).
‡ On 19 March 2020, the Group signed a new bancassurance agreement with TMB Bank for a period of 15 years. This extended exclusive partnership agreement required the novation of TMB
Bank’s current bancassurance distribution agreement with another insurance group. The agreement cost Thai Baht 24.5 billion, which were paid in two instalments with Thai Baht 12.0 billion
paid in April 2020 and the remainder in January 2021. The amount included in additions in the table above is $788 million.

Prudential plc
C4 Intangible assets continued
C4.2 Deferred acquisition costs and other intangible assets continued

(b) The DAC amount in respect of US arises in the insurance operations which comprises the following amounts:
31 Dec 2020 31 Dec 2019
$m $m
Variable annuity and other business 14,064 12,935

Cumulative shadow DAC (for unrealised gains/losses booked in other comprehensive income)* (201) (695)
Total DAC for US operations 13,863 12,240
* A net gain of $494 million (2019: a net loss of $(631) million) for shadow DAC amortisation is booked within other comprehensive income to reflect a reduction in shadow DAC of $535 million
as a result of the reinsurance of substantially all of Jackson’s fixed and fixed index annuity business to Athene Life offset by the impact from the positive unrealised valuation movement for 2020
of $2,717 million (2019: positive unrealised valuation movement of $4,023 million). These adjustments reflect the movement from year to year, in the changes to the pattern of reported gross
profits that would have happened if the assets reflected in the statement of financial position had been sold, crystallising the unrealised gains and losses, and the proceeds reinvested at the
yields currently available in the market.
(c)
Sensitivity of US DAC amortisation charge
The amortisation charge to the income statement in respect of the US DAC asset is reflected in both adjusted operating profit and short-term fluctuations in investment returns.
The amortisation charge to adjusted operating profit in a reporting period generally comprises:
–A core amount that reflects a relatively stable proportion of underlying premiums or profit; and
–A n element of acceleration or deceleration arising from market movements differing from expectations.
In periods where the cap and floor features of the mean reversion technique (which is used for moderating the effect of short-term volatility in investment returns) are not relevant,
the technique operates to dampen the second element above. Nevertheless, extreme market movements can cause material acceleration or deceleration of amortisation in spite of this
dampening effect. It is currently estimated that DAC amortisation will accelerate (decelerate) by $17 million for every 1 per cent under (over) the mean reversion rate (set using the calculation
described below to give an average over an 8-year period of 7.15 per cent (2019: 7.4 per cent)) the actual separate account growth rate differs by.
Furthermore, in those periods where the cap or floor is relevant, the mean reversion technique provides no further dampening and additional volatility may result.
In 2020, the DAC amortisation charge for adjusted operating profit was determined after including a credit for decelerated amortisation of $330 million (2019: credit for deceleration:
$280 million). DAC amortisation for variable annuities is sensitive to separate account performance. The deceleration arising in 2020 reflected a mechanical decrease in the projected separate
account return for the next five years under the mean-reversion technique. Under this technique, the projected level of return for each of the next five years is adjusted so that in combination
with the actual rates of return for the preceding three years (including the current year) the assumed long-term annual separate account return of 7.15 per cent is realised on average over the
entire eight-year period.
The application of the mean reversion formula (described in note A3.1) has the effect of dampening the impact of equity market movements on DAC amortisation while the mean
reversion assumption lies within the corridor. At 31 December 2020, it would take approximate movements in separate account values of more than either negative 40 per cent or positive
19 per cent for mean reversion assumption to move outside the corridor.
Changes to the assumed long-term separate account return will also impact the calculation of the DAC balance and could increase or decrease the DAC amortisation charge in a given
period. If the assumption for the long-term separate account investment returns (net of external fund management fees) was reduced by 0.5 per cent from 7.15 per cent to 6.65 per cent
at 31 December 2020, the 2020 amortisation charge for adjusted operating profit would have increased by around $70 million with a corresponding reduction in the DAC balance at
31 December 2020. In addition, pre-tax short-term fluctuations in investment returns would reduce by circa $64 million following changes to the policyholder liabilities valued using
longer-term equity assumptions under SOP03-1, resulting in a total impact on profit before tax of $134 million.
(ii) DAC related to insurance and investment contracts

The movements in DAC relating to insurance and investment contracts are as follows:
2020 $m 2019 $m
Insurance Investment Insurance Investment
contracts contracts contracts contracts
Balance at 1 Jan 14,206 33 12,758 99

Removal of discontinued UK and Europe operations – – (62) (72)
Additions 1,354 3 1,411 11
Amortisation 85 (4) 699 (5)
Exchange differences 43 2 31 –
Change in shadow DAC related to movement in unrealised appreciation of debt
securities classified as available-for-sale 494 – (631) –
Balance at 31 Dec 16,182 34 14,206 33
Note
All of the additions for investment contracts are through internal development. The carrying amount of the DAC balance comprises the following gross and accumulated amortisation amounts:
31 Dec 2020 31 Dec 2019
$m $m
Gross amount 39 34
Accumulated amortisation (5) (1)
Carrying amount 34 33
272 Prudential plc

(iii) PVIF and other intangibles attributable to shareholders
Group overview
2020 $m 2019 $m
Other Other
intangibles intangibles
Distribution (including Distribution (including
PVIF rights software) Total PVIF rights software) Total
note (a) note (b) note (a) note (b)
Balance at 1 Jan
Strategic report
Cost 175 3,783 379 4,337 295 2,546 399 3,240
Accumulated amortisation (137) (812) (218) (1,167) (252) (587) (250) (1,089)
38 2,971 161 3,170 43 1,959 149 2,151
Removal of discontinued UK and Europe
operations – – – – (1) – (8) (9)
Additions – 1,047 67 1,114 – 1,110 69 1,179
Governance
Amortisation charge (5) (180) (45) (230) (5) (196) (42) (243)
Disposals and transfers – – (12) (12) – – (11) (11)
Exchange differences and other movements 1 13 3 17 1 98 4 103
Balance at 31 Dec 34 3,851 174 4,059 38 2,971 161 3,170
Comprising:
Cost 177 4,845 424 5,446 175 3,783 379 4,337
Accumulated amortisation (143) (994) (250) (1,387) (137) (812) (218) (1,167)

34 3,851 174 4,059 38 2,971 161 3,170
Notes
(a) All of the net PVIF balances relate to insurance contracts. The PVIF attaching to investment contracts have been fully amortised.
(b) Distribution rights relate to fees paid in relation to 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.

Prudential plc
C5 Borrowings
Although initially recognised at fair value (net of transaction costs), borrowings are subsequently accounted for on an amortised cost basis
using the effective interest method, with the exception of liabilities of consolidated collateralised debt obligations which continue to be carried
at fair value. Under the effective interest method, the difference between the redemption value of the borrowing and the initial proceeds (net of
related issue costs) is amortised through the income statement to the date of maturity or for hybrid debt, over the expected life of the instrument.
C5.1 Core structural borrowings of shareholder-financed businesses
31 Dec 2020 31 Dec 2019

$m $m
Central operations:
Subordinated debt:
US$250m 6.75% Notes note (i) 250 250
US$300m 6.5% Notes note (i) 300 300
US$700m 5.25% Notes 700 700
US$1,000m 5.25% Notes 999 996
US$725m 4.375% Notes 723 721
US$750m 4.875% Notes 746 744
€20m Medium Term Notes 2023 24 22
£435m 6.125% Notes 2031 590 571
Senior debt: note (ii)
£300m 6.875% Notes 2023 406 392
£250m 5.875% Notes 2029 312 298
$1,000m 3.125% Notes 2030 note (iii) 983 –
$350m Loan 2024 note (iv) 350 350
Total central operations 6,383 5,344
Jackson US$250m 8.15% Surplus Notes 2027 note (v) 250 250
Total core structural borrowings of shareholder-financed businesses 6,633 5,594
Notes
(i) These borrowings can be converted, in whole or in part, at the Company’s option and subject to certain conditions, on any interest payment date, into one or more series of Prudential
preference shares.
(ii) The senior debt ranks above subordinated debt in the event of liquidation.
(iii) In April 2020, the Company issued $1,000 million 3.125 per cent senior debt maturing on 14 April 2030 with proceeds, net of costs of $983 million.
(iv) In November 2020, the $350 million term loan was settled, and the Group entered into a replacement $350 million term loan facility at a cost of daily compounded Secured Overnight
Financing Rate (SOFR) plus 59 basis points. The new term loan matures in 2024.
(v) Jackson’s borrowings are unsecured and subordinated to all present and future indebtedness, policy claims and other creditor claims of Jackson.
C5.2 Operational borrowings
31 Dec 2020 31 Dec 2019

$m $m
Borrowings in respect of short-term fixed income securities programmes – commercial paper 501 520
Lease liabilities under IFRS 16 302 371
Non-recourse borrowings of consolidated investment funds note (a) 994 1,045
Bank loans and overdrafts – 29
Other borrowings note (b) 453 377
Operational borrowings attributable to shareholder-financed businesses 2,250 2,342
Lease liabilities under IFRS 16 194 259
Other borrowings – 44
Operational borrowings attributable to with-profits businesses 194 303
Total operational borrowings 2,444 2,645
Notes
(a) In all instances, the holders of the debt instruments issued by consolidated investment funds do not have recourse beyond the assets of those funds.
(b) Other borrowings attributable to shareholder-financed business mainly represent senior debt issued through the Federal Home Loan Bank of Indianapolis (FHLB), secured by collateral posted
with the FHLB by Jackson.
274 Prudential plc

Group overview
C6 Risk and sensitivity analysis
C6.1 Group overview
The Group’s risk framework and the management of risks, including those attached to the Group’s financial statements including financial
assets, financial liabilities and insurance liabilities, together with the inter-relationship with the management of capital, have been included
in the audited sections of the Group Chief Risk and Compliance Officer’s report on the risks facing our business and how these are managed.
The financial and insurance assets and liabilities on the Group’s statement of financial position are, to varying degrees, subject to market and
insurance risk and other changes of experience assumptions that may have a material effect on IFRS basis profit or loss and shareholders’ equity.
Strategic report
The market and insurance risks and also ESG-related risks, including how they affect Group’s operations and how these are managed are
discussed in the Risk report referred to above. The ESG-related risks discussed in the Risk report include in particular the potential long-term
impact of environmental risks associated with climate change (including physical and transition risks) on the Group’s investments.
The most significant items that the IFRS shareholders’ profit or loss and shareholders’ equity for the Group’s life assurance business are
sensitive to, are shown in the following tables. The distinction between direct and indirect exposure is not intended to indicate the relative size
of the sensitivity.
Governance
Type of business Market and credit risk Insurance and lapse risk
All business Mortality and/or
morbidity risk
Persistency risk
With-profits business Net neutral direct exposure (indirect exposure to investment performance,

which is subject to smoothing through declared bonuses)
Unit-linked business Net neutral direct exposure (indirect exposure to investment performance,
through asset management fees)
Non-participating business Asset/liability mismatch risk which results in sensitivity to interest rates and credit
spreads, particularly for operations where the insurance liability basis is sensitive
to current market movements
Indirect exposure to investment performance through policyholder charges

and guarantees in some cases
All business Asset/liability mismatch risk Mortality risk
Adjusted operating profit is sensitive to market conditions, both with respect to
income earned on spread-based products and indirectly with respect to income
earned on variable annuity asset management fees
Variable annuity business Net effect of market risk (equity and interest rates) arising from incidence of Persistency and utilisation
guarantee features and variability of asset management fees, offset by derivative risk (risk that utilisation of
hedging programme* withdrawal benefits or

lapse levels differ from
those assumed)
General account business Credit risk and market risk (equity and interest rate) in meeting guaranteed rates of Persistency risk, mitigated
accumulation on general account annuity and interest sensitive life products which in some cases by the
may lead to smaller spread profits, being the difference between the earned rate application of market
and the policyholder crediting rate. As at 1 June 2020, the risk has been value adjustments
substantially transferred for the fixed and fixed index annuity products as part of
the reinsurance transaction with Athene described in note D1.1
Shareholders’ equity is impacted by interest rate and credit risk via impairments
and unrealised gains/losses on fixed income securities. For those instruments
classified as available-for-sale under IAS 39, unrealised gains/losses do not
directly impact profit, unless they are considered permanent reductions in value
* Jackson’s derivative programme, which is described in note C2.3(ii), is used to manage the economic interest rate risk associated with a broad range of products and equity market risk attaching to
its equity-based products. Movements in equity markets, equity volatility, interest rates and credit spreads materially affect the carrying value of derivatives that are used to manage the liabilities to
policyholders and backing investment assets. Movements in the carrying value of derivatives combined with the use of US GAAP measurement (as ‘grandfathered’ under IFRS 4) for the insurance
contracts assets and liabilities, which is largely insensitive to current year market movements, mean that the Jackson total profit (ie including short-term fluctuations in investment returns) is sensitive
to market movements.

Prudential plc
C6 Risk and sensitivity analysis continued
C6.1 Group overview continued

The profit for the year of asset management operations is sensitive to the level of assets under management, as this significantly affects the
value of management fees earned by the business in the current and future periods. Assets under management will rise and fall as market
conditions change, with a consequential impact on profitability. Other than this, there is limited sensitivity to market risks since the Group’s asset
management and other operations do not hold significant financial investments. At 31 December 2020, the financial investments of the other
operations are principally short-term investments held by the Group’s treasury function for liquidity purposes and so there is limited sensitivity
to interest rate movements.
Sensitivity analyses of IFRS shareholders’ equity to key market and other risks by business unit are provided below. The sensitivity analyses
provided show the effect on shareholders’ equity to changes in the relevant risk variables, all of which are considered to be reasonably possible
at the relevant balance sheet date.
The sensitivities reflect all consequential impacts from market movements at the valuation date. The sensitivities below only allow for limited
management actions such as changes to policyholder bonuses, where applicable. If the economic conditions set out in the sensitivities persisted,
the financial impacts may differ to the instantaneous impacts. Given the continuous risk management processes in place, management could
take additional actions to help mitigate the impact of these stresses, including (but not limited to) rebalancing investment portfolios, further market
risk hedging, increased use of reinsurance, repricing of in-force benefits, changes to new business pricing and the mix of new business being sold.
Other limitations of the sensitivities include: the use of hypothetical market movements that cannot be predicted with any certainty to
demonstrate potential risk, which only represent Prudential’s view of reasonably possible near-term market changes; the assumption that interest
rates in all countries move identically; and the lack of consideration of the inter-relation of interest rates, equity markets and foreign currency
exchange rates.
The Group benefits from diversification benefits achieved through the geographical spread of the Group’s operations and, within those
operations, through a broad mix of product types. These benefits are not reflected in the simplified sensitivities below. Relevant correlation
factors include:
—— Correlation across geographic regions for both financial and non-financial risk factors; and
—— Correlation across risk factors for longevity risk, expenses, persistency and other risks.
The geographical diversity of the Group’s business means that it has some exposure to the risk of foreign exchange rate fluctuations. The Group
has no exposure to currency fluctuation from business units that operate in USD, or currencies pegged to the USD (such as HKD), and reduced
exposure to currencies partially managed to the USD within a basket of currencies (such as SGD). Sensitivities to exchange rate movements in
the Group’s key markets are therefore expected to be limited.
C6.2 Sensitivity to interest rate risk

The sensitivities shown below are for movements in risk-free rates (based on local government bond yields at the valuation date) in isolation
and are subject to a floor of zero. They do not include movements in credit risk that may affect credit spreads and hence the valuation of debt
securities and policyholder liabilities. A one-letter credit downgrade in isolation (ie ignoring any consequential change in valuation) would not
have a material impact on IFRS profit or shareholders’ equity.
To reflect the substantial fall and current level of low interest rates in 2020, the estimated sensitivity to a decrease in interest rates
at 31 December 2020 has been updated to a decrease of 0.5 per cent. This compares to a 1 per cent change at 31 December 2019.
The estimated sensitivity to a decrease and increase in interest rates at 31 December 2020 is as follows:
Asia insurance $m US insurance $m

Decrease Increase Decrease Increase
31 December 2020 of 0.5% of 1% of 0.5% of 1%
Net effect on shareholders’ equity* (1,274) (318) (594) (68)
* The effect from the instantaneous changes in interest rates above, if they arose, would impact profit after tax for Asia insurance operations and would mostly be recorded within short-term
fluctuations in investment returns. The impact on profit after tax would be the same as the net effect on shareholders’ equity. For US insurance operations, the instantaneous changes in interest rates
above, if they arose, would cause the net effect on equity shown above through two constituent movements. Firstly, profit after tax, net of related changes in the amortisation of DAC, would be
impacted (decrease of 0.5 per cent: $(1,319) million; increase of 1 per cent: $1,976 million), and would mostly be recorded within short-term fluctuations in investment returns. Secondly, the effect
would also impact other comprehensive income (decrease of 0.5 per cent: $725 million; increase of 1 per cent: $(2,044) million) in respect of the direct effect on the carrying value of the
available-for-sale debt securities, net of related changes in the amortisation of DAC and related tax effects.
The estimated sensitivity to a decrease and increase in interest rates at 31 December 2019 was as follows:
Asia insurance $m US insurance $m

31 December 2019 of 1% of 1% of 1% of 1%
Net effect on shareholders’ equity* (702) (718) 20 (553)
* The effect from the instantaneous changes in interest rates above, if they arose, would impact profit after tax for Asia insurance operations and would mostly be recorded within short-term
fluctuations in investment returns. The impact on profit after tax would be the same as the net effect on shareholders’ equity. For US insurance operations, the instantaneous changes in interest rates
above, if they arose, would cause the net effect on equity shown above through two constituent movements. Firstly, profit after tax, net of related changes in the amortisation of DAC, would be
impacted (decrease of 1 per cent: $(2,224) million; increase of 1 per cent: $1,691 million), and would mostly be recorded within short-term fluctuations in investment returns. Secondly, the effect
would also impact other comprehensive income (decrease of 1 per cent: $2,244 million; increase of 1 per cent: $(2,244) million) in respect of the direct effect on the carrying value of the
available-for-sale debt securities, net of related changes in the amortisation of DAC and related tax effects.
276 Prudential plc

Group overview
The degree of sensitivity of the results of the non-linked shareholder-backed business of the Asia operations to movements in interest rates
depends upon the degree to which the liabilities under the ‘grandfathered’ IFRS 4 measurement basis reflects market interest rates from year
to year. This varies by local business unit. For example:
—— Certain Asia businesses apply US GAAP, for which the results can be more sensitive as the effect of interest rate movements on the backing
investments may not be offset by liability movements;
—— The level of options and guarantees in the products written in the particular business unit will also affect the degree of sensitivity to interest
Strategic report
rate movements; and
—— The degree of sensitivity of the results is dependent on the interest rate level at that point of time.
The sensitivity of the Asia operations presented as a whole at a given point in time will also be affected by a change in the relative size of the
individual businesses.
For many operations the sensitivities are dominated by the impact of interest rate movements on the value of government and corporate
bond investments, which are expected to increase in value as interest rates fall to a greater extent than the offsetting increase in liabilities
(and vice versa if rates rise). This arises because the discount rate in some operations does not fluctuate in line with interest rate movements.
Governance
At higher levels of interest rates the liabilities become less sensitive to interest rate movements and the effects on assets becomes more
dominant. This pattern is evident in the ‘increase of 1 per cent’ sensitivity at 31 December 2020.
The ‘decrease of 0.5%’ sensitivities reflects that some local business units’ liabilities become more sensitive at lower interest rates and the
fluctuations in liabilities begin to exceed asset gains. The liability movements also reflect the prudent nature of some of the regulatory regimes which
leads to duration of liabilities that are longer than would be expected on a more economic basis and hence results in a mismatch with the assets that
are managed on a more realistic basis. Following the substantial fall in interest rates over 2020, at 31 December 2020, the ‘decrease of 0.5 per cent’
sensitivity is dominated by the impact of interest rate movements on some local business units’ policyholder liabilities, which are expected to increase

more than the offsetting increase in the value of government and corporate bond investments, if interest rates were to fall further from the historically
low levels seen at 31 December 2020. As noted above, the results only allow for limited management actions, and if such economic conditions
persisted management could take additional actions to help mitigate the impact of these stresses, including (but not limited to) rebalancing
investment portfolios, increased use of reinsurance, changes to new business pricing and the mix of new business being sold.
The GMWB features attached to variable annuity business (other than ‘for life’ components) are accounted for under US GAAP at fair value
and, therefore, will be sensitive to changes in interest rates. Debt securities and related derivatives are marked to fair value. Value movements
on derivatives, net of related changes to amortisation of DAC and deferred tax, are recorded within the income statement. Fair value movements
on debt securities, net of related changes to amortisation of DAC and deferred tax, are recorded within other comprehensive income.
As at 1 June 2020, the interest rate risks relating to Jackson’s fixed and fixed index annuity products have been substantially transferred
as part of the reinsurance transaction with Athene described in note D1.1, leaving only a limited exposure from residual policies and new policies
written post 1 June 2020. Jackson is exposed primarily to the following interest rate risks:
—— Related to meeting guaranteed rates of accumulation on general account annuity and interest sensitive life products following a sustained
fall in interest rates;
—— Related to increases in the present value of projected benefits related to guarantees issued in connection with its variable annuity contracts
following a sustained fall in interest rates especially if in conjunction with a fall in equity markets;
—— Related to the surrender value guarantee features attached to the Company’s general account annuity and interest sensitive life products
and to policyholder withdrawals following a sharp and sustained increase in interest rates; and

—— The risk of mismatch between the expected duration of certain annuity liabilities and prepayment risk and extension risk inherent in
mortgage-backed securities.
A prolonged low interest rate environment may result in a lengthening of maturities of the general account annuity and interest-sensitive life
contract holder liabilities from initial estimates, primarily due to lower policy lapses. As interest rates remain at low levels, Jackson may also have
to reinvest the cash it receives as interest or proceeds from investments that have matured or that have been sold at lower yields, reducing its
investment margins. Moreover, borrowers may prepay or redeem the securities in their investment portfolios with greater frequency in order
to borrow at lower market rates, which exacerbates this risk. The majority of Jackson’s general account business was designed with contractual
provisions that allow crediting rates to be re-set annually, subject to minimum crediting rate guarantees.
The sensitivity movements provided in the table above are at a point in time and reflect the hedging programme in place on the balance sheet
date, while the actual impact on financial results would vary contingent upon a number of factors. Jackson’s hedging programme is primarily
focused on managing the economic risks in the business and protecting statutory solvency under larger market movements, and does not
explicitly aim to hedge the IFRS accounting results. The magnitude of the impact of the sensitivities on profit after tax at 31 December 2020
is larger than the impact at 31 December 2019, reflecting the liabilities being more sensitive to further interest rate movements at the current
low interest rate levels (after taking into account the impact of interest rate movements on derivatives). In determining the value of liabilities,
assumed future separate account return is based on risk-free rates under ‘grandfathered’ US GAAP. The reduction in the magnitude of the impact
of the sensitivities on other comprehensive income, and hence shareholders’ equity, reflects the impact of the Athene reinsurance transaction
described in note D1.1 on the profile of Jackson’s general account liabilities and the consequential reduction in available-for-sale debt securities.

Prudential plc
277
Annual Report 2020
C6.3 Sensitivity to equity and property price risk

In the equity risk sensitivity analysis shown, the Group has considered the impact of an instantaneous 20 per cent fall in equity markets. If equity
markets were to fall by more than 20 per cent, the Group believes that this would not be an instantaneous fall but rather would be expected to
occur over a longer period of time, during which the hedge positions within Jackson, where the underlying equity risk is greatest, would be
rebalanced. The equity risk sensitivity analysis provided assumes that all equity indices fall by the same percentage.

The estimated sensitivity to a 10 per cent increase and 20 per cent decrease in equity and property prices is as follows:
31 Dec 2020 $m 31 Dec 2019 $m

of 20% of 10% of 20% of 10%
Net effect on shareholders’ equity* (848) 410 (816) 408
* The effect from the instantaneous changes in equity and property prices above, if they arose, would impact profit after tax for Asia insurance operations, which would mostly be recorded within
short-term fluctuations in investment returns.
Generally, changes in equity and property investment values are not directly offset by movements in non-linked policyholder liabilities.
Movements in equities backing with-profits and unit-linked business have been excluded as they are generally matched by an equal movement
in insurance liabilities (including unallocated surplus of with-profits funds). The impact on changes to future profitability as a result of changes to
the asset values within unit-linked or with-profits funds have not been included in the instantaneous sensitivity above. The estimated sensitivities
shown above include equity and property investments held by the Group’s joint venture and associate businesses.
At December 31, 2020 and 2019, the Company provided variable annuity contracts with guarantees, for which the net amount at risk (‘NAR’)
is defined as the amount of guaranteed benefit in excess of current account value, as follows (dollars in millions):
31 Dec 2020 $m 31 Dec 2019 $m

Account Net amount Account Net amount
value at risk value at risk
Return of net deposits plus a minimum return

GMDB 170,510 2,340 150,576 2,477
GMWB – premium only 2,858 12 2,753 16
GMWB 248 11 257 14
GMAB – premium only 39 – 37 –
Highest specified anniversary account value minus withdrawals post-anniversary – –
GMDB 13,512 86 12,547 69
GMWB – highest anniversary only 3,459 41 3,232 51
GMWB 646 55 698 52
Combination net deposits plus minimum return, highest specified anniversary
account value minus withdrawals post-anniversary – –
GMDB 8,891 615 8,159 687
GMIB 1,675 556 1,688 616
GMWB 159,857 5,656 140,529 7,160
278 Prudential plc

Jackson is primarily exposed to equity risk through the guarantees included in certain variable annuity benefits. This risk is managed using
Group overview
an equity hedging programme to minimise the risk of a significant economic impact as a result of increases or decreases in equity market levels.
Jackson purchases futures and options that hedge the risks inherent in these products, while also considering the impact of rising and falling
guaranteed benefit fees.
Due to the nature of valuation under IFRS of the free-standing derivatives and certain of the variable annuity guarantee features, this hedge,
while effective on an economic basis, would not automatically offset within the financial statements as the impact of equity market movements
resets the free-standing derivatives immediately while the hedged liabilities reset more slowly and fees are recognised prospectively in the year
in which they are earned. Jackson’s hedging programme is focused on managing the economic risks in the business and protecting statutory
Strategic report
solvency in the circumstances of large market movements. The hedging programme does not aim to hedge IFRS accounting results, which
can lead to volatility in the IFRS results in a period of significant market movements, as was seen in 2020.
In addition to the exposure explained above, Jackson is also exposed to equity risk from its holding of equity securities, partnerships
in investment pools and other financial derivatives.
The estimated sensitivity to a 10 per cent increase and 20 per cent decrease in equity and property prices is shown below.
31 Dec 2020 $m 31 Dec 2019 $m
Governance
of 20% of 10% of 20% of 10%
Net effect on shareholders’ equity* 744 299 762 608
* The effect from the instantaneous changes in equity and property prices above, if they arose, would impact profit after tax for US insurance operations, which would mostly be recorded within
short‑term fluctuations in investment returns.
The table above excludes the impact of instantaneous equity movements on future separate account fee income.

The above sensitivities assume instantaneous market movements while the actual impact on financial results would vary contingent upon
the volume of new product sales and lapses, changes to the derivative portfolio, correlation of market returns and various other factors including
volatility, interest rates and elapsed time.
The directional movements in the sensitivities reflect the hedging programme in place at 31 December 2020 and 2019 respectively. The
nature of Jackson’s dynamic hedging programme means that the portfolio, and hence the results of these sensitivities, will change on an ongoing
basis. The impacts shown under an increase or a decrease in equity markets reflect the factors discussed above.
Jackson had variable annuity contracts with guarantees. Account balances of contracts with guarantees were invested in variable separate
accounts as follows:
31 Dec 2020 31 Dec 2019
$m $m
Mutual fund type:

Equity 132,213 121,520
Bond 20,203 19,341
Balanced 39,626 30,308
Money market 1,862 956
Total 193,904 172,125


Prudential plc
C6.4 Sensitivity to insurance risk

In Asia, adverse persistency experience can impact the IFRS profitability of certain types of business written in the region. This risk is
managed at a local business unit level through regular monitoring of experience and the implementation of management actions as necessary.
These actions could include product enhancements, increased management focus on premium collection, as well as other customer retention
efforts. The potential financial impact of lapses is often mitigated through the specific features of the products, eg surrender charges, or through
the availability of premium holiday or partial withdrawal policy features. The reserving basis in Asia is generally such that a change in lapse
assumptions has an immaterial effect on immediate profitability.
Many of the business units in Asia are exposed to mortality and morbidity risk and a provision is made within policyholder liabilities to cover
the potential exposure. If all these assumptions were strengthened by 5 per cent then it is estimated that post-tax profit and shareholders’
equity would decrease by approximately $77 million (2019: $77 million). Weakening these assumptions by 5 per cent would have a similar
opposite impact.
Jackson is sensitive to mortality risk, lapse risk and other types of policyholder behaviour, such as the utilisation of its GMWB product features.
Jackson’s persistency assumptions reflect a combination of recent experience for each relevant line of business and expert judgement, especially
where a lack of relevant and credible experience data exists. These assumptions vary by relevant factors, such as product, policy duration,
attained age and for variable annuity lapse assumptions, the extent to which guaranteed benefits are ‘in the money’ relative to policy account
values. Changes in these assumptions, which are assessed on an annual basis after considering recent experience, could have a material impact
on policyholder liabilities and therefore on profit before tax. Any changes in these assumptions are recorded within short-term fluctuations in
investment returns in the Group’s supplementary analysis of profit (see note B1.2).
In addition, in the absence of hedging, equity and interest rate movements can both cause a direct loss or increase the future sensitivity
to policyholder behaviour. Jackson has an extensive derivative programme that seeks to manage the exposure to such altered equity markets
and interest rates.
Note A3.1 describes the methodology applied by Jackson to amortise DAC. The amount of amortisation charged in any one period is sensitive
to separate account investment returns. The sensitivity of DAC amortisation charge is discussed in note C4.2.
C7 Tax assets and liabilities
Accounting policies on deferred tax are included in note B3.
C7.1 Current tax
At 31 December 2020, of the $444 million (31 December 2019: $492 million) current tax recoverable, the majority is expected to be recovered
more than 12 months after the reporting period.
At 31 December 2020, the current tax liability of $280 million (31 December 2019: $396 million) includes $113 million (31 December 2019:
$198 million) of provisions for uncertain tax matters. Further detail is provided in note B3.2.
C7.2 Deferred tax
The statement of financial position contains the following deferred tax assets and liabilities in relation to:
2020 $m
Other
Movement movements
through other including
Movement comprehensive foreign
Balance in income income and currency Balance
at 1 Jan statement equity movements at 31 Dec
Deferred tax assets

Unrealised losses or gains on investments – – – – –
Balances relating to investment and insurance contracts 32 55 – – 87
Short-term temporary differences 3,889 765 – 8 4,662
Unused tax losses 154 (50) – 5 109
Total 4,075 770 – 13 4,858
Deferred tax liabilities
Unrealised losses or gains on investments (877) (78) (102) (6) (1,063)
Balances relating to investment and insurance contracts (1,507) (235) – (23) (1,765)
Short-term temporary differences (2,853) (377) – (17) (3,247)
Total (5,237) (690) (102) (46) (6,075)
280 Prudential plc

Group overview
2019 $m
Other
Movement movements
Demerger through other including
of UK and Movement comprehensive foreign
Balance Europe in income income and currency Balance
at 1 Jan operations statement equity movements at 31 Dec
Deferred tax assets

Unrealised losses or gains on investments 144 – (16) – (128) –
Strategic report
Balances relating to investment and insurance contracts 1 – 60 – (29) 32
Short-term temporary differences 2,998 (160) 1,066 (15) – 3,889
Unused tax losses 162 – 8 – (16) 154
Total 3,305 (160) 1,118 (15) (173) 4,075
Deferred tax liabilities
Unrealised losses or gains on investments (1,104) 1,053 (231) (713) 118 (877)
Governance
Balances relating to investment and insurance contracts (1,276) – (246) – 15 (1,507)
Short-term temporary differences (2,742) 298 (414) 19 (14) (2,853)
Total (5,122) 1,351 (891) (694) 119 (5,237)
Of the short-term temporary differences of $4,662 million relating to deferred tax assets, $3,274 million for US insurance operations is expected
to be recovered in line with the run off of the in-force book, and the majority of the remaining balances are expected to be recovered within five
years.

The deferred tax balances are further analysed as follows:
Deferred tax assets Deferred tax liabilities

31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019
$m $m $m $m
Asia operations 316 270 (2,552) (2,146)

US operations 4,542 3,804 (3,523) (3,091)
Other operations – 1 – –
Total Group 4,858 4,075 (6,075) (5,237)
The taxation regimes applicable across the Group often apply separate rules to trading and capital profits and losses. The distinction between
temporary differences that arise from items of either a trading or capital nature may affect the recognition of deferred tax assets. The following tax
benefits and losses have not been recognised for the years shown:
31 Dec 2020 $m 31 Dec 2019 $m

Tax benefits Losses Tax benefits Losses
Trading losses 191 991 36 175

Capital losses 2 7 1 5

Of the benefit from unrecognised trading losses, $26 million will expire within the next 10 years and the rest have no expiry date.
Some of the Group’s businesses are located in jurisdictions in which a withholding tax charge is incurred upon the distribution of earnings.
At 31 December 2020, deferred tax liabilities of $323 million (31 December 2019: $247 million) have not been recognised in respect of such
withholding taxes as the Group is able to control the timing of the distributions and it is probable that the timing differences will not reverse
in the foreseeable future.

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Annual Report 2020
C8 Share capital, share premium and own shares
Shares are classified as equity when their terms do not create an obligation to transfer assets. Amounts recorded in share capital represent the
nominal value of the shares issued. The difference between the proceeds received on issue of the shares, net of share issue costs, and the nominal
value of the shares issued, is credited to share premium. Where the Company purchases shares for the purposes of employee incentive plans,
the consideration paid, net of issue costs, is deducted from retained earnings. Upon issue or sale any consideration received is credited to
retained earnings net of related costs.
2020 2019
Number of Number of
ordinary Share Share ordinary Share Share
Issued shares of 5p each fully paid shares capital premium shares capital premium
$m $m $m $m
Balance at 1 Jan 2,601,159,949 172 2,625 2,593,044,409 166 2,502

Shares issued under share-based schemes 8,329,753 1 12 8,115,540 – 22
Impact of change in presentation currency – – – – 6 101
Balance at 31 Dec 2,609,489,702 173 2,637 2,601,159,949 172 2,625
Options outstanding under save as you earn schemes to subscribe for shares at each year end shown below are as follows:
Number Share price range

of shares to Exercisable
subscribe for from to by year
31 Dec 2020 2,320,320 964p 1,455p 2026

31 Dec 2019 3,805,447 1,104p 1,455p 2025
Transactions by Prudential plc and its subsidiaries in Prudential plc shares

The Group buys and sells Prudential plc shares (‘own shares’) either in relation to its employee share schemes or, up until the demerger of its
UK and Europe operations (M&G plc) in October 2019, via transactions undertaken by authorised investment funds that the Group is deemed
to control. The cost of own shares of $243 million at 31 December 2020 (31 December 2019: $183 million) is deducted from retained earnings.
The Company has established trusts to facilitate the delivery of shares under employee incentive plans. At 31 December 2020, 11.2 million
(31 December 2019: 8.4 million) Prudential plc shares with a market value of $205 million (31 December 2019: $161 million) were held
in such trusts, all of which are for employee incentive plans. The maximum number of shares held during the year was 11.5 million which
was in June 2020.
Within the trusts, shares are notionally allocated by business unit reflecting the employees to which the awards were made.
The Company purchased the following number of shares in respect of employee incentive plans:
2020 2019
Number Share price Number Share price

of shares Low High Cost* of shares Low High Cost*
£ £ $ £ £ $
January 62,395 14.42 14.68 1,195,275 75,165 14.25 14.29 1,384,926

February 62,680 14.57 14.60 1,183,717 71,044 15.00 15.18 1,390,865
March 79,057 11.18 11.40 1,110,374 68,497 15.20 16.32 1,385,182
April 5,363,563 10.21 10.48 68,010,967 2,638,429 15.65 16.73 54,052,710
May 81,377 11.16 11.30 1,117,783 73,417 16.35 16.45 1,550,109
June 167,724 11.86 12.67 2,540,749 217,800 16.20 16.36 4,484,773
July 87,239 12.30 12.51 1,365,109 60,514 17.47 17.71 1,321,427
August 72,287 12.21 12.33 1,167,008 72,671 14.86 15.21 1,318,593
September 75,368 11.61 11.68 1,138,447 73,284 14.14 14.76 1,318,767
October 116,802 11.49 11.71 1,764,694 178,359 13.78 14.24 3,148,811
November 74,178 10.62 12.76 1,233,127 75,904 13.38 13.85 1,309,146
December 70,814 12.78 12.83 1,217,842 68,573 13.07 13.13 1,178,206
Total 6,313,484 83,045,092 3,673,657 73,843,515
* The cost in USD shown has been calculated from the share prices in GBP using the monthly average exchange rate for the month in which those shares were purchased.
Up until the demerger of M&G plc in October 2019, the Group consolidated a number of authorised investment funds managed by M&G plc
that held shares in Prudential plc. The cost of acquiring these shares was included in the cost of own shares in 2019.
All share transactions were made on an exchange other than the Stock Exchange of Hong Kong.
Other than set out above, the Group did not purchase, sell or redeem any Prudential plc listed securities during 2020 or 2019.
282 Prudential plc

Group overview
C9 Provisions
31 Dec 2020 31 Dec 2019

$m $m
Staff benefits provisions note (i) 328 408

Other provisions 22 58
Total provisions note (ii) 350 466
Strategic report
Notes
(i) Provisions for staff benefits are generally expected to be paid out within the next three years.
(ii) Analysis of movement in total provisions is shown below:
2020 $m 2019 $m
Balance at 1 Jan 466 1,373

Removal of discontinued UK and Europe operations – (946)
Charged (credited) to income statement:
Governance
Additional provisions 128 188
Unused amounts released (13) (7)
Utilisation during the year (241) (154)
Exchange differences 10 12
Balance at 31 Dec 350 466

C10 Capital
C10.1 Group objectives, policies and processes for managing capital

(i) Capital measure
The Group manages its Group LCSM capital resources as its measure of capital. At 31 December 2020, estimated Group shareholder LCSM
capital resources is $15.8 billion (31 December 2019: $14.0 billion).
(ii) External capital requirements

The Hong Kong Insurance Authority (IA) assumed the role of the group-wide supervisor for the Prudential Group following the demerger
of M&G plc in October 2019. Ultimately, Prudential plc will become subject to the Group-wide Supervision (GWS) Framework. The primary
legislation was enacted in July 2020 and will come into operation on 29 March 2021. The relevant subsidiary legislation, including the Insurance
(Group Capital) Rules, were tabled before the Legislative Council on 6 January 2021 and will also come into operation on 29 March 2021.
The GWS Framework is expected to be effective for Prudential upon designation by the Hong Kong IA in the second quarter of 2021,
Until Hong Kong’s GWS Framework comes into force, Prudential applies the local capital summation method (LCSM) that has been agreed
with the Hong Kong IA to determine Group regulatory capital requirements (both minimum and prescribed levels). The GWS Framework is
expected to be largely consistent with that applied under LCSM with the exception of the treatment of debt instruments which will be subject
to transitional arrangements under the GWS Framework. Prudential’s initial analysis indicates that all debt instruments (senior and subordinated)
issued by Prudential will meet the transitional conditions set by the Hong Kong IA and will be included as eligible Group capital resources,
although this will be subject to approval by the Hong Kong IA. The LCSM surplus represents the summation of capital resources across local

solvency regimes for regulated entities of the Group and IFRS net assets (with some adjustments) for non-regulated entities less the summation
of local statutory capital requirements across the Group, with no allowance for diversification between business operations.
(iii) Meeting of capital management objectives

The Group minimum capital requirement has been met during 2020.
As well as holding sufficient capital to meet LCSM requirements at Group level, the Group also closely manages the cash it holds within
its central holding companies so that it can:
—— Fund new opportunities;
—— Maintain flexibility and absorb shock events;
—— Cover central costs; and
—— Fund dividends.
More details on holding company cash flows and balances are given in section I(iii) in the Additional unaudited financial information section.
Reserve adequacy testing under a range of scenarios and dynamic solvency testing is carried out, including under certain scenarios mandated
by the Asia and US regulators.
The Group manages its assets, liabilities and capital locally, in accordance with local regulatory requirements and reflecting the different types
of liabilities in each business unit. As a result of the diversity of products offered by Prudential and the different regulatory regimes under which
it operates, the Group employs differing methods of asset/liability and capital management, depending on the business concerned.
The sensitivity of liabilities and other components of total capital vary depending upon the type of business concerned and this conditions
the approach to asset/liability management.

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Annual Report 2020
C10 Capital continued
C10.2 Local capital regulations

(i) Asia insurance operations
The local valuation basis for the assets, liabilities and capital requirements of significant operations in Asia are:
China JV
A risk-based capital, risk management and governance framework, known as the China Risk Oriented Solvency System (C-ROSS), applies in
China. Under C-ROSS, insurers are required to maintain a core solvency ratio (core capital over minimum capital) and a comprehensive solvency
ratio (capital resources over minimum capital) of not lower than 50 per cent and 100 per cent, respectively. The review of C-ROSS by the China
Banking Insurance Regulatory Commission (CBIRC) has resulted in elevating the relevant principles of C-ROSS into regulatory requirements.
The actual capital is the difference between the admitted assets and admitted liabilities with trading and available-for-sale assets marked-to-
market and other assets at book value. Policyholder liabilities are based on a gross premium valuation method using best estimate assumptions
with a separate risk margin.
Hong Kong
The capital requirements set out in the regulations vary by underlying risk type and duration of liabilities, but are generally determined
as a percentage of mathematical reserves and capital at risk.
Mathematical reserves are based on a net premium valuation method using assumptions which include a suitable margin for prudence.
The valuation interest rate used to value long-term liabilities reflects a blend between the prudent assessment of the portfolio yield and
the reinvestment yield subject to a maximum of the prudent portfolio yield. The approach used to determine the reinvestment yield for
reserving allows for average yields thus the impact of movements in interest rates are reflected in the valuation interest rate over time.
The basis of calculation was updated in 2020 in line with a circular issued by the Hong Kong IA. The capital resources are based on assets
that are marked-to-market. The nature of the current regulatory regime means that the duration of statutory liabilities is longer than would
be expected on an economic basis and hence there is an inherent mismatch with the assets that are managed on a more realistic basis.
The Hong Kong IA is in the process of developing a risk-based capital framework with several quantitative impact studies performed
over the past few years, implementation of this framework is targeted by 2024 but the exact timing is uncertain.
Indonesia
Solvency capital is determined using a risk-based capital approach. The capital resources are based on assets that are marked-to-market,
with policyholder liabilities based on a gross premium valuation method using best estimate assumptions with a suitable margin for prudence.
Liabilities are zeroised at a policy level (ie negative liabilities are not permitted at a policy level). For unit-linked policies an unearned premium
reserve is established.
Malaysia
A risk-based capital framework applies in Malaysia. The local regulator, Bank Negara Malaysia (BNM), has set a Supervisory Target Capital Level
of 130 per cent below which supervisory actions of increasing intensity will be taken. Each insurer is also required to set its own Individual Target
Capital Level to reflect its own risk profile and this is expected to be higher than the Supervisory Target Capital Level.
The capital resources are based on assets that are marked-to-market, with policyholder liabilities based on a gross premium valuation method
using best estimate assumptions with a suitable margin for prudence. Liabilities are zeroised at a fund level (ie negative liabilities are not permitted
at a fund level). The BNM has initiated a review of its RBC framework. An exposure draft on Valuation of Insurance and Takaful Liabilities was
issued on 24 December 2019 to gather industry feedback by 15 April 2020. The exact timing of implementation of potential revisions remains
uncertain.
Market liberalisation measures were introduced by BNM in April 2009, which increases the limit from 49 per cent to 70 per cent on foreign
equity ownership for insurance companies and Takaful operators in Malaysia. A higher foreign equity limit beyond 70 per cent for insurance
companies will be considered by BNM on a case by case basis, for example, for companies who support expansion of providing insurance
coverage to the most vulnerable in Malaysian society.
Singapore
A risk-based capital framework applies in Singapore. The regulator also has the authority to direct that the insurer satisfies additional capital
adequacy requirements in addition to those set forth under the Singapore Insurance Act if it considers such additional requirements appropriate.
The capital resources are based on assets that are marked-to-market, with policyholder liabilities based on a gross premium valuation method
using best estimate assumptions with a suitable margin for prudence. The updated risk-based capital framework (RBC2) came into effect on
31 March 2020 and this permits the recognition of a prudent allowance for negative reserves in the capital resources.
(ii) US insurance operations

The regulatory framework for Jackson is governed by the requirements of the US NAIC-approved Risk-Based Capital standards. Under these
requirements life insurance companies report using a formula-based capital standard, which includes components calculated by applying
after-tax factors to various asset, premium and reserve items and a separate model-based component for market risk and interest rate risk
associated primarily with variable annuity products.
284 Prudential plc

(iii) Asset management operations – regulatory and other surplus
Group overview
Certain asset management subsidiaries of the Group are subject to local regulatory requirements. The movement in the year of the estimated
surplus regulatory capital position of those subsidiaries, combined with the movement in the IFRS basis shareholders’ equity for unregulated
asset management operations, is as follows:
2020 $m 2019 $m
Total asset Total asset
Regulatory and other surplus Eastspring US management management
Strategic report
Balance at 1 Jan 376 6 382 1,271
Removal of discontinued UK and Europe operations – – – (846)
Gains (losses) during the year 223 (1) 222 238
Movement in capital requirement 48 – 48 (32)
Capital injection 65 – 65 (10)
Distributions made to the parent company (204) – (204) (213)
Exchange and other movements (49) – (49) (26)
Governance
Balance at 31 Dec 459 5 464 382
C10.3 Transferability of capital resources

For Asia, the amounts retained within the insurance companies are at levels that provide an appropriate level of capital strength in excess of the
local regulatory minimum. The businesses in Asia may, in general, remit dividends to parent entities, provided the statutory insurance fund meets
the local regulatory solvency requirements and there are sufficient statutory accounting profits. For with-profits funds, the excess of assets over

liabilities is retained within the funds, with distribution to shareholders tied to the shareholders’ share of declared bonuses.
Jackson can pay dividends on its capital stock only out of earned surplus unless prior regulatory approval is obtained. Furthermore, dividends
that exceed the greater of statutory net gain from operations less net realised investments losses for the prior year or 10 per cent of Jackson’s
prior year end statutory surplus, excluding any increase arising from the application of permitted practices, require prior regulatory approval.
Capital resources of the non-insurance business units is transferable after taking account of an appropriate level of operating capital, based
on local regulatory solvency requirements, where relevant.

Prudential plc
285
Annual Report 2020
C11 Property, plant and equipment
Property, plant and equipment comprise Group occupied properties and tangible assets. Property, plant and equipment also includes
right-of-use assets for operating leases of properties occupied by the Group and leases of equipment and other tangible assets. All property,
plant and equipment, including the right-of-use assets under operating leases, are held at cost less cumulative depreciation, calculated using
the straight-line method, and impairment charge.
The Group does not have any right-of-use assets that would meet the definition of investment property. As at 31 December 2020, total
right-of-use assets comprised $429 million (31 December 2019: $569 million) of property and $13 million (31 December 2019: $24 million)
of non-property assets. Of the $442 million (31 December 2019: $593 million) total right-of-use assets, $182 million (31 December 2019:
$253 million) were held by the Group’s with-profits businesses.
Extension and termination options are included in a number of property and equipment leases across the Group. These are used to maximise
operational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and termination options held are
exercisable only by the Group and not by the respective lessor. The Group assesses at lease commencement whether it is reasonably certain to
exercise the option. This assertion is revisited if there is a material change in circumstances. As at 31 December 2020, the undiscounted value
of lease payments beyond the break period not recognised in the lease liabilities is $179 million (31 December 2019: $185 million).
A reconciliation of the carrying amount of the Group’s property, plant and equipment from the beginning to the end of the years shown
is as follows:
2020 $m 2019 $m
Group Group
occupied Tangible Right-of- occupied Tangible Right-of-
property assets use assets Total property assets use assets Total
Balance at 1 Jan
Cost 351 687 734 1,772 525 2,089 – 2,614
Accumulated depreciation (76) (490) (141) (707) (105) (714) – (819)
Opening net book amount 275 197 593 1,065 420 1,375 – 1,795
Removal of discontinued UK and Europe
operations – – – – (143) (1,170) – (1,313)
Recognition of right-of-use asset on initial
application of IFRS 16 – – – – – – 527 527
Arising on acquisitions of subsidiaries – – – – 6 13 1 20
Additions 3 56 21 80 1 63 196 260
Depreciation and impairment charge (9) (64) (145) (218) (9) (77) (141) (227)
Disposals and transfers (3) (13) (25) (41) – (11) 1 (10)
Effect of movements in exchange rates 1 8 (2) 7 – 4 9 13
Balance at 31 Dec 267 184 442 893 275 197 593 1,065
Representing:
Cost 355 707 710 1,772 351 687 734 1,772
Accumulated depreciation (88) (523) (268) (879) (76) (490) (141) (707)
Closing net book amount 267 184 442 893 275 197 593 1,065
The Group has non-cancellable property subleases which have been classified as operating leases under IFRS 16. The sublease rental income
received in 2020 for the leases is $10.8 million (2019: $11 million from continuing operations).
Tangible assets
At 31 December 2020, of the $184 million (31 December 2019: $197 million) tangible assets, $72 million (31 December 2019: $83 million)
were held by the Group’s with-profits businesses.
Capital expenditure: property, plant and equipment by segment

The capital expenditure in 2020 of $59 million (2019: $64 million) arose as follows: $30 million (2019: $44 million) in Asia and $2 million
(2019: $5 million) in the US, with the remaining balance of $27 million (2019: $15 million) arising from corporate expenditure unallocated
to a segment.
286 Prudential plc

D Other information
Group overview
D1 Corporate transactions
D1.1 Gain (loss) attaching to corporate transactions

Where there is a disposal, income and expenses of entities sold during the year are included in the income statement up to the date of disposal.
The gain or loss on disposal is calculated as the difference between sale proceeds net of selling costs, less the net assets of the entity at the
date of disposal, adjusted for foreign exchange movements attaching to the sold entity that are required to be recycled to the income
statement under IAS 21.
Strategic report
2020 $m 2019 $m
Gain on disposals note (i) – 265

Other transactions note (ii) (48) (407)
Total gain (loss) attaching to corporate transactions as shown separately on the consolidated income statement (48) (142)
Gain arising on reinsurance of Jackson’s in-force fixed and fixed index annuity business note (iii) 804 –
Gain arising on reinsurance transaction undertaken by the Hong Kong business note (iv) 765 –
Governance
Total gain (loss) attaching to corporate transactions 1,521 (142)
Notes
(i) In 2019, the gain on disposals principally related to profits arising from a 4 per cent reduction in the Group’s stake in its associate in India, ICICI Prudential Life Insurance Company, and
the disposal of Prudential Vietnam Finance Company Limited, a wholly-owned subsidiary that provides consumer finance.
(ii) In 2020, other transactions include $(38) million of costs associated with the work to plan for the separation of Jackson. In 2019, other transactions primarily reflected costs related
to the demerger of the Group’s UK and Europe operations (M&G plc).
(iii) With effect from 1 June 2020, Jackson reinsured substantially all of its in-force portfolio of US fixed and fixed index annuities with Athene Life Re Ltd, which resulted in a pre-tax gain of

$804 million, after allowing for the write-off of DAC associated with the business reinsured and after reflecting post-closing adjustments made in the second half of 2020. The transaction
excluded Jackson’s legacy life and institutional business as well as the REALIC portfolio and group pay-out annuity business reinsured from John Hancock and was collateralised to reduce
the exposure to counterparty risk. Under the reinsurance arrangement, Jackson reinsured $27.6 billion liabilities (valued at 1 June 2020) in return for a premium of $28.9 billion net of ceding
commission, comprising principally of bonds. The pre-tax gain also includes the realised gains arising on the bonds net of the DAC written off as a result of the transaction of $2.1 billion.
After allowing for tax of $(0.2) billion and the reduction in unrealised gains recorded directly in other comprehensive income of $(1.8) billion, the impact of the reinsurance transaction on IFRS
shareholders’ equity is a reduction of $(1.2) billion.
(iv) The benefit arises from a co-reinsurance quota share transaction undertaken by the Hong Kong business in December 2020 as part of the Group’s on-going asset/liability management.
Future surpluses (or losses) arising from the business being reinsured will be shared with the reinsurer in accordance with the terms of the treaty. This treaty helps mitigate the effect of the
accounting mismatch under the existing regulatory framework in Hong Kong and is part of our management of the transition to the new RBC regime.
D1.2 Equity investment by Athene into the US business

In 2020, all of the $1,014 million effect of transactions relating to non-controlling interests recognised in the consolidated statement of changes
in equity relates to the equity investment by Athene Life Re Ltd (‘Athene’) into the US business completed on 17 July 2020. Under the transaction,
Athene invested $500 million in Prudential’s US business in return for an 11.1 per cent economic interest for which the voting interest is
9.9 per cent. Athene’s investment is in the form of a cash subscription for the issuance of new common equity in the holding company containing
Prudential’s US businesses, including Jackson National Life Insurance Company and PPM America.
The following is summarised financial information for non-controlling interest in Prudential’s US operations currently held by Athene since
July 2020:
—— The profit after tax generated by the US operations and attributable to Athene is $57 million;
—— The comprehensive loss generated by the US operations and attributable to Athene is $(8) million; and
—— Of the US operations’ total equity, the amount attributable to Athene is $1,063 million.

Analysis of assets and liabilities of the US operations is included in note C1 segmental balance sheet. Profit or loss of the US operations is included
in note B1.4 segmental income statement. Total net decrease in cash and cash equivalents for the US operations during the year is shown below:
2020 $m
Cash flows from operating activities (807)

Cash flows from investing activities (2)
Cash flows from financing activities 470
Net cash flows in the year (339)
No dividends were paid to Athene during the year.


Prudential plc
D Other information / continued
D1 Corporate transactions continued
D1.3 Discontinued UK and Europe operations

On 21 October 2019, the Group completed the demerger of its UK and Europe operations (M&G plc), which were classified as discontinued
operations in the comparatives included within these consolidated financial statements in accordance with IFRS 5 ‘Non-current assets held for
sale and discontinued operations’.
The results and cash flows for the discontinued UK and Europe operations presented in the consolidated financial statements for the period
of ownership up to the demerger are analysed below. The profit and other comprehensive income for the period from the discontinued UK
and Europe operations were wholly attributable to the equity holders of the Company.
Total comprehensive income
2019 $m
Total revenue, net of reinsurance 33,212

Total charges, net of reinsurance (31,118)
Profit before tax 2,094
Re-measurement on demerger 188
Cumulative exchange loss recycled from other comprehensive income (2,668)
Total (loss) profit before tax (386)
Tax (charge) credit (775)
(Loss) profit for the year (1,161)
Other comprehensive income:
Cumulative exchange loss recycled through profit or loss 2,668
Other items, net of related tax 203
Other comprehensive income (loss) for the year, net of related tax 2,871
Total comprehensive income for the year 1,710
Cash flows
2019 $m
Cash flows from operating activities 2,375

Cash flows from investing activities (454)
Cash and cash equivalents divested on demerger (7,611)
Net cash flows in the year (5,690)
Net cash flows between discontinued and continuing operations* (436)
Cash and cash equivalents at beginning of year 6,048
Effect of exchange rate changes on cash and cash equivalents 78
Cash and cash equivalents at end of year –
*The net cash flows between discontinued and continuing operations of $(436) million primarily represented dividends of $(4,525) million, offset by payment for the transfer of debt to M&G plc from
Prudential plc prior to the demerger of $4,161 million.
288 Prudential plc

Group overview
D2 Contingencies and related obligations
Litigation and regulatory matters

The Group is involved in various litigation and regulatory proceedings. These may from time to time include class actions involving Jackson.
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.
Guarantees
Strategic report
Guarantee funds in the US and certain markets in Asia provide for payments to be made to policyholders on behalf of insolvent life
insurance companies and are financed by payments assessed on solvent insurance companies based on location, volume and type of business.
The estimated reserve for future guarantee fund assessments is not significant. For the majority of the markets in Asia, the insurance company’s
obligation is limited to the amount paid based on a fixed percentage of premiums. The Directors believe that sufficient provision has been made
on the balance sheet for all anticipated payments.
The Group has provided other guarantees and commitments to third parties entered into in the normal course of business but the Group
does not consider that the amounts involved are significant.
Governance
Intra-group capital support arrangements
Prudential has put in place intra-group arrangements to formalise undertakings by Prudential to the regulators of the Hong Kong subsidiaries
regarding their solvency levels.
D3 Post balance sheet events

Dividends
The 2020 second interim ordinary dividend approved by the Board of Directors after 31 December 2020 is as described in note B5.
Intention to demerge the Group’s US operations in the second quarter of 2021

In January 2021, the Board announced that it had decided to pursue the separation of its US operations (Jackson) from the Group through
a demerger, whereby shares in Jackson would be distributed to Prudential shareholders.
Subject to shareholder and regulatory approvals, the planned demerger is expected to complete in the second quarter of 2021 and would lead
to a significantly earlier separation of Jackson from the Group than would have been possible through a minority IPO and future sell-downs,
which from market precedent may have lasted until 2023. At the point of demerger, Prudential is planning to retain a 19.9 per cent non-controlling
interest in Jackson, which will be reported within the consolidated financial position as a financial investment at fair value. Subject to market
conditions, the Group intends to monetise a portion of this investment to support investment in Asia within 12 months of the planned demerger,
such that the Group will own less than 10 per cent at the end of such period.
Following this decision in January 2021, the US operations (equivalent to the US segment disclosed in these financial statements) are
considered to meet the held for distribution criteria in accordance with IFRS 5 ‘Non-current assets held for sale and discontinued operations’.
It is not practicable to quantify the potential financial effect of the planned demerger and the retained non-controlling interest at this stage.
D4 Related party transactions

Transactions between the Company and its subsidiaries are eliminated on consolidation.
The Company has transactions and outstanding balances with collective investment schemes, collateralised debt obligations and similar
entities that are not consolidated and where a Group company acts as manager, which are regarded as related parties for the purposes of IAS 24.
The balances are included in the Group’s statement of financial position at fair value or amortised cost in accordance with IAS 39 classifications
with the corresponding amounts included in the income statement. The transactions include amounts paid on issue of shares or units, amounts
received on cancellation of shares or units and amounts paid in respect of the periodic charge and administration fee.
In addition, there are no material transactions between the Group’s joint ventures and associates, which are accounted for on an equity
method basis, and other Group companies.
Key management personnel of the Company, as described in note B2.3, may from time to time purchase insurance, asset management or
annuity products marketed by Group companies in the ordinary course of business on substantially the same terms as those prevailing at the time
for comparable transactions with other persons.
In 2020 and 2019, other transactions with key management personnel were not deemed to be significant both by virtue of their size and in the
context of the individuals’ financial positions. All of these transactions were on terms broadly equivalent to those that prevailed in arm’s-length
transactions.
Additional details on the Directors’ interests in shares, transactions or arrangements are given in the Directors’ remuneration report.
Key management remuneration is disclosed in note B2.3.

Prudential plc
D5 Commitments
The Group has provided, from time to time, certain guarantees and commitments to third parties.
At 31 December 2020, Asia operations had $1,913 million unfunded commitments (31 December 2019: $2,013 million) primarily related to
investments in infrastructure funds and alternative investment funds. At 31 December 2020, Jackson had unfunded commitments of $831 million
(31 December 2019: $889 million) related to investments in limited partnerships and $185 million (31 December 2019: $796 million) related
to commercial mortgage loans and other fixed income securities. These commitments were entered into in the normal course of business
and a material adverse impact on the operations is not expected to arise from them.
D6 Investments in subsidiary undertakings, joint ventures and associates
D6.1 Basis of consolidation
The Group consolidates those investees it is deemed to control. The Group has control over an investee if all three of the following are met:
(1) it has power over an investee; (2) it is exposed to, or has rights to, variable returns from its involvement with the investee; and (3) it has ability
to use its power over the investee to affect its own returns.
(i) Subsidiaries
Subsidiaries are those investees that the Group controls. The majority of the Group’s subsidiaries are corporate entities, but the Group’s
insurance operations also invest in a number of limited partnerships.
The Group performs a re-assessment of consolidation whenever there is a change in the substance of the relationship between the Group
and an investee. Where the Group is deemed to control an entity it is treated as a subsidiary and its results, assets and liabilities are consolidated.
Where the Group holds a minority share in an entity, with no control over the entity, the investments are carried at fair value through profit or loss
within financial investments in the consolidated statement of financial position.
(ii) Joint ventures and associates

Joint ventures are joint arrangements arising from a contractual agreement whereby the Group and other investors have joint control of the net
assets of the arrangement. In a number of these arrangements, the Group’s share of the underlying net assets may be less than 50 per cent but
the terms of the relevant agreement make it clear that control is jointly exercised between the Group and the third party. Associates are entities
over which the Group has significant influence, but it does not control. Generally it is presumed that the Group has significant influence if it holds
between 20 per cent and 50 per cent voting rights of the entity.
With the exception of those referred to below, the Group accounts for its investments in joint ventures and associates by using the equity
method of accounting. The Group’s share of profit or loss of its joint ventures and associates is recognised in the income statement and its share
of movements in other comprehensive income is recognised in other comprehensive income. The equity method of accounting does not apply
to investments in associates and joint ventures held by the Group’s insurance or investment funds. This includes venture capital business, mutual
funds and unit trusts and which, as allowed by IAS 28, ‘Investments in Associates and Joint Ventures’, are carried at fair value through profit or loss.
(iii) Structured entities
Structured entities are those that have been designed so that voting or similar rights are not the dominant factor in deciding who controls the
entity. Voting rights relate to administrative tasks. Relevant activities are directed by means of contractual arrangements. The Group invests
in structured entities such as:
—— Collective investment schemes;
—— Limited partnerships;
—— Variable interest entities;
—— Investment vehicles within separate accounts offered through variable annuities;
—— Collateralised debt obligations;
—— Mortgage-backed securities; and
—— Similar asset-backed securities.
Collective investment schemes
The Group invests in collective investment schemes, which invest mainly in equities, bonds, cash and cash equivalents, and properties.
The Group’s percentage ownership in these entities can fluctuate on a daily basis according to the participation of the Group and other investors
in them.
—— Where the entity is managed by a Group asset manager, and the Group’s ownership holding in the entity exceeds 50 per cent, the Group
is judged to have control over the entity.
—— Where the entity is managed by a Group asset manager, and the Group’s ownership holding in the entity is between 20 per cent and
50 per cent, the facts and circumstances of the Group’s involvement in the entity are considered, including the rights to any fees earned by
the asset manager from the entity, in forming a judgement as to whether the Group has control over the entity.
—— Where the entity is managed by a Group asset manager, and the Group’s ownership holding in the entity is less than 20 per cent, the Group
is judged to not have control over the entity.
—— Where the entity is managed by an asset manager outside the Group, an assessment is made of whether the Group has existing rights that
gives it the ability to direct the current activities of the entity and therefore control the entity. In assessing the Group’s ability to direct an entity,
the Group considers its ability relative to other investors.
290 Prudential plc

Where the Group is deemed to control these entities, they are treated as a subsidiary and are consolidated, with the interests of investors
Group overview
other than the Group being classified as liabilities, and appear as net asset value attributable to unit holders of consolidated investment funds.
Where the Group does not control these entities (as it is deemed to be acting as an agent) and they do not meet the definition of associates,
they are carried at fair value through profit or loss within financial investments in the consolidated statement of financial position.
Where the Group’s asset manager sets up investment funds as part of asset management operations, the Group’s interest is limited to
the administration fees charged to manage the assets of such entities. With no participation in these entities, the Group does not retain risks
associated with investment funds. For these investment funds, the Group is not deemed to control the entities but to be acting as an agent.
The Group generates returns and retains the ownership risks in investment vehicles commensurate to its participation and does not have
Strategic report
any further exposure to the residual risks of these investment vehicles.
Jackson’s separate account assets

These are investment vehicles that invest contract holders’ premiums in equity, fixed income, bonds and money market mutual funds. The contract
holder retains the underlying returns and the ownership risks related to the underlying investments. The shareholder’s economic interest in separate
accounts is limited to the administrative fees charged. The separate accounts are set up as separate regulated entities governed by a Board of
Governors or trustees for which the majority of the members are independent of Jackson or any affiliated entity. The independent members are
Governance
responsible for any decision making that impacts contract holders’ interest and govern the operational activities of the entities’ advisers, including
asset managers. Accordingly, the Group does not control these vehicles. These investments are carried at fair value through profit or loss within
financial investments in the consolidated statement of financial position.
Limited partnerships
The Group’s insurance operations invest in a number of limited partnerships, either directly or through unit trusts, through a mix of capital
and loans. These limited partnerships are managed by general partners, in which the Group holds equity. Such interest in general partners

and limited partnerships provide the Group with voting and similar rights to participate in the governance framework of the relevant activities
in which limited partnerships are engaged in. Accounting for the limited partnerships as subsidiaries, joint ventures, associates or other financial
investments depends on the terms of each partnership agreement and the shareholdings in the general partners.
Other structured entities

The Group holds investments in mortgage-backed securities, collateralised debt obligations and similar asset-backed securities, the majority
of which are actively traded in a liquid market.
The Group consolidates the vehicles that hold the investments where the Group is deemed to control the vehicles. When assessing control
over the vehicles, the factors considered include the purpose and design of the vehicle, the Group’s exposure to the variability of returns and
the scope of the Group’s ability to direct the relevant activities of the vehicle including any kick-out or removal rights that are held by third parties.
The outcome of the control assessment is dependent on the terms and conditions of the respective individual arrangements.
The majority of such vehicles are not consolidated. In these cases, the Group is not the sponsor of the vehicles in which it holds investments
and has no administrative rights over the vehicles’ activities. The Group generates returns and retains the ownership risks commensurate to
its holding and its exposure to the investments and does not have any further exposure to the residual risks or losses of the investments or
the vehicles in which it holds investments. Accordingly, the Group does not have power over the relevant activities of such vehicles and all
are carried at fair value through profit or loss within financial investments in the consolidated statement of financial position.
The table below provides aggregate carrying amounts of the investments in unconsolidated structured entities reported in the Group’s
statement of financial position:
31 Dec 2020 $m 31 Dec 2019 $m

Separate Other Separate Other
Investment account structured Investment account structured
Statement of financial position line items funds assets entities funds assets entities

investment schemes 27,192 219,062 – 23,622 195,070 –
Debt securities – – 3,414 – – 6,573
Total 27,192 219,062 3,414 23,622 195,070 6,573
As at 31 December 2020 and 2019, the Group does not have an agreement, contractual or otherwise, or intention to provide financial support
to structured entities that could expose the Group to a loss.

Prudential plc
D6 Investments in subsidiary undertakings, joint ventures and associates continued
D6.2 Dividend restrictions and minimum capital requirements

Certain Group subsidiaries and joint ventures are subject to restrictions on the amount of funds they may transfer in the form of cash dividends
or otherwise to the parent company.
Under UK company law, UK companies can only declare dividends if they have sufficient distributable reserves.
Jackson is subject to state laws that limit the dividends payable to its parent company based on statutory capital, surplus and prior year
earnings. Dividends in excess of these limitations require prior regulatory approval.
The Group’s subsidiaries, joint ventures and associates in Asia may remit dividends to the Group, in general, provided the statutory insurance
fund meets the capital adequacy standard required under local statutory regulations and has sufficient distributable reserves. For further details
on local capital regulations in Asia please refer to note C10.2.
D6.3 Investments in joint ventures and associates

The Group has shareholder-backed joint venture insurance and asset management businesses in China with CITIC Group and a joint venture
asset management business in India with ICICI Bank. In addition, there is an asset management joint venture in Hong Kong with Bank of China
International Holdings Limited (BOCI) and Takaful insurance joint venture in Malaysia.
For the Group’s joint ventures that are accounted for by using the equity method, the net of tax results of these operations are included
in the Group’s profit before tax.
The Group’s associates, which are also accounted for under the equity method, include the Indian insurance entity (with the majority
shareholder being ICICI Bank). In addition, the Group has investments in collective investment schemes, funds holding collateralised debt
obligations, property funds where the Group has significant influence. As allowed under IAS 28, these investments are accounted for on
a fair value through profit or loss basis. The aggregate fair value of associates accounted for at fair value through profit or loss, where there
are published price quotations, is approximately $0.7 billion at 31 December 2020 (31 December 2019: $0.7 billion).
For joint ventures and associates accounted for using the equity method, the 12 months financial information of these investments for
the years ended 31 December 2020 and 2019 (covering the same period as that of the Group) has been used in these consolidated financial
statements.
The Group’s share of the profits for shareholder-backed business (including short-term fluctuations in investment returns), net of related tax,
in joint ventures and associates, which are equity accounted as shown in the consolidated income statement at 31 December 2020, comprises
the following:
Share of profits from joint ventures and associates, net of related tax 2020 $m 2019 $m
Asia insurance operations 400 291

Asia asset management operations 117 106
Total segment and Group total 517 397
There is no other comprehensive income in the joint ventures and associates. There has been no unrecognised share of losses of a joint venture
or associate that the Group has stopped recognising in total comprehensive income.
The Group’s interest in joint ventures gives rise to no contingent liabilities or capital commitments that are material to the Group.
292 Prudential plc

Key to share classes:
LBG Limited by Guarantee
LPI Limited Partnership Interest
MI Membership Interest
MFS Mutual Fund Shares
NSB Non-stock basis
OS Ordinary Shares
PI Partnership Interest
PS Preference Shares
UUnits
D6.4 Related undertakings
Group overview
In accordance with Section 409 of the Companies Act 2006, a list of Prudential Group’s subsidiaries, joint ventures, associates and significant
holdings (being holdings of more than 20 per cent) is disclosed below, along with the classes of shares held, the registered office address and
the effective percentage of equity owned at 31 December 2020.
The definitions of a subsidiary undertaking, joint venture and associate in accordance with the Companies Act 2006 are different from the
definition under IFRS Standards. As a result, the related undertakings included within the list below may not be the same as the undertakings
consolidated in the Group IFRS financial statements. The Group’s consolidation policy is described in note D6.1. The Group also operates
through branches. At 31 December 2020, there was no significant branch outside the UK.
Strategic report
Direct subsidiary undertakings of the parent company, Prudential plc (shares held directly or via nominees)
Classes of Proportion
Name of entity shares held held Registered office address
Prudential Corporation Asia Limited OS 100.00% 13th Floor, One International Finance Centre, 1 Harbour View Street, Central,
Hong Kong
Governance
Prudential Group Holdings Limited OS 100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
Other subsidiaries, joint ventures, associates and significant holdings of the Group – no shares held directly
by the parent company, Prudential plc or its nominees
The table below represents the list of entities within the Group excluding the entities within the US business, which are shown
in a separate table below.

Aberdeen Standard Cash Creation Fund U 31.40% 28th Floor Bangkok City Tower, 179 South Sathorn Road, Thungmahamek,
Sathorn, Bangkok 10120, Thailand
Aberdeen Standard Global Opportunities Fund U 32.24% 20 Collyer Quay, #01-01, Singapore 049319
Aberdeen Standard Singapore Equity – SGD class U 57.89%
Aberdeen Standard Singapore Equity Fund – USD class U 42.67% 21 Church Street, #01-01, Capital Square Two, Singapore 049480
Allianz Global Investors Greater China Fund U 43.06% 5F, No.378, Fu Xing N. Rd. Taipei, Taiwan
Alternatives North America Ltd. U 100.00% c/o MaplesFS Limited, P.O. Box 1093, Queensgate House, Grand Cayman,
Cayman Islands KY1-1102
AMUNDI FTSE China A50 Index ETF U 58.20% 90, boulevard Pasteur, 75015 Paris – France
BOCHK Aggressive Growth Fund U 44.20% 27th Floor, Bank of China Tower, 1 Garden Road, Hong Kong
BOCHK Balanced Growth Fund U 38.00%
BOCHK China Equity Fund U 61.53%
BOCHK Conservative Growth Fund U 38.26%
BOCHK US Dollar Money Market Fund U 24.23%

BOCI-Prudential Asset Management Limited OS 36.00%
BOCI-Prudential Trustee Limited OS 36.00% 12th Floor and 25th Floor, Citicorp Centre, 18 Whitfield Road, Causeway Bay,
Hong Kong
Capital Asian Bond Fund U 40.72% 15F., No.69, Sec. 2, Dunhua South. Rd. Da-an District, Taiwan
CBRE European Industrial Fund U 23.40% 2100 McKinney Avenue, 12th Floor, Dallas, TX 75201, USA
CITIC-CP Asset Management Co., Ltd. MI 26.95% Room 101-2, No.128 North Zhangjiabang Road, Pudong District, Shanghai, China
CITIC-Prudential Fund Management Company Limited MI 49.00% Level 9, HSBC Building, Shanghai IFC, 8 Century Avenue, Pudong, Shanghai,
China
CITIC-Prudential Life Insurance Company Limited MI 50.00% 0507-0510, 1601-1616, East Tower, World Financial Centre, No.1 East Third Ring
Middle Road, Chaoyang District, Beijing, 100020, China
Eastspring Al-Wara’ Investments Berhad OS 100.00% Level 25, Menara Hong Leong, No. 6 Jalan Damanlela, Bukit Damansara,
50490 Kuala Lumpur, Malaysia
Eastspring Asset Management Korea Co. Ltd. OS 100.00% 15th Floor, Shinhan Investment Tower, 70 Yoidae-ro, Youngdungpo-gu,
Seoul 07325, Korea
Eastspring Global Smart Beta Baby Investment Trust H U 60.00% Goodmorning Shinhan Tower 15F Yeoido Dong 23-2, Youngdungpo-gu,
Seoul 150-010, Korea
Eastspring Global Smart Beta Baby Investment Trust USD U 100.00%

Prudential plc
D6.4 Related undertakings continued

by the parent company, Prudential plc or its nominees continued
Eastspring Infrastructure Debt Fund L.P. PI 90.68% PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands
Eastspring Investment Asia Real Estate Multi Asset Income U 80.65% 26, Boulevard Royal, L-2449, Luxembourg
Fund
Eastspring Investment Asia Sustainable Bond Fund U 99.99%
Eastspring Investment K-Short Term Bond Alpha U 20.41% 15th Floor, Shinhan Investment Tower, 70 Yoidae-ro, Youngdungpo-gu,
Securities Investment Trust (Bond Balanced) Seoul 07325, Korea
Eastspring Investment Management (Shanghai) Company MI 100.00% Unit 306-308, 3rd Floor, Azia Center, 1233 Lujiazui Ring Road, China (Shanghai)
Limited Pilot Free Trade Zone, China
Eastspring Investments – Global Growth Equity Fund U 73.87% 26, Boulevard Royal, L-2449, Luxembourg
Eastspring Investments – Global Low Volatility Equity Fund U 99.48%
Eastspring Investments – Global Technology Fund U 81.38%
Eastspring Investments – Pan European Fund U 64.88%
Eastspring Investments – US High Yield Bond Fund U 41.33%
Eastspring Investments (Hong Kong) Limited OS 100.00% 13th Floor, One International Finance Centre, 1 Harbour View Street, Central,
Hong Kong
Eastspring Investments (Luxembourg) S.A. OS 100.00% 26, Boulevard Royal, L-2449, Luxembourg
Eastspring Investments (Singapore) Limited OS 100.00% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre Tower 2,
Singapore 018983
Eastspring Investments Asia Oceania High Dividend U 100.00% Eastspring Investments Limited, Marunouchi Park Bldg., 2-6-1 Marunochi,
Equity Fund Chiyoda-ku, Tokyo, Japan 100-6905
Eastspring Investments Asia Oceania U&I Bond Fund U 99.92%
Eastspring Investments Asia Pacific Equity Fund U 99.97% 26, Boulevard Royal, L-2449, Luxembourg
Eastspring Investments Asian Bond Fund U 39.08%
Eastspring Investments Asian Dynamic Fund U 90.00%
Eastspring Investments Asian Equity Fund U 99.17%
Eastspring Investments Asian Equity Income Fund U 80.97%
Eastspring Investments Asian High Yield Bond Fund U 29.28%
Eastspring Investments Asian High Yield Bond MY Fund U 67.90% Eastspring Investments Berhad, Level 22, Menara Prudential, Persiaran TRX
Barat, 55188 Tun Razak Exchange, Kuala Lumpur, Malaysia
Eastspring Investments Asian Infrastructure Equity Fund U 71.48% 26, Boulevard Royal, L-2449, Luxembourg
Eastspring Investments Asian Investment Grade Bond U 92.65%
Fund
Eastspring Investments Asian Low Volatility Equity Fund U 99.11%
Eastspring Investments Asian Multi Factor Equity Fund U 100.00%
Eastspring Investments Asian Property Securities Fund U 97.70%
Eastspring Investments Berhad OS 100.00% Level 25, Menara Hong Leong, No. 6 Jalan Damanlela, Bukit Damansara,
Eastspring Investments China A Shares Growth Fund U 91.25% 26, Boulevard Royal, L-2449, Luxembourg
Eastspring Investments Dragon Peacock Fund U 90.95%
294 Prudential plc

NSB Non-stock basis
OS Ordinary Shares
UUnits
Group overview
Eastspring Investments Emerging Markets Star Players U 41.15% Eastspring Investments Limited, Marunouchi Park Bldg., 2-6-1 Marunochi,
Chiyoda-ku, Tokyo, Japan 100-6905
Eastspring Investments Equity Income Fund U 29.20% Eastspring Investments Berhad, Level 22, Menara Prudential, Persiaran TRX
Eastspring Investments European Inv Grade Bond Fund U 99.73% 26, Boulevard Royal, L-2449, Luxembourg
Strategic report
Eastspring Investments Fund Management Limited MI 100.00% 23rd Floor, Saigon Trade Center, 37 Ton Duc Thang Street, District 1,
Liability Company Ho Chi Minh City, Vietnam
Eastspring Investments Global Emerging Markets Bond U 99.96% 26, Boulevard Royal, L-2449, Luxembourg
Fund
Eastspring Investments Global Equity Navigator Fund U 98.43%
Eastspring Investments Global Market Navigator Fund U 99.63%
Governance
Eastspring Investments Global Multi Asset Income Plus U 99.99%
Growth Fund
Eastspring Investments Greater China Equity Fund U 94.66%
Eastspring Investments Group Pte. Ltd. OS 100.00% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre Tower 2,
Singapore 018983
Eastspring Investments Incorporated OS 100.00% 874 Walker Road, Suite C, Dover, DE 19904, USA
Eastspring Investments India Consumer Equity Open OS 100.00% 3rd Floor, 355 NEX, Rue du Savoir, Cybercity Ebene, 72201, Mauritius

Limited
Eastspring Investments India Equity Fund U 77.64% 26, Boulevard Royal, L-2449, Luxembourg
Eastspring Investments India Equity Open Limited OS 100.00% 3rd Floor, 355 NEX, Rue du Savoir, Cybercity Ebene, 72201, Mauritius
Eastspring Investments India Infrastructure Equity Open OS 100.00%
Limited
Eastspring Investments Japan Dynamic MY Fund U 37.02% Eastspring Investments Berhad, Level 22, Menara Prudential, Persiaran TRX
Eastspring Investments Limited OS 100.00% Marunouchi Park Building, 6-1 Marunouchi 2-chome, Chiyoda-Ku, Tokyo, Japan
Eastspring Investments MY Focus Fund U 26.11% Eastspring Investments Berhad, Level 22, Menara Prudential, Persiaran TRX
Eastspring Investments Services Pte. Ltd. OS 100.00% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre Tower 2,
Singapore 018983
Eastspring Investments SICAV-FIS – Alternative U 100.00% 26, Boulevard Royal, L-2449, Luxembourg
Investments Fund
Eastspring Investments SICAV-FIS – Asia Pacific Loan Fund U 90.92%
Eastspring Investments Unit Trust – Dragon Peacock Fund U 97.74% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre, Singapore 018983
Eastspring Investments US Corporate Bond Fund U 60.63% 26, Boulevard Royal, L-2449, Luxembourg

Eastspring Investments US High Inv Grade Bond Fund U 90.09%
Eastspring Investments US Investment Grade Bond Fund U 40.83%
Eastspring Investments UT Singapore ASEAN Equity Fund U 98.74% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre, Singapore 018983
Eastspring Investments UT Singapore Select Bond Fund U 75.14%
Eastspring Investments Vietnam Navigator Fund U 76.45% 23rd Floor, Saigon Trade Center, 37 Ton Duc Thang Street, District 1,
Ho Chi Minh City, Vietnam
Eastspring Investments World Value Equity Fund U 95.42% 26, Boulevard Royal, L-2449, Luxembourg
Eastspring Overseas Investment Fund Management MI 100.00% Unit 306-308, 3rd Floor, 1233 Lujiazui Ring Road, China (Shanghai)
(Shanghai) Company Limited Pilot Free Trade Zone, China
Eastspring Real Assets Partners OS 100.00% PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands
Eastspring Securities Investment Trust Co., Ltd. OS 99.54% 4th Floor, No.1 Songzhi Road, Taipei 110, Taiwan

Prudential plc

First Sentier Global Property Securities Fund U 56.08% 38 Beach Road, #06-11 South Beach Tower, Singapore 189767
First State China Focus Fund U 71.78% 70 Sir John Rogerson’s Quay, Dublin 2, D02 R296, Ireland
FRANK TP ASIA GR-A-ACC-SGD U 28.03% 8A, rue Albert Borschette, L-1246 Luxembourg
Fubon China Bond Umbrella Fund U 37.09% 8F., No.108, Sec.1, Dunhua South. Rd. Taipei, Taiwan
Fubon Global Investment Grade Bond Fund U 41.28%
Fuh Hwa Emerging Market RMB Fixed Income Fund U 24.51% 8F & 9F., No.308, Sec. 2, Bade Rd., Da-an District
Furnival Insurance Company PCC Limited OS 100.00% PO Box 155, Mill Court, La Charroterie, St Peter Port, GY1 4ET, Guernsey
GS Twenty Two Limited OS 100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
Hyde Holdco 1 Limited (In Liquidation) OS 100.00% c/o Mazars LLP, 45 Church Street, Birmingham, B3 2RT, United Kingdom
ICICI Prudential Asset Management Company Limited OS 49.00% 12th Floor, Narain Manzil, 23, Barakhamba Road, New Delhi 110001, India
ICICI Prudential Life Insurance Company Limited OS 22.11% ICICI PruLife Towers, 1089 Appasaheb Marathe Marg, Prabhadevi,
Mumbai 400025, India
ICICI Prudential Pension Funds Management Company OS 22.11%
Limited
ICICI Prudential Trust Limited OS 49.00% 12th Floor, Narain Manzil, 23, Barakhamba Road, New Delhi 110001, India
Invesco Fixed Maturity Selective Emerging Market Bonds U 100.00% 8F, No 122, Tung Hua N. Rd. Taipei, Taiwan
2024
Invesco Select 6 Year Maturity Global Bond Fund U 100.00%
iShares Core MSCI Asia U 72.07% 16/F Champion Tower, 3 Garden Road, Central, Hong Kong
iShares Edge MSCI USA Minimum Volatility ESG UCITS U 78.95% J.P. Morgan, 200 Capital, 79 Sir John Rogerson’s Quay, Dublin 2, D02 RK57,
Fund Ireland
iShares Edge MSCI USA Momentum Factor UCITS Fund U 37.14%
iShares Fallen Angels High Yield Corporate Bond UCITS U 38.11% 79 Sir John Rogerson’s Quay, Dublin 2, D02 RK 57, Ireland
ETF Wing
JPMorgan Investment Funds – Global Select Equity Fund U 28.59% JPMorgan Asset Management (Europe) S.à r.l., 6, route de Trèves, L-2633
Senningerberg, Luxembourg
JPMorgan Liquidity Funds – SGD Liquidity LVNAV Fund U 21.21%
KKP Active Equity Fund U 22.04% 19/F Muang Thai-Phatra Complex, Building Tower, A, 252/25 Ratchadapisek
Road, Huaykwang, Bangkok 10310, Thailand
Krungsri Greater China Equity Hedged Dividend Fund U 25.64% 12th, 18th Zone B Floor, Ploenchit Tower 898 Ploenchit Road, Lumpini
Pathumwan, Bangkok 10330, Thailand
Lasalle Property Securities SICAV-FIS U 100.00% 11-13 Boulevard de la Foire, L-1528 Luxembourg
M&G Asia Property Trust U 100.00% 8 Marina Boulevard, 05-02 Marina Bay, Financial Centre Tower 1,
Singapore, 018981
M&G Luxembourg European Strategic Value Fund U 78.60% 49 Avenue J.F. Kennedy, L-1855, Luxembourg
M&G Real Estate Asia Holding Company Pte. Ltd. OS 33.00% 10 Marina Boulevard, #31-03, Marina Bay, Financial Centre Tower 2,
Singapore, 018983
Manulife Asia Pacific Bond Fund U 50.85% 9/F, No 89 Son Ren Road, Taipei, Taiwan
Manulife China Dim Sum High Yield Bond Fund U 65.43%
Manulife China Offshore Bond Fund U 66.01%
Manulife USD High Yield Bond Fund U 26.54%
296 Prudential plc

NSB Non-stock basis
OS Ordinary Shares
UUnits
Group overview
Neuralbay Pte. Ltd. OS 100.00% 10 Central Exchange Green, Pixel, Singapore 138649
Nomura Six Years Fixed Maturity Asia Pacific Emerging U 100.00% 101 Tower, 30F, No. 7 Sec. 5, Xinyi Rd., Xinyi Dist., Taipei, Taiwan
Market Bond Fund
Nomura Six Years Fixed Maturity Emerging Market U 43.03%
Bond Fund
Strategic report
Nomura Six Years Ladder Maturity Asia Pacific Emerging U 100.00%
Market Bond Fund
North Sathorn Holdings Company Limited OS 100.00% 3 Rajanakarn Building, 20th Floor, South Sathorn Road, Yannawa Subdistrict,
Sathorn District, Bangkok, Thailand
PCA IP Services Limited OS 100.00% 13th Floor, One International Finance Centre, 1 Harbour View Street, Central,
Hong Kong
PCA Life Assurance Co. Ltd. OS 99.79% 8th Floor, No.1 Songzhi Road, Taipei City, 11047, Taiwan
Governance
PCA Reinsurance Co. Ltd. OS 100.00% Unit Level 13(A), Main Office Tower, Financial Park Labuan, Jalan Merdeka,
87000 Federal Territory of Labuan, Malaysia
Prenetics Limited PS 12.65% 7th Floor, Prosperity Millennia Plaza, 663 King’s Road, North Point, Hong Kong
Pru Life Insurance Corporation of U.K. OS 100.00% 9th Floor, Uptown Place Tower 1, 1 East 11th Drive, Uptown Bonifacio,
1634 Taguig City, Metro Manila, Philippines
Pru Life UK Asset Management and Trust Corporation OS 100.00% 2nd Floor, Uptown Parade 2, 36th Street, Uptown Bonifacio, 1634 Taguig City,

Metro Manila, Philippines
Prudence Foundation LBG 100.00% 13th Floor, One International Finance Centre, 1 Harbour View Street, Central,
Hong Kong
Prudential (Cambodia) Life Assurance Plc OS 100.00% 20th Floor, #445, Monivong Blvd, Boeung Prolit, 7 Makara, Phnom Penh Tower,
Phnom Penh, Cambodia
Prudential (US Holdco 1) Limited OS 100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
Prudential Africa Holdings Limited OS 100.00%
Prudential Africa Services Limited OS 100.00% Vienna Court, Ground Floor, State House Crescent, Off State House Avenue,
Nairobi, P.O Box 25093, Kenya
Prudential Assurance Company Singapore (Pte) Limited OS 100.00% 30 Cecil Street, #30-01 Prudential Tower, Singapore 049712
Prudential Assurance Malaysia Berhad* OS 51.00% Level 20, Menara Prudential, Persiaran TRX Barat, 55188 Tun Razak Exchange,
Kuala Lumpur, Malaysia
Prudential Assurance Uganda Limited OS 100.00% Zebra Plaza, Plot 23, Kampala Road, P.O. Box 2660, Kampala, Uganda
Prudential BeGeneral Insurance S.A. OS 51.00% Immeuble WOODIN Center 1st Floor, Avenue Nogues, Plateaux, Abidjan,
Cote d’Ivoire
Prudential BeLife Insurance S.A. OS 50.93%
Prudential Beneficial General Insurance Cameroon S.A. OS 50.04% 1944 Blvd de la République, BP 2328, Douala, Cameroon
Prudential Beneficial Life Insurance Cameroon S.A. OS 51.00%

Prudential Beneficial Life Insurance Togo S.A. OS 50.99% 2963 Rue De La Chance Agbalepedogan, P.B. 1115, Lome, Togo
Prudential BSN Takaful Berhad† OS 49.00% Level 8A, Menara Prudential, 10 Jalan Sultan Ismail, 50250 Kuala Lumpur,
Malaysia
Prudential Corporation Australasia Holdings Pty Limited OS 100.00% 31 Highgate Circuit, Kellyville, NSW, 2155, Australia
(in liquidation)
Prudential Corporation Holdings Limited OS 100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
Prudential General Insurance Hong Kong Limited OS 100.00% 59th Floor, One Island East, 18 Westlands Road, Quarry Bay, Hong Kong
Prudential Group Secretarial Services HK Limited OS 100.00% 13th Floor, One International Finance Centre, 1 Harbour View Street, Central,
Hong Kong
Prudential Group Secretarial Services Limited OS 100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
Prudential Holdings Limited OS 100.00% 4th Floor, Saltire Court, 20, Castle Terrace, Edinburgh, EH1 2EN, United Kingdom

Prudential plc

Prudential Hong Kong Limited OS 100.00% 59th Floor, One Island East, 18 Westlands Road, Quarry Bay, Hong Kong
Prudential International Treasury Limited OS 100.00% 13th Floor, One International Finance Centre, 1 Harbour View Street, Central,
Hong Kong
Prudential IP Services Limited OS 100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
Prudential Life Assurance (Lao) Company Limited OS 100.00% 5th Floor, Lao international Business and Tourist Center Project (Vientiane
Center), Khouvieng Road, Nongchan Village, Sisattanak District, Vientiane
Capital, Lao PDR
Prudential Life Assurance (Thailand) Public Company OS 99.93% 9/9 @Sathorn Building, 20th–27th Floor, South Sathorn Road, Yannawa, Sahtorn,
Limited Bangkok 10120, Thailand
Prudential Life Assurance Kenya Limited OS 100.00% Vienna Court, Ground Floor, State House Crescent, Off State House Avenue,
Nairobi, P.O Box 25093, Kenya
Prudential Life Assurance Zambia Limited OS 100.00% Prudential House, Plot No.32256, Thabo Mbeki Road, P.O. Box 31357, Lusaka,
Zambia
Prudential Life Insurance Ghana Limited OS 100.00% 35 North Street, Tesano, Accra, Accra-North, PO Box AN11549, Ghana
Prudential Life Vault Limited OS 100.00% 98 Awolowo Road, South-West Ikoyi, Lagos, Nigeria
Prudential Mauritius Holdings Limited OS 100.00% 3rd Floor, 355 NEX, Rue du Savoir, Cybercity Ebene, 72201, Mauritius
Prudential Myanmar Life Insurance Limited OS 100.00% #15-01, 15th Floor, Sule Square, 221 Sule Pagoda Road, Kyauktada Township,
Yangon, Myanmar
Prudential Pensions Management Zambia Limited OS 49.00% Prudential House, Plot No.32256, Thabo Mbeki Road, P.O. Box 31357, Lusaka,
Zambia
Prudential Services Asia Sdn. Bhd. OS 100.00% Suite 1005, 10th Floor, Wisma Hamzah-Kwong Hing, No. 1 Leboh Ampang,
PS 100.00% 50100 Kuala Lumpur, Malaysia
Prudential Services Limited OS 100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
Prudential Services Singapore Pte. Ltd. OS 100.00% 1 Wallich Street, #19-01 Guoco Tower, Singapore 078881
Prudential Singapore Holdings Pte. Limited OS 100.00% 30 Cecil Street, #30-01 Prudential Tower, Singapore 049712
Prudential Technology and Services India Private Limited OS 100.00% EPIP Industrial Area, Whitefield Road, K.R Puram, Near SAP Labs, Hubli,
Bangalore, Karnataka, 560066, India
Prudential Vietnam Assurance Private Limited OS 100.00% 25th Floor, Saigon Trade Centre, 37 Ton Duc Thang Street, District 1,
Ho Chi Minh City, Vietnam
Prudential Zenith Life Insurance Limited OS 51.00% 13th Floor, Civic Towers, Ozumba Mbadiwe Avenue, Victoria Island, Lagos,
Nigeria
PT. Eastspring Investments Indonesia OS 100.00% Prudential Tower, 23rd Floor, Jl. Jend. Sudirman Kav.79, Jakarta 12910, Indonesia
PT. Prudential Life Assurance OS 94.62% Prudential Tower, JI. Jend. Sudirman Kav. 79, Jakarta 12910, Indonesia
Pulse EcoSystems Pte. Ltd. OS 100.00% 1 Wallich Street, #19-01 Guoco Tower, Singapore 078881
PVFC Financial Limited OS 100.00% Suite 509, 5th Floor, One International Finance Centre, 1 Harbour View Street,
Central, Hong Kong
298 Prudential plc

NSB Non-stock basis
OS Ordinary Shares
UUnits
Group overview
Reksa Dana Eastspring IDR Fixed Income Fund (NDEIFF) U 99.64% Prudential Tower, 23rd Floor, Jl. Jend. Sudirman Kav.79, Jakarta 12910, Indonesia
Reksa Dana Eastspring Investments Alpha Navigator Fund U 85.85%
Reksa Dana Eastspring Investments Cash Reserve U 99.16%
Reksa Dana Eastspring Investments IDR High Grade U 21.46%
Strategic report
Reksa Dana Eastspring Investments Value Discovery U 88.20%
Reksa Dana Syariah Eastspring Syariah Equity Islamic Asia U 86.66%
Pacific USD
Reksa Dana Syariah Eastspring Syariah Fixed Income U 59.79%
Amanah
Reksa Dana Syariah Eastspring Syariah Money Market U 98.30%
Khazanah
Governance
Reksa Dana Syariah Penyertaan Terbatas Bahana Syariah U 99.01% Graha CIMB Niaga 21st Floor. Jl Jend Sudirman Kav 58, Jakarta-12190, Indonesia
BUMN Fund
Rhodium Investment Fund U 99.82% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre Tower 2,
Singapore 018983
SCB Global Income Fund U 26.65% 7-8th Floor, SCB Park Plaza 1, 18 Ratchadapisek Road, Chatuchak,
Bangkok 10900, Thailand
Schroder Asian Investment Grade Credit U 35.52% 138 Market Street, #23-01 CapitaGreen, Singapore 048946

Schroder Emerging Markets Fund U 63.91%
Schroder Multi-Asset Revolution U 59.60%
Schroder US Dollar Money Fund U 37.08% HSBC Institutional Trust Service (Asia) Limited, 1 Queen’s Road Central,
Hong Kong
Scotts Spazio Pte. Ltd. OS 45.00% 30 Cecil Street #23-02 Prudential Tower, Singapore, 049712
Shenzhen Prudential Technology Limited MI 100.00% Unit 5, 8th Floor, China Resources Tower, No.2666 Keyuan South Road,
Yuehai Street, Nanshan District, Shenzhen, 518054, China
Sri Han Suria Sdn. Bhd. OS 51.00% Suite 1005, 10th Floor Wisma Hamzah-Kwong Hing, No. 1 Leboh Ampang,
Staple Limited OS 100.00% 3 Rajanakarn Building, 20th Floor, South Sathorn Road, Yannawa Subdistrict,
Sathorn District, Bangkok, Thailand
Thanachart Fund Management Co., Ltd. OS 50.10% Units 902-908, 9th Floor, Mitrtown Office Tower 944 ,Rama 4 Road, Wangmai,
Patumwan, Bangkok, 10330, Thailand
TMB Asset Management Co., Ltd. OS 65.00% 32nd Floor, Abdulrahim Building, 990 Rama IV Road, Silom, Bangrak,
Bangkok 10500, Thailand
UOB Smart Global Healthcare U 36.67% 23A, 25th Floor, Asia Centre Building, 173/27-30, 32-33 South Sathorn Road,
Thungmahamek, Sathorn, Bangkok 10120, Thailand
UOB Smart Millennium Growth Fund U 34.24%

* Prudential Assurance Malaysia Berhad is consolidated at 100 per cent in the Group’s financial statements reflecting the economic interest to the Group.
† Prudential BSN Takaful Berhad is a joint venture that is accounted for using the equity method, for which the Group has an economic interest of 70 per cent for all business sold up to 23 December
2016 and of 49 per cent for new business sold subsequent to this date.

Prudential plc

The table below represents the list of entities within the Group’s US business. On 17 July 2020, the Group completed the equity investment
transaction by Athene, under which Athene invested $500 million in the Group’s US business in return for an 11.1 per cent economic interest for
which the voting interest is 9.9 per cent. The proportion held shown in the table below represents the Prudential’s effective percentage of voting
interest owned.
95th Avenue Retail Building, LLC MI 90.10% 901 S., Ste. 201, Second St., Springfield, IL, 62704-7909, USA
Allied Life Brokerage Agency, Inc LPI 90.10% 1 Corporate Way, Lansing, MI 48951, USA
Brier Capital LLC OS 90.10%
Brooke Life Insurance Company OS 90.10%
Centre Capital Non-Qualified Investors IV AIV-RA, LP LPI 39.74% 2711 Centreville Road, Suite 400, Wilmington, DE 19808, USA
Centre Capital Non-Qualified Investors V AIV-ELS LP LPI 32.96%
Centre Capital Non-Qualified Investors V LP LPI 33.98%
CEP IV-A CWV AIV LP LPI 21.60% 615 South Dupont Highway, Dover, DE 19901, USA
CEP IV-A Davenport AIV LP LPI 21.57% 22 St. Clair Avenue East, Suite 1700, Toronto CA M4T 2S3
CEP IV-A INDY AIV Limited Partnership Canada LPI 21.57%
CEP IV-A Indy AIV LP LPI 21.57%
CEP IV-A NMR AIV LP LPI 21.57%
Hermitage Management LLC OS 90.10% 1 Corporate Way, Lansing, MI 48951, USA
Jackson Charitable Foundation Inc NSB 90.10%
Jackson Finance LLC OS 90.10%
Jackson Financial Inc OS 90.10% 1105 North Market Street, Suite 1300, Wilmington, DE 19801, USA
Jackson Holdings LLC OS 90.10%
Jackson National Asset Management LLC OS 90.10% 1 Corporate Way, Lansing, MI 48951, USA
Jackson National Life (Bermuda) Limited OS 90.10% Cedar House, Hamilton, Bermuda
Jackson National Life Distributors LLC OS 90.10% 1209 Orange Street, Wilmington, DE 19801, USA
Jackson National Life Insurance Agency, LLC OS 90.10%
Jackson National Life Insurance Company OS 90.10% 1 Corporate Way, Lansing, MI 48951, USA
Jackson National Life Insurance Company of New York OS 90.10% 2900 Westchester Avenue, Suite 305, Purchase, NY 10577, USA
Mission Plans of America, Inc OS 90.10% 1999 Bryan Street, Suite 900, Dallas, TX 75201, USA
National Planning Holdings, LLC OS 90.10% 1209 Orange Street, Wilmington, DE 19801, USA
Old Hickory Fund I, LLC MI 90.10% 874 Walker Road, Suite C, Dover, DE 19904, USA
PGDS (US One) LLC OS 90.10% 1209 Orange Street, Wilmington, DE 19801, USA
PPM America Capital Partners III, LLC MI 54.51% 874 Walker Road, Suite C, Dover, DE 19904, USA
PPM America Capital Partners IV, LLC MI 31.08%
PPM America Capital Partners V, LLC MI 30.63%
PPM America Capital Partners VI, LLC MI 28.83%
PPM America Private Equity Fund III LP LPI 45.10%
PPM America Private Equity Fund IV LP LPI 45.01%
PPM America Private Equity Fund V LP LPI 45.01%
PPM America Private Equity Fund VI LP LPI 43.22%
PPM America Private Equity Fund VII LP LPI 48.03%
PPM America, Inc OS 90.10%
PPM CLO 2018-1 Ltd. PS 74.78% Queensgate House, South Church Street, George Town, Grand Cayman
KY1-1102, Cayman Islands
PPM CLO 3 Ltd. OS 90.10% PO Box 1093, Queensgate House, Grand Cayman KY1-1102, Cayman Islands
300 Prudential plc

NSB Non-stock basis
OS Ordinary Shares
UUnits
Group overview
PPM CLO 4 Ltd. PS 71.18% PO Box 1093, Queensgate House, Grand Cayman KY1-1102, Cayman Islands
PPM Funds – PPM Core plus Fixed Income Fund MFS 89.96% 84 State Street, 6th Floor, Boston, MA 02109, USA
PPM Funds – PPM High Yield Core Fund MFS 90.08%
PPM Funds – PPM Small Cap Value Fund MFS 53.84%
Strategic report
PPM Holdings, Inc OS 90.10% 874 Walker Road, Suite C, Dover, DE 19904, USA
PPM Loan Management Company LLC MI 90.10%
PPM Loan Management Holding Company LLC MI 90.10%
REALIC of Jacksonville Plans, Inc OS 90.10% 1999 Bryan Street, Suite 900, Dallas, TX 75201, USA
ROP, Inc OS 90.10% 1209 Orange Street, Wilmington, DE 19801, USA
Squire Capital I LLC MI 90.10% 1 Corporate Way, Lansing, MI 48951, USA
Governance
Squire Capital II LLC OS 90.10%
Squire Reassurance Company II, Inc OS 90.10% 40600 Ann Arbor Road, East Suite 201, Plymouth, MI 48170, USA
Squire Reassurance Company LLC OS 90.10% 1 Corporate Way, Lansing, MI 48951, USA
VFL International Life Company SPC, Ltd. OS 90.10% 171 Elgin Avenue, Grand Cayman, Cayman Islands
Wynnefield Private Equity Partners I, L.P. LPI 89.09% 1313 North Market Street Ste 5100, Wilmington, DE 19801, USA


Prudential plc
Statement of financial position of the parent company
31 Dec 2020 31 Dec 2019

Note $m $m
Non-current assets
Investments in subsidiary undertakings 5 12,682 10,444
Amounts owed by subsidiary undertakings – 2,000
12,682 12,444
Current assets
Amounts owed by subsidiary undertakings 6,722 6,352
Tax recoverable – 66
Other debtors 5 4
Cash at bank and in hand 5 54
6,732 6,476
Liabilities: amounts falling due within one year
Commercial paper 6 (501) (520)
Amounts owed to subsidiary undertakings (149) (141)
Tax payable (16) (14)
Accruals and deferred income (79) (78)
(745) (753)
Net current assets 5,987 5,723
Total assets less current liabilities 18,669 18,167
Liabilities: amounts falling due after more than one year
Subordinated liabilities 6 (4,332) (4,304)
Debenture loans 6 (1,701) (690)
Other borrowings 6 (350) –
(6,383) (4,994)
Total net assets 12,286 13,173
Capital and reserves
Share capital 7 173 172
Share premium 7 2,637 2,625
Profit and loss account 8 9,476 10,376
Shareholders’ funds 12,286 13,173
2020 $m 2019 $m
(Loss) profit for the year (85) 12,255
The financial statements of the parent company on pages 302 to 308 were approved by the Board of Directors on 2 March 2021 and signed on its
behalf.


302 Prudential plc

Statement of changes in equity of the parent company
Group overview
Total
Share Share Profit and shareholders’
capital premium loss account funds
$m $m $m $m
Balance at 1 Jan 2019 166 2,502 6,820 9,488
Total comprehensive income for the year

Profit for the year – – 12,255 12,255
Strategic report
Actuarial loss recognised in respect of the defined benefit pension scheme – – (75) (75)
Foreign exchange translation differences due to change in presentation currency
at 31 Dec 2019 – – 393 393
Total comprehensive income for the year – – 12,573 12,573
Transactions with owners, recorded directly in equity

New share capital subscribed – 22 – 22
Governance
Share based payment transactions – – (4) (4)
Dividend in specie of M&G plc – – (7,379) (7,379)
Other dividends – – (1,634) (1,634)
Foreign exchange translation differences due to change in presentation currency
at 31 Dec 2019 6 101 – 107
Total contributions by and distributions to owners 6 123 (9,017) (8,888)

Balance at 31 Dec 2019 172 2,625 10,376 13,173
Balance at 1 Jan 2020 172 2,625 10,376 13,173
Total comprehensive loss for the year – – (85) (85)
Transactions with owners, recorded directly in equity

New share capital subscribed 1 12 – 13
Share based payment transactions – – (1) (1)
Dividends – – (814) (814)
Total contributions by and distributions to owners 1 12 (815) (802)
Balance at 31 Dec 2020 173 2,637 9,476 12,286


Prudential plc
303
Annual Report 2020
Notes to the parent company financial statements
1 Nature of operations
Prudential plc (‘the Company’) together with its subsidiaries (collectively, ‘the Group’ or ‘Prudential’) is an international financial services group.
The Group currently has operations in Asia, Africa, the US and the UK. The Group helps individuals to get the most out of life by making
healthcare accessible and affordable, helping people accumulate wealth through growing their assets and empowering its customers to
save for their goals.
2 Basis of preparation
The financial statements of the Company, which comprise the statement of financial position, statement of changes in equity and related notes,
are prepared in accordance with UK Generally Accepted Accounting Practice, including Financial Reporting Standard 101 Reduced Disclosure
Framework (‘FRS 101’) and Part 15 of the Companies Act 2006.
In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements in accordance with
IFRS Standards as issued by the IASB and the international accounting standards in conformity with the requirements of the Companies Act 2006
but makes amendments where necessary in order to comply with the Companies Act 2006 and has set out below where advantage of the FRS
101 disclosure exemptions has been taken. The Company has also taken advantage of the exemption under Section 408 of the Companies Act
2006 from presenting its own profit and loss account.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
—— A cash flow statement and related notes;
—— Disclosures in respect of transactions with wholly-owned subsidiaries within the Prudential Group;
—— Disclosure in respect of capital management; and
—— The effects of new but not yet effective IFRS.
As the consolidated financial statements of the Group include the equivalent disclosures, the Company has also applied the exemptions available
under FRS 101 in respect of the following disclosures:
—— IFRS 2 ‘Share Based Payments’ in respect of Group-settled share-based payments;
—— Disclosure required by IFRS 7 ‘Financial Instrument Disclosures’ and IFRS 13 ‘Fair Value Measurement’, except for the consequential
amendments to IFRS 7 related to IFRS 9 which have not been adopted by the Group; and
—— IFRS 15, ‘Revenue from Contracts with Customers’ in respect of revenue recognition.
The accounting policies set out in note 3 below have, unless otherwise stated, been applied consistently to both years presented in these financial
statements.
The Company and Group manages its cash resources, remittances and financing primarily in US dollars. Accordingly, the functional currency
of the Company is US dollars.
3 Significant accounting policies
Investments in subsidiary undertakings

Investments in subsidiary undertakings are shown at cost, less impairment. Investments are assessed for impairment by comparing the net assets
of the subsidiary undertakings with the carrying value of the investment.
Amounts owed by subsidiary undertakings

Amounts owed by subsidiary undertakings are shown at cost, less provisions. Provisions are determined using the expected credit loss approach
under IFRS 9.
Financial Instruments
Under IFRS 9, except for derivative instruments (where applicable) that are mandatorily classified as fair value through profit or loss, all of the
financial assets and liabilities of the Company are held at amortised cost. The Company assesses impairment on its loans and receivables using
the expected credit loss approach. The expected credit loss on the Company’s loans and receivables, the majority of which represent loans to
its subsidiaries, have been assessed by taking into account the probability of default on those loans. In all cases, the subsidiaries are expected to
have sufficient resources to repay the loan either now or over time based on projected earnings. For loans recallable on demand, the expected
credit loss has been limited to the impact of discounting the value of the loan between the balance sheet date and the anticipated recovery date.
For loans with a fixed maturity date the expected credit loss has been determined with reference to the historic experience of loans with
equivalent credit characteristics.
304 Prudential plc

Borrowings
Group overview
Borrowings are initially recognised at fair value, net of transaction costs, and subsequently accounted for on an amortised cost basis using the
effective interest method. Under the effective interest method, the difference between the redemption value of the borrowing and the initial
proceeds, net of transaction costs, is amortised through the profit and loss account to the date of maturity or, for subordinated debt, over the
expected life of the instrument. Where modifications to borrowings do not result in a substantial difference to the terms of the instrument, any
costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining expected life of the modified instrument.
Where modifications to borrowings do result in a substantial difference to the terms of the instrument, the instrument is treated as if it had been
extinguished and replaced by a new instrument which is initially recognised at fair value and subsequently accounted for on an amortised cost
Strategic report
basis using the effective interest method. Any costs or fees arising from such a modification are recognised as an expense when incurred.
Dividends
Interim dividends are recorded in the period in which they are paid.
Share premium
The difference between the proceeds received on issue of shares and the nominal value of the shares issued is credited to the share premium
Governance
account.
Foreign currency translation

Transactions not denominated in the Company’s functional currency, US dollars, are initially recorded at the functional rate of currency prevailing
on the date of the transaction. Monetary assets and liabilities not denominated in the Company’s functional currency are translated to the
Company’s functional currency at year end spot rates. The impact of these currency translations is recorded within the profit and loss account
for the year.

Tax
Current tax expense is charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable
amounts for the current year. To the extent that losses of an individual UK company are not offset, they can be carried back for one year or carried
forward indefinitely to be offset, subject to restrictions based on future taxable profits, against profits arising from the same company or other
companies in the same UK tax group.
Deferred tax assets and liabilities are recognised in accordance with the provisions of IAS 12 ’Income Taxes’. Deferred tax assets are
recognised to the extent that it is regarded as more likely than not that future taxable profits will be available against which these losses can
be utilised. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
Following the demerger of M&G plc, it is unlikely that the UK tax group will have future taxable income which would enable a current tax
credit or deferred tax asset to be recognised.
Share-based payments
The Group offers share award and option plans for certain key employees and a Save As You Earn (‘SAYE’) plan for all UK and certain overseas
employees. The share-based payment plans operated by the Group are mainly equity-settled.
Under IFRS 2 ‘Share-based payment’, where the Company, as the parent company, has the obligation to settle the options or awards of its
equity instruments to employees of its subsidiary undertakings, and such share-based payments are accounted for as equity-settled in the Group
financial statements, the Company records an increase in the investment in subsidiary undertakings for the value of the share options and awards
granted with a corresponding credit entry recognised directly in equity. The value of the share options and awards granted is based upon the fair

value of the options and awards at the grant date, the vesting period and the vesting conditions. Cash receipts from business units in respect
of newly issued share schemes are treated as returns of capital within investments in subsidiaries. Additional information

Prudential plc
305
Annual Report 2020
Notes to the parent company financial statements / continued
4 Reconciliation from the FRS 101 parent company results to the IFRS Group results
The parent company financial statements are prepared in accordance with FRS 101 and the Group financial statements are prepared in
accordance with IFRS Standards as issued by the IASB, the international accounting standards as required by the Companies Act 2006
and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
The tables below provide a reconciliation between the FRS 101 parent company results and the IFRS Group results.
2020 $m 2019 $m
Profit after tax

(Loss)/profit for the financial year of the Company in accordance with FRS 101 note (i) (85) 12,255
Accounting policy difference note (ii) (18) 15
Share in the IFRS result of the Group, net of distributions to the Company note (iii) 2,221 (11,487)
Profit after tax of the Group attributable to equity holders in accordance with IFRS 2,118 783

31 Dec 2020 31 Dec 2019
$m $m
Shareholders’ equity
Shareholders’ funds of the Company in accordance with FRS 101 12,286 13,173
Accounting policy difference note (ii) 15 33
Share in the IFRS net equity of the Group note (iii) 8,577 6,271
Shareholders’ equity of the Group in accordance with IFRS 20,878 19,477
Notes
(i) The Company’s (loss) profit for the financial year includes distributions to the Company from subsidiaries.
(ii) Accounting policy difference represents difference in accounting policy for expected credit losses on loan assets, the Company has adopted IFRS 9 while the Group applies IAS 39.
(iii) The ‘share in the IFRS result and net equity of the Group’ lines represent the parent company’s equity in the earnings and net assets of its subsidiaries and associates.
The (loss) profit for the year of the Company in accordance with IFRS includes dividends received from subsidiary undertakings of $406 million
for the year ended 31 December 2020 (2019: $9,599 million). Dividends received in 2019 included dividends from M&G plc prior to demerger
of $5,566 million and dividends from US subsidiaries of $2,000 million in the form of non-current debt instruments. This debt instrument was
settled in June 2020, in exchange for an issue of equity shares from an immediate subsidiary of the Company.
5 Investments in subsidiary undertakings
2020 $m 2019 $m
At 1 Jan 10,444 13,787

Capital injections and acquisitions – 72
Exchange of non-current debt instruments for equity shares note (i) 2,000 –
Equity shares issued in exchange for assuming bank loan liability note (ii) 350 –
Distribution of M&G plc – cost of investment note (iii) – (3,730)
Other disposals – (13)
Amounts in respect of share based payments note (iv) (112) (123)
Other note (v) – 451
At 31 Dec 12,682 10,444
Notes
(i) On 16 June 2020, the non-current debt instrument of $2,000 million received by the Company in 2019 as a dividend in specie was settled in exchange for the issue of equity instruments from
Prudential Corporation Asia Limited, an immediate subsidiary of the Company.
(ii) On 20 June 2020, Prudential Corporation Asia Limited issued equity shares to Company, in exchange for the Company assuming a bank loan liability of $350 million (see note 6).
(iii) On 21 October 2019, the Company distributed its equity shareholding in its subsidiary M&G plc as a dividend in-specie.
(iv) Amounts in respect of share-based payments of $(112) million (2019: $(123) million) comprise of $2 million (2019: $5 million) in respect of share-based payments reflecting the value of
payments settled by the Company for employees of its subsidiary undertakings, less $(114) million (2019: $(128) million) relating to cash received from subsidiaries in respect of share awards.
(v) The 2019 comparative included amounts relating to foreign translation differences arising on the retranslation of reserves due to the change in the Company’s presentation currency on
31 December 2019.
Investments in subsidiaries held at 31 December 2020 have been assessed for impairment and no impairment was identified.
Subsidiary undertakings of the Company at 31 December 2020 are listed in note D6 of the Group IFRS financial statements.
306 Prudential plc

Group overview
6 Borrowings
Core structural borrowings Other borrowings Total

31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019
$m $m $m $m $m $m
Core structural borrowings note (i)

Subordinated liabilities note (ii) 4,332 4,304 – – 4,332 4,304
Strategic report
Debenture loans 1,701 690 – – 1,701 690
Bank loan note (iii) 350 – – – 350 –
6,383 4,994 – – 6,383 4,994
Commercial paper note (iv) – – 501 520 501 520
Total borrowings 6,383 4,994 501 520 6,884 5,514
Governance
Borrowings are repayable as follows:
Within 1 year – – 501 520 501 520
Between 1 and 5 years 780 414 – – 780 414
After 5 years 5,603 4,580 – – 5,603 4,580
6,383 4,994 501 520 6,884 5,514
Notes

(i) Further details on the core structural borrowings of the Company are provided in note C5.1 of the Group IFRS financial statements.
(ii) The interests of the holders of the subordinated liabilities are subordinate to the entitlements of other creditors of the Company.
(iii) On 20 June 2020, the Company assumed a $350 million bank loan from a subsidiary entity. In November 2020, the $350 million loan was settled, and the Company entered into
a replacement $350 million term loan facility at a cost of daily compounded Secured Overnight Financing Rate (SOFR) plus 59 basis points. The new term loan matures in 2024.
(iv) These borrowings support a short-term fixed income securities programme.
7 Share capital and share premium
A summary of the ordinary shares in issue and the options outstanding to subscribe for the Company’s shares at 31 December 2020 is set out
in note C8 of the Group IFRS financial statements.
8 Retained profit of the Company
Retained profit at 31 December 2020 amounted to $9,476 million (31 December 2019: $10,376 million). The retained profit includes distributable
reserves of $3,838 million (31 December 2019: $4,735 million) and non-distributable reserves of $5,638 million (31 December 2019:
$5,641 million). The non-distributable reserves of the Company relate to gains on intra-group transactions, in which qualifying consideration
was not received, and share-based payment reserves.
Under UK company law, Prudential may pay dividends only if sufficient distributable reserves of the Company are available for the purpose
and if the amount of its net assets is greater than the aggregate of its called up share capital and non-distributable reserves (such as the share

premium account) and the payment of the dividend does not reduce the amount of its net assets to less than that aggregate.
The retained profit of the Company is substantially generated from dividend income received from subsidiaries. The Group segmental
analysis illustrates the generation of profit across the Group (see note B1 of the Group IFRS financial statements). The Group and its subsidiaries
are subject to local regulatory minimum capital requirements, as set out in note C10 of the Group IFRS financial statements. A number of the
principal risks set out in the ‘Group Chief Risk and Compliance Officer’s report on the risks facing our business and how these are managed’
could impact the generation of profit in the Group’s subsidiaries in the future and hence impact their ability to pay dividends in the future.
In determining the dividend payment in any year, the directors follow the Group dividend policy described in the Group Chief Financial
Officer and Chief Operating Officer’s report section of this Annual Report. The directors consider the Company’s ability to pay current and
future dividends twice a year by reference to the Company’s business plan and certain stressed scenarios.

Prudential plc
Notes to the parent company financial statements / continued
9 Other information
a Information on key management remuneration is given in note B2.3 of the Group IFRS financial statements. Additional information
on directors’ remuneration is given in the directors’ remuneration report section of this Annual Report.
b Information on transactions of the directors with the Group is given in note D4 of the Group IFRS financial statements.
c The Company employs no staff.
d Fees payable to the Company’s auditor for the audit of the Company’s annual accounts were $0.1 million (2019: $0.1 million) and
for other services were $0.1 million (2019: $0.1 million).
e In certain instances, the Company has guaranteed that its subsidiaries will meet their obligations when they fall due for payment.

10 Post balance sheet events
Dividends
The second interim ordinary dividend for the year ended 31 December 2020, which was approved by the Board of Directors after
31 December 2020, is described in note B5 of the Group IFRS financial statements.

Subject to shareholder and regulatory approvals, the planned demerger is expected to complete in the second quarter of 2021 and would
lead to a significantly earlier separation of Jackson from the Group than would have been possible through a minority IPO and future sell-downs,
308 Prudential plc

Statement of Directors’ responsibilities in respect
of the Annual Report and the financial statements
The directors are responsible for preparing the Annual Report and The directors are responsible for keeping adequate accounting
Group overview
the Group and parent company financial statements in accordance records that are sufficient to show and explain the parent company’s
with applicable law and regulations. transactions and disclose with reasonable accuracy at any time the
financial position of the parent company and enable them to ensure
Company law requires the directors to prepare Group and parent that its financial statements comply with the Companies Act 2006.
company financial statements for each financial year. Under that They have general responsibility for taking such steps as are
law they are required to prepare the Group financial statements in reasonably open to them to safeguard the assets of the Group
accordance with international accounting standards in conformity and to prevent and detect fraud and other irregularities.
Strategic report
with the requirements of the Companies Act 2006, and have elected
to prepare the parent company financial statements in accordance Under applicable law and regulations, the directors are also
with UK accounting standards and applicable law (UK Generally responsible for preparing a strategic report, directors’ report,
Accepted Accounting Practice) including FRS 101 Reduced Disclosure directors’ remuneration report and corporate governance
Framework. In addition, the Group financial statements are required statement that comply with that law and those regulations.
under the UK Disclosure Guidance and Transparency Rules to
be prepared in accordance with international financial reporting The directors are responsible for the maintenance and integrity of
standards adopted pursuant to Regulation (EC) No 1606/2002 the corporate and financial information included on the Company’s
Governance
as it applies in the European Union. website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation
Under company law the directors must not approve the financial in other jurisdictions.
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and parent company and of their Responsibility statement of the directors in respect
profit or loss for that period. In preparing each of the Group and of the annual financial report
parent company financial statements, the directors are required to: The directors of Prudential plc, whose names and positions are set

out on pages 122 to 127 confirm that to the best of their knowledge:
—— select suitable accounting policies and then apply them consistently;
—— the financial statements, prepared in accordance with the
—— make judgements and estimates that are reasonable, relevant, applicable set of accounting standards, give a true and fair view
reliable and prudent; of the assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation
—— for the Group financial statements, state whether they have been
taken as a whole;
prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 —— the strategic report includes a fair review of the development
and international financial reporting standards adopted pursuant to and performance of the business and the position of the Group
Regulation (EC) No 1606/2002 as it applies in the European Union; and the undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and
—— for the parent company financial statements, state whether
uncertainties that they face; and
applicable UK accounting standards have been followed, subject
to any material departures disclosed and explained in the parent —— the Annual Report and financial statements, taken as a whole,
company financial statements; is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position and
—— assess the Group and parent company’s ability to continue as a
performance, business model and strategy.
going concern, disclosing, as applicable, matters related to going
concern; and
—— use the going concern basis of accounting unless they either intend

to liquidate the Group or the parent company or to cease operations,
or have no realistic alternative but to do so.

Prudential plc
309
Annual Report 2020
Independent auditor’s report to the members of Prudential plc
1. Our opinion is unmodified Basis for opinion

We have audited the financial statements of Prudential plc We conducted our audit in accordance with International Standards
(“the Company”) for the year ended 31 December 2020 on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
which comprise; are described below. We believe that the audit evidence we have
obtained is a sufficient and appropriate basis for our opinion.
—— the consolidated income statement, consolidated statement Our audit opinion is consistent with our report to the audit committee.
of comprehensive income, consolidated statement of changes
in equity, consolidated statement of financial position and We were appointed as auditor by the shareholders in October 1999.
consolidated statement of cash flows, and the related notes, The period of total uninterrupted engagement is for the 22 financial
including accounting policies in note A3.1; and years ended 31 December 2020. We have fulfilled our ethical
responsibilities under, and we remain independent of the Group
—— the parent company statements of financial position and of changes in accordance with, UK ethical requirements including the Financial
in equity, and the related notes, including the significant accounting Reporting Council (‘FRC’) Ethical Standard as applied to listed public
policies in note 3. interest entities. No non-audit services prohibited by that standard
were provided.
In our opinion:
—— The financial statements give a true and fair view of the state 2. Key audit matters: our assessment of risks
of the Group’s and of the parent company’s affairs as at of material misstatement
31 December 2020 and of the Group’s profit for the year Key audit matters are those matters that, in our professional judgement,
then ended; were of most significance in the audit of the financial statements and
include the most significant assessed risks of material misstatement
—— The Group financial statements have been properly prepared in (whether or not due to fraud) identified by us, including those which
accordance with international accounting standards in conformity had the greatest effect on: the overall audit strategy; the allocation
with the requirements of the Companies Act 2006; of resources in the audit; and directing the efforts of the engagement
team. We summarise below the key audit matters (unchanged from
—— The parent company financial statements have been properly 2019) in decreasing order of audit significance, in arriving at our audit
prepared in accordance with UK Accounting Standards including opinion above, together with our key audit procedures to address
FRS 101 Reduced Disclosure Framework; and those matters and, as required for public interest entities, our results
from those procedures. These matters were addressed, and our results
—— The financial statements have been prepared in accordance with are based on procedures undertaken, in the context of, and solely for
the requirements of the Companies Act 2006 and, as regards the the purpose of, our audit of the financial statements as a whole, and in
Group financial statements, Article 4 of the IAS Regulation to the forming our opinion thereon, and consequently are incidental to that
extent applicable. opinion, and we do not provide a separate opinion on these matters.
310 Prudential plc

Group overview
Valuation of insurance contract liabilities and investment contract liabilities with discretionary participation features
(2020: $437,266 million, 2019: $380,776 million).
The risk compared to the prior year has increased.
Refer to page 150 (Audit Committee report), page 216 (accounting policy) and pages 259 to 269 (financial disclosures)
The risk Our response
The Group has significant insurance contract liabilities We used our own actuarial specialists to assist us in performing our procedures
Strategic report
and investment contract liabilities with discretionary in this area.
participation features (policyholder liabilities) representing
88 per cent (2019: 88 per cent) of the Group’s total Our procedures included:
liabilities.
Methodology choice
Subjective valuation We assessed the methodology for selecting assumptions and calculating
This is an area that involves significant judgement over the policyholder liabilities. This included:
Governance
uncertain future outcomes, mainly the ultimate total
settlement value of these long term policyholder liabilities, —— Assessing the methodology adopted for selecting assumptions by applying
and we consider the risk to have increased in the current our industry knowledge and experience and comparing the methodology
year in light of the business and economic disruption used against industry standard actuarial practice;
caused by the Coronavirus pandemic’s (COVID-19)
—— Assessing the methodology adopted for calculating the policyholder liabilities
potential impact on policyholder behaviour in respect
by reference to the requirements of the accounting standard and actuarial
of decisions such as lapses and guarantee utilisation,
market practice, and assessing the impact of current year changes in
making historical experience less reliable in setting

methodology on the calculation of policyholder liabilities, including the
operating assumptions.
discount rate applied to the valuation of insurance contract liabilities with
Auditor judgement is required to assess whether the certain guaranteed withdrawal benefits in the US;
directors’ overall estimate, taking into account key
—— Comparing changes in methodology to our expectations derived from market
economic assumptions, including investment return
experience, taking into account the impact of COVID-19 on the observed
and associated discount rates, and operating assumptions
policyholder experience and the extent to which such impacts are likely to
including mortality, morbidity, expenses, utilisation of
persist; and
guarantees and persistency (including consideration of
policyholder behaviour), which are the key inputs used —— Evaluating the analysis of the movements in policyholder liabilities during
to estimate these long term liabilities, falls within the year, including consideration of whether the movements were in line
an acceptable range, in addition to the appropriate with the methodology and assumptions adopted.
design and calibration of complex reserving models.
The specific application of these judgements to individual Control operation

segments is explained below. We used our own IT specialists to assist us in performing our procedures in
this area which included testing of the design, implementation and operating
For the US insurance segment, the valuation of the effectiveness of key controls over the valuation process. Controls testing in respect
guarantees in the variable annuity (‘VA’) business is of the valuation process included assessment and approval of the methods and
complex as it involves exercising significant judgement assumptions adopted over the calculation of policyholder liabilities as well as
related to inputs such as expected market rates of return, appropriate access and change management controls over the actuarial models.
fund performance, and discount rates, as well as

assumptions such as mortality, benefit utilisation,
and persistency.
For the Asia insurance segment, the valuation of the

policyholder liabilities requires significant judgement
over the setting of mortality, morbidity, persistency
and expense assumptions.
The effect of these matters is that, as part of our risk

assessment, we determined that the valuation of
policyholder liabilities has a high degree of estimation
uncertainty, with a potential range of reasonable
outcomes greater than our materiality for the financial
statements as a whole and possibly many times that
amount. The financial statements note C6 disclose
the sensitivities estimated by the Group.

Prudential plc
311
Annual Report 2020
Independent auditor’s report to the members of Prudential plc / continued
Valuation of insurance contract liabilities and investment contract liabilities with discretionary participation features
(2020: $437,266 million, 2019: $380,776 million).
Our procedures for the US insurance segment also included:
Historical comparison
—— Assessing the assumptions relating to benefit utilisation, persistency, and
mortality by comparing to relevant company and industry historical experience
data in order to assess whether this supported the year-end assumptions
adopted, taking into account the impact of COVID-19 on the observed
policyholder experience.
Benchmarking assumptions and sector experience

—— Assessing the assumptions for expected market rates of returns and fund
performance by comparing to company specific and industry data and for
future growth rates by comparing to market trends and market volatility.
—— Utilising the results of our industry benchmarking of assumptions and actuarial

market practice to inform our challenge of assumptions in relation to
policyholder behaviour.
Model evaluation
—— Assessing the cash flow projections in the reserving models by reference to
the inclusion of relevant product features. We have also assessed the impact
of modelling and assumption changes by inspecting pre and post change
model runs and comparing the outcomes of the changes to our expectations.
—— Independently recalculating the liabilities for a selection of individual policies

to assess whether the selected model calibration had been appropriately
implemented.
Our procedures for the Asia insurance segment also included:

—— Evaluating the experience analysis in respect of the mortality, morbidity,
persistency, and expense assumptions by reference to actual experience, taking
into account the impact of COVID-19 on the observed experience in order to
assess whether this supported the year-end assumptions adopted.
Benchmarking assumptions and sector experience

—— Using our sector experience and market knowledge to inform our challenge
of the assumptions in the areas noted above.
Model evaluation
—— Assessing the reserving models by considering the accuracy of the cash flow
projections including by reference to the inclusion of relevant product features.
We have also assessed the impact of modelling and assumption changes by
inspecting pre and post change model runs and comparing the outcomes of the
changes to our expectations.
Assessing transparency
We assessed whether the disclosures in relation to the assumptions used in the
valuation of policyholder liabilities are compliant with the relevant accounting
requirements.
Our result
We found the valuation of policyholder liabilities to be acceptable
(2019: acceptable).
312 Prudential plc

Group overview
Valuation of certain level 2 and level 3 investments held at fair value (2020: $63,823 million, 2019: $77,203 million).
The Group’s investments portfolio represents 83 per cent We used our own valuation specialists in order to assist us in performing
(2019: 89 per cent) of the Group’s total assets. our procedures in this area.
Strategic report
Subjective valuation Our procedures included:
The area that involved significant audit effort and
judgement in 2020 was the valuation of certain level 2 Methodology choice
and level 3 positions within the portfolio of financial We assessed the appropriateness of the pricing methodologies with reference
investments held at fair value. These included unlisted to relevant accounting standards as well as industry practice.
debt securities and unlisted funds that are valued by
reference to their Net Asset Value (‘NAV funds’). Control operation
Governance
For these positions a reliable third-party price was We tested the design, implementation and operating effectiveness of key controls
not readily available and therefore involved the over the valuation process, including the Group’s review and approval of the
application of expert judgement in the valuations adopted. estimates and assumptions used for the valuation including key authorisation
and data input controls.
Auditor judgement is required to assess whether the
directors’ overall estimate, based on their judgement Tests of details
depending on the observability and significance of the For a sample of securities, we used our valuation specialists to assess the Group’s

inputs into the valuation and the consequent impact classification of assets within Level 2 or Level 3 by evaluating the observability
on the classification of those investments, falls within of the inputs used in valuing these securities.
an acceptable range, and further judgement is required
in determining the appropriate valuation methodology For a sample of unlisted debt securities we compared the price adopted to our
where external pricing sources are either not readily independently derived price, using our valuation specialists.
available or are unreliable.
For a sample of unlisted equity securities, we agreed the valuations for the NAV
The effect of these matters is that, as part of our risk funds to the most recent NAV statements. To assess reliability of these statements
assessment, we determined that the valuation of certain we compared to audited financial statements of the funds, where available, or
level 2 and 3 investments held at fair value has a high performed a retrospective test over the NAV valuations for each fund to assess if
degree of estimation uncertainty, with a potential range the fund valuations reported in the audited financial statements in the prior year
of reasonable outcomes greater than our materiality for were materially consistent with the most recent NAV valuation statements available
the financial statements as a whole and possibly many at the time.
times that amount.
The financial statements note C6 disclose the sensitivities Assessing transparency

estimated by the Group. We assessed whether the disclosures in relation to the valuation of level 2 and 3
investments held at fair value are compliant with the relevant accounting
requirements.
Our result

We found the valuation of level 2 and 3 investments held at fair value to be
acceptable (2019: acceptable).

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Annual Report 2020
Amortisation of US deferred acquisition costs (‘DAC’) (2020: $13,863 million, 2019: $12,240 million).
The risk compared to the prior year has increased
DAC represents 3 per cent (2019: 3 per cent) of the We used our own actuarial specialists to assist us in performing our audit
Group’s total assets. The DAC associated with the US procedures in this area.
component, which represents 85 per cent (2019:
86 per cent) of the total DAC, involves the greatest Our procedures included:
judgement in terms of measurement.
Assumptions relating to benefit utilisation, persistency and mortality are also
Subjective valuation relevant to the calculation of the insurance contract liabilities. See further detail
US DAC related to annuities is amortised in proportion in our response to that risk.
to estimated gross profits. Auditor judgement is required
to assess whether the directors’ overall estimate, taking We have also assessed the appropriateness of the assumptions used in determining
into account key assumptions impacting estimated gross the estimated future profit profile and the extent of the associated adjustment
profits, which include assumptions such as benefit necessary to the amortisation of the US DAC asset. Our work included critically
utilisation, mortality and persistency as well as the assessing the judgements that determine the future profit profiles in the context
assumptions around long-term investment return of actual historical experience as well as by reference to market trends.
and future hedge costs, falls within an acceptable range.
We consider the risk to have increased in the current year Our sector experience
due to the business and economic disruption caused by We challenged the reasonableness of the selected assumptions relating to
the Coronavirus pandemic and its impact on policyholder projected investment return and future hedge costs based on our understanding
experience, and the prolonged low interest rate of developments in the business and the impact of COVID-19 related uncertainty
environment. on market performance and volatility. Our work included comparing the projected
investment returns against the investment portfolio mix and market return data.
The effect of these matters is that, as part of our risk Additionally, we evaluated management’s modelling approach for deriving the
assessment, we determined that the amortisation of US assumption for future hedge costs by reference to actuarial market practice, trends
DAC has a high degree of estimation uncertainty, with a in the historical profile of hedge costs, and our expectations regarding the likely
potential range of reasonable outcomes greater than our development of interest rates and the associated impact on the hedge costs.
materiality for the financial statements as a whole. The
financial statements note C6 discloses the sensitivities Tests of details
estimated by the Group. We assessed the appropriateness of the extent of amortisation adjustment in the
current period by recalculating the estimated gross profits for a selection of
individual policies by reference to the future profiles.
Assessing transparency
We assessed whether the disclosures in relation to the amortisation of US DAC
are compliant with the relevant accounting requirements.
Our result
We found the amortisation of US DAC to be acceptable (2019: acceptable).
Recoverability of parent company’s investment in subsidiaries – (2020: $12,682 million, 2019: $10,444 million)
The risk compared to the prior year is unchanged. The risk relates to the parent company financial statements.
Refer to page 150 (Audit Committee report), Refer to page 304 (accounting policy) and page 306 (financial disclosures)
Low risk, high value Our procedures included:
The carrying amount of the parent company’s investments
in subsidiaries represents 65 percent (2019: 55 percent) Tests of details
of the company’s total assets. Their recoverability is not Comparing the carrying amount of 100% of the investments in subsidiaries with
at a high risk of significant misstatement or subject to the relevant subsidiaries’ draft balance sheet to identify whether their net assets,
significant judgement. However, due to their materiality being an approximation of their minimum recoverable amount, were in excess of
in the context of the parent company financial statements, their carrying amount and assessing whether those subsidiaries have historically
this is considered to be the area that had the greatest been profit-making.
effect on our overall parent company audit.
Assessing subsidiary audits
Assessing the work performed by the subsidiary audit teams on all of those subsidiaries
and considering the results of that work on those subsidiaries’ profits and net assets.
Our result
We found the Group’s assessment of the recoverability of the investment
in subsidiaries to be acceptable (2019: acceptable).
314 Prudential plc

3. Our application of materiality and an overview company financial statements as a whole is lower than the materiality
Group overview
of the scope of our audit we would otherwise have determined by reference to its net assets.
Materiality for the Group financial statements as a whole was set
at $250 million (2019: $298 million) determined with reference to In line with our audit methodology, our procedures on individual
a benchmark of IFRS shareholders’ equity (of which it represents account balances and disclosures were performed to a lower
1.2 per cent (2019: 1.5 per cent)). We consider IFRS shareholders’ threshold, performance materiality, so as to reduce to an acceptable
equity to be the most appropriate benchmark as it represents the level the risk that detected and undetected immaterial misstatements
residual interest that can be ascribed to shareholders after in individual account balances aggregate up to a material amount
Strategic report
policyholder assets and corresponding liabilities have been accounted across the financial statements as a whole.
for; we consider that this is the most appropriate measure for the size
of the business and that it provides a stable measure year on year. Performance materiality for both the group and parent company
We compared our materiality against other relevant benchmarks was set at 75% (2019: 75%) of materiality for the financial statements
(total assets, total revenue and profit before tax) to ensure the as a whole, which equates to $187 million (2019: $223 million)
materiality selected was appropriate for our audit. We set out and $45 million (2019: $30 million), respectively. We applied this
below the materiality thresholds that are key to the audit. percentage in our determination of performance materiality because
we did not identify any factors indicating an elevated level of risk
Governance
Materiality for the parent company financial statements as a whole across the financial statements as a whole.
was set at $60 million (2019: $40 million), determined with reference
to a benchmark of parent company’s net assets, of which it represents We agreed to report to the Group audit committee any corrected
0.5 per cent (2019: 0.3 per cent). The component materiality, as or uncorrected identified misstatements exceeding $12.5 million
determined by the Group audit team, applied to the audit of the parent (2019: $15 million) in addition to other identified misstatements
that warrant reporting on qualitative grounds.

IFRS Shareholders’ Equity Group Materiality
$20.88bn (2019: $19.48bn) $250m (2019: $298m)
$250m
Whole financial statements materiality
(2019: $298m)
$187m
Whole financial statements performance materiality
(2019: $223m)
$120m
Range of materiality at 13 components ($13m–$120m)
(2019: $55m to $115m)
$12.5m
Misstatements reported to the audit committee
(2019: $15m)
Shareholders’ Equity Group materiality
We subjected the Group’s operations to audits for group reporting The components subjected to an audit of account balances included European Embedded Value (EEV) basis results
purposes as follows: the insurance operations in Thailand, Taiwan and the Philippines,
and the fund management operations of Eastspring Singapore. The
Of the 14 (2019:14) reporting components scoped in for the Group account balances audited for Thailand were policyholder liabilities,
audit, we subjected 8 (2019: 10) to full scope audits for group reporting investments, deferred acquisition costs, intangible assets, premiums
purposes, 4 (2019: 4) to an audit of account balances, 1 (2019: nil) to and claims; the account balances audited for Taiwan were policyholder
specified risk-focused audit procedures over cash and debt securities liabilities, investments, and deferred acquisition costs, premiums and
and 1 (2019: nil) to specified risk-focused audit procedures over claims; the account balances audited for Eastspring Singapore were
operational and other borrowings. The components for which we other income and expenses the account balances audited for the
performed work other than full scope audits for group reporting Philippines were policyholder liabilities and investments. The
purposes were not individually significant but were included in the components for which we performed specified audit risk-focused
scope of our group reporting work as they did present specific procedures over cash and debt securities as well as operational and
individual audit risks that needed to be addressed or in order to other borrowings were the Group’s treasury operations as well as the
provide further coverage over the Group’s results. US collateralised loan obligation operations, respectively.
The components subjected to full scope audits consisted of the For the remaining operations, we performed analysis at an aggregated
parent company and the insurance operations in the US, Hong Kong, Group level to re-examine our assessment that there were no
Indonesia, Singapore, Malaysia, Vietnam, and mainland China. significant risks of material misstatement within these operations.

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Annual Report 2020
These components accounted for the following percentages of the Group’s results:
Group revenue Group profit before tax1
97% 87%
(2019: 97%) (2019: 92%)
92 79
5
4 93 74
18
Group total assets Group shareholders’ equity
99% 93%
(2019: 97%) (2019: 94%)
4 95 86
94 7 89
3
5
Full scope for Group audit Audit of account balances Full scope for Group audit Audit of account balances Residual components
purposes 2020 and specified risk focused purposes 2019 and specified risk focused
audit procedures 2020 audit procedures 2019
Note
1 These percentages represent the total profits and losses that made up group profit before tax
The Group audit team held a global planning conference with an assessment was made of audit risk and strategy, the findings
component auditors to identify audit risks and decide how each reported to the Group audit team were discussed in more detail,
component team should address the identified audit risks. The Group key working papers were inspected and any further work required by
audit team instructed component auditors as to the significant areas the Group audit team was then performed by the component auditor.
to be covered, including the relevant risks detailed above and the
information to be reported. The Group audit team approved the The Group team also routinely reviews the audit documentation of
component materialities, which ranged from $13 million to $120 million all component audits. This year for one component in mainland China,
(2019: $40 million to $238 million) across the components, having a joint venture of the Group, we were unable to perform a file review.
regard to the size and risk profile of the Group across the components. As the Coronavirus prevented entry to the country throughout the
The work on 12 components (2019: 13 components) was performed audit period, and remote access to audit documentation is prohibited,
by component auditors and work on the remaining two components, we instead extended our oversight of that component team through
which included the parent company, was performed by the Group extended telephone and video discussions and expanded reporting.
audit team.
The Senior Statutory Auditor, in conjunction with other senior staff
Whilst it would be conventional practice to visit component teams, in the Group and component audit teams, also regularly attended
the impact of the Coronavirus restrictions on travel has required Business Unit audit committee meetings and participated in meetings
an alternative approach this year, which required more extensive with local components to obtain additional understanding, first hand,
use of video and telephone conference meetings with all component of the key risks and audit issues at a component level which may affect
auditors. During these video and telephone conference meetings, the Group financial statements.
316 Prudential plc

4. We have nothing to report on going concern However, as we cannot predict future events or conditions and
Group overview
The Directors have prepared the financial statements on the going as subsequent events may result in outcomes that are inconsistent
concern basis as they do not intend to liquidate the Company or the with judgements that were reasonable at the time they were made,
Group or to cease their operations, and as they have concluded that the above conclusions are not a guarantee that the Group and the
the Company’s and the Group’s financial position means that this Company will continue in operation.
is realistic. They have also concluded that there are no material
uncertainties that could have cast significant doubt over their ability 5. Fraud and breaches of laws and regulations – ability to detect
to continue as a going concern for at least a year from the date of
Identifying and responding to risks of material misstatement
Strategic report
approval of the financial statements (“the going concern period”).
due to fraud
We used our knowledge of the Group and Company, its industry, To identify risks of material misstatement due to fraud (“fraud risks”)
and the general economic environment in which it operates to identify we assessed events or conditions that could indicate an incentive or
the inherent risks to its business model and analysed how those risks pressure to commit fraud or provide an opportunity to commit fraud.
might affect the Group and Company’s financial resources or ability to Our risk assessment procedures included:
continue operations over the going concern period. The risks that were
considered most likely to adversely affect the Group’s and Company’s —— Enquiring of directors, the audit committee, internal audit, group
Governance
available financial resources over this period were: security, and inspecting key papers provided to those charged
with governance as to the high-level policies and procedures
—— Adverse impacts arising from fluctuations or negative trends in the to prevent and detect fraud, including the Group’s channel for
economic environment which affect the valuations of the Group’s “whistleblowing” and process for engaging local management
investments, wider credit spreads and defaults and valuation of to identify fraud risks specific to their business units, as well
policyholder liabilities due to the impact of these market as whether they have knowledge of any actual, suspected,
movements; or alleged fraud.

—— The impact on regulatory capital solvency margins from —— Reading board and audit committee minutes.
movements in interest rates; and
—— Considering remuneration incentive schemes and performance
—— Severely adverse policyholder lapse or claims experience. targets for directors.
We also considered less predictable but realistic second order impacts, —— Consulted with professionals with forensic knowledge to assist us
such as failure of some of the Group’s counterparties (such as banks in identifying fraud risks based on discussions of the circumstances
and reinsurers) to meet commitments, which could give rise to a of the Group and Company.
negative impact on the Group’s financial position and liquidity, and
wider economic factors such as the Coronavirus pandemic’s impact We communicated identified fraud risks throughout the audit team
on economic volatility and market uncertainty in the period, and other and remained alert to any indications of fraud throughout the audit.
such macroeconomic events. This included communication from the group team to all component
audit teams in scope of relevant fraud risks identified at the Group level
We considered whether these risks could plausibly affect the liquidity and requests to these audit teams to report to the Group audit team
or solvency in the going concern period by assessing the Directors’ any instances of fraud that could give rise to a material misstatement
sensitivities over the level of available financial resources indicated at group.
by the Group’s and Company’s cash flow forecasts taking account
of severe but plausible adverse effects that could arise from these risks As required by auditing standards, and taking into account possible
individually and collectively. pressures to meet profit targets, we perform procedures to address
the risks of management override of controls, in particular the risk
We considered whether the going concern disclosure in note A1 to that group and component management may be in a position to make

the financial statements gives a full and accurate description of the inappropriate accounting entries and the risk of bias in accounting
directors’ assessment of going concern, including the identified risks estimates and judgements. Accordingly, we identified fraud risks
and related sensitivities. related to both the valuation of insurance contract liabilities and US
DAC amortisation. This reflects their direct impact on the Group’s
Our conclusions based on this work: profit, the opportunity for management to manipulate assumptions
—— we consider that the directors’ use of the going concern basis due to the subjectivity involved and given the long-term nature of
of accounting in the preparation of the financial statements these assumptions which are more difficult to corroborate, and
is appropriate; potential incentives for the group to manipulate the profitability of
both the US and Asia businesses given the planned separation of the
—— we have not identified, and concur with the directors’ assessment US business taking into account the potential for any management
that there is not, a material uncertainty related to events or bias in determining the results for the US business.
conditions that, individually or collectively, may cast significant
doubt on the Group and Company’s ability to continue as a going On this audit we do not consider there is a fraud risk related to revenue
concern for the going concern period; recognition as there is limited management judgement involved in the
determination of all material revenue streams as the amounts are
—— we have nothing material to add or draw attention to in relation to the contractually derived.
Directors’ statement in note A1 to the financial statements on the use

of the going concern basis of accounting with no material In determining the audit procedures to address the identified fraud
uncertainties that may cast significant doubt over the Group and risks, we took into account the results of our evaluation and testing of
Company’s use of that basis for the going concern period, and we the operating effectiveness of the group-wide anti-fraud risk controls.
found the going concern disclosure in note A1 to be acceptable; and In order to address the risk of fraud specifically as it relates to the
valuation of insurance contract liabilities and amortisation of US DAC,
—— the related statement under the Listing Rules set out on page 168 we involved actuarial specialists to assist in our challenge of
is materially consistent with the financial statements and our management. We challenged management in relation to the selection
audit knowledge. of assumptions and the appropriateness of the rationale for any

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Annual Report 2020
changes, the consistency of the selected assumptions across different if a breach of operational regulations is not disclosed to us or evident
aspects of the financial reporting process and comparison to our from relevant correspondence, an audit will not detect that breach.
understanding of the product portfolio, trends in experience,
policyholder behaviour and economic conditions and also by We discussed with the audit committee matters related to actual
reference to market practice. Further detail in respect of these or suspected to breaches of laws or regulations, for which disclosure
is set out in the audit response to the risks associated with these is not necessary, and considered any implications for our audit.
two key audit matters in section 2 of this report.
Context of the ability of the audit to detect fraud or breaches
To address the pervasive risk as it relates to management override, of law or regulation
we also performed procedures including: Owing to the inherent limitations of an audit, there is an unavoidable
risk that we may not have detected some material misstatements
—— Identifying journal entries to test for all in-scope components, other in the financial statements, even though we have properly planned
than those only in scope for specified risk-based audit procedures, and performed our audit in accordance with auditing standards.
based on risk criteria and comparing the identified entries to For example, the further removed non-compliance with laws and
supporting documentation. These include unusual journal entries regulations (irregularities) is from the events and transactions reflected
posted to either cash or borrowings. in the financial statements, the less likely the inherently limited
procedures required by auditing standards would identify it.
—— Evaluating the business purpose of non-recurring transactions.
In addition, as with any audit, there remained a higher risk of non-
—— Assessing significant accounting estimates for bias.
detection of fraud, as these may involve collusion, forgery, intentional
We discussed with the audit committee matters related to actual or omissions, misrepresentations, or the override of internal controls. We
suspected fraud, for which disclosure is not necessary, and considered are not responsible for preventing non-compliance or fraud and cannot
any implications for our audit. be expected to detect non-compliance with all laws and regulations.
Identifying and responding to risks of material misstatement 6. We have nothing to report on the other information
due to non-compliance with laws and regulations in the Annual Report
We identified areas of laws and regulations that could reasonably The directors are responsible for the other information presented in
be expected to have a material effect on the financial statements from the Annual Report together with the financial statements. Our opinion
our general commercial and sector experience, through discussion on the financial statements does not cover the other information and,
with the directors, and from inspection of the Group’s regulatory and accordingly, we do not express an audit opinion or, except as explicitly
legal correspondence. We discussed with the directors and other stated below, any form of assurance conclusion thereon.
management the policies and procedures regarding compliance
Our responsibility is to read the other information and, in doing so,
with laws and regulation.
consider whether, based on our financial statements audit work,
As the Group is regulated, our assessment of risks involved gaining the information therein is materially misstated or inconsistent with the
an understanding of the control environment including the entity’s financial statements or our audit knowledge. Based solely on that work
procedures for complying with regulatory requirements. we have not identified material misstatements in the other information.
We communicated identified laws and regulations throughout our Strategic report and directors’ report
team and remained alert to any indications of non-compliance Based solely on our work on the other information:
throughout the audit. This included communication from the group
to all in-scope component audit teams, with the exception of those —— we have not identified material misstatements in the strategic
scoped in only for specified risk-based audit procedures, of relevant report and the directors’ report;
laws and regulations identified at the group level, and a request for
these teams to report to the group any instances of non-compliance —— in our opinion the information given in those reports for the
with said laws and regulations, or any identified local laws and financial year is consistent with the financial statements; and
regulations, that could give rise to a material misstatement at group.
—— in our opinion those reports have been prepared in accordance
The potential effect of these laws and regulations on the financial with the Companies Act 2006.
statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly In our opinion the part of the Directors’ Remuneration Report to
affect the financial statements including financial reporting legislation be audited has been properly prepared in accordance with the
(including related companies legislation), distributable profits Companies Act 2006.
legislation and taxation legislation and we assessed the extent of
compliance with these laws and regulations as part of our procedures Disclosures of emerging and principal risks and longer-term viability
on the related financial statement items. We are required to perform procedures to identify whether there
is a material inconsistency between the directors’ disclosures in
Secondly, the Group is subject to many other laws and regulations respect of emerging and principal risks and the viability statement,
where the consequences of non-compliance could have a material and the financial statements and our audit knowledge. Based on those
effect on amounts or disclosures in the financial statements, for procedures, we have nothing material to add or draw attention to
instance through the imposition of fines or litigation or the loss of the in relation to:
Group’s licence to operate. We identified the area of regulatory capital
as that most likely to have such an effect recognising the financial and —— The directors’ confirmation within the viability statement on page
regulated nature of the Group’s activities. Auditing standards limit the 68, that they have carried out a robust assessment of the emerging
required audit procedures to identify non-compliance with these laws and principal risks facing the Group, including those that would
and regulations to enquiry of the directors and other management and threaten its business model, future performance, solvency
inspection of regulatory and legal correspondence, if any. Therefore, and liquidity;
318 Prudential plc

—— The emerging and principal risks disclosures on pages 45 to 69 —— Certain disclosures of directors’ remuneration specified by law
Group overview
describing these risks and explaining how they are being managed are not made; or
and mitigated; and
—— We have not received all the information and explanations
—— The directors’ explanation in the viability statement of how they we require for our audit.
have assessed the prospects of the Group, over what period
they have done so and why they considered that period to be We have nothing to report in these respects.
appropriate, and their statement as to whether they have a
Strategic report
reasonable expectation that the Group will be able to continue 8. Respective responsibilities
in operation and meet its liabilities as they fall due over the period Directors’ responsibilities
of their assessment, including any related disclosures drawing As explained more fully in their statement set out on page 309,
attention to any necessary qualifications or assumptions. the directors are responsible for the preparation of the financial
statements including being satisfied that they give a true and fair view.
We are also required to review the viability statement, set out on page
They are also responsible for: such internal control as they determine
68, under the Listing Rules. Based on the above procedures, we have
is necessary to enable the preparation of financial statements that
concluded that the above disclosures are materially consistent with the
are free from material misstatement, whether due to fraud or error;
Governance
financial statements and our audit knowledge.
assessing the Group and parent company’s ability to continue as a
Our work is limited to assessing these matters in the context of only going concern, disclosing, as applicable, matters related to going
the knowledge acquired during our financial statements audit. As concern; and using the going concern basis of accounting unless they
we cannot predict all future events or conditions and as subsequent either intend to liquidate the Group or the parent company or to cease
events may result in outcomes that are inconsistent with judgements operations, or have no realistic alternative but to do so.
that were reasonable at the time they were made, the absence of
anything to report on these statements is not a guarantee as to the Auditor’s responsibilities

Group’s and Company’s longer-term viability. Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
Corporate governance disclosures whether due to fraud or other irregularities (see below), or error, and to
We are required to perform procedures to identify whether there is issue our opinion in an auditor’s report. Reasonable assurance is a high
a material inconsistency between the directors’ corporate governance level of assurance, but does not guarantee that an audit conducted in
disclosures and the financial statements and our audit knowledge. accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud, other irregularities
Based on those procedures, we have concluded that each of the or error and are considered material if, individually or in aggregate,
following is materially consistent with the financial statements and they could reasonably be expected to influence the economic
our audit knowledge: decisions of users taken on the basis of the financial statements.
—— the directors’ statement that they consider that the Annual Report A fuller description of our responsibilities is provided on the FRC’s
and financial statements taken as a whole is fair, balanced and website at www.frc.org.uk/auditorsresponsibilities.
understandable and provides the information necessary for
shareholders to assess the Group’s position and performance, 9. The purpose of our audit work and to whom
business model and strategy; we owe our responsibilities
This report is made solely to the Company’s members, as a body,
—— the section of the Annual Report describing the work of the in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Audit Committee, including the significant issues that the audit Our audit work has been undertaken so that we might state to the
committee considered in relation to the financial statements, Company’s members those matters we are required to state to them
and how those issues were addressed; and

in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
—— the section of the Annual Report that describes the review of other than the Company and the Company’s members, as a body,
the effectiveness of the Group’s risk management and internal for our audit work, for this report, or for the opinions we have formed.
control systems.
We are required to review the part of the Corporate Governance

Statement relating to the Group’s compliance with the provisions
of the UK Corporate Governance Code specified by the Listing Rules
for our review. We have nothing to report in this respect.
Philip Smart (Senior Statutory Auditor)
7. We have nothing to report on the other matters on which For and on behalf of KPMG LLP, Statutory Auditor
we are required to report by exception
Under the Companies Act 2006 we are required to report to you if, Public Interest Entity Auditor recognised in accordance
in our opinion: with the Hong Kong Financial Reporting Council Ordinance
—— Adequate accounting records have not been kept by the parent Chartered Accountants
company, or returns adequate for our audit have not been received London
from branches not visited by us; or
2 March 2021
—— The parent company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or

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319
Annual Report 2020
European
Embedded
Value (EEV)
basis results
Contents
322 Index to EEV basis results
320 Prudential plc

321
Annual Report 2020
Prudential plc

Index to European Embedded Value (EEV) basis results
Page
Basis of preparation 323
EEV results highlights 324
Movement in Group EEV shareholders’ equity 325
Movement in Group free surplus 327
Notes on the EEV basis results

1 Analysis of new business profit and EEV for long-term business operations 329
2 Analysis of movement in EEV for long-term business operations 330
3 Sensitivity of results for long-term business operations to alternative assumptions 333
4 Expected transfer of value of in-force business and required capital to free surplus for Asia long-term business operations 336
on a discounted basis
5 EEV basis results for other operations 337
6 Net core structural borrowings of shareholder-financed businesses 338
7 Comparison of EEV basis shareholders’ equity with IFRS basis shareholders’ equity 338
8 Methodology and accounting presentation 339
9 Assumptions 344
10 Insurance new business 347
11 Post balance sheet events 347
Statement of Directors’ responsibilities 348

Auditor’s report 349
Description of EEV basis reporting

The EEV basis results have been prepared in accordance with the EEV Principles issued by the European Insurance CFO Forum in 2016.
All results are stated net of tax and converted using actual exchange rates (AER) unless otherwise stated. AER are actual historical exchange
rates for the relevant accounting period. Constant exchange rate (CER) results are calculated by translating prior year results using current period
foreign currency exchange rates, ie current period average rates for the income statements and current period closing rate for the balance sheet.
Where appropriate, the EEV basis results include the effects of adoption of IFRS Standards.
The Directors are responsible for the preparation of the supplementary information in accordance with the EEV Principles. In preparing the
EEV basis supplementary information, the Directors have satisfied themselves that the Group remains a going concern. Further information
is provided in note A1 of the IFRS financial statements.
322 Prudential plc

Group overview
In broad terms, IFRS profit for long-term business reflects the aggregate of results on a traditional accounting basis. By contrast, EEV is a
way of measuring the value of the in-force life insurance business. The value of future new business is excluded from the embedded value.
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. Results prepared under the EEV Principles represent the present value of the shareholders’ interest
in the post-tax future profits (on a local statutory basis) expected to arise from the current book of long-term business, after sufficient allowance
has been made for the aggregate risks in the business. The shareholders’ interest in the Group’s long-term business is the sum of the
Strategic report
shareholders’ total net worth and the value of in-force business.
For the purposes of preparing EEV basis 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 basis results at the Group’s proportionate share of IFRS basis shareholders’ equity, with central Group debt shown
on a market value basis.
Key features of the Group’s EEV methodology include:
Governance
—— Economic assumptions. The projected post-tax profits assume a level of future investment return and are discounted using a risk discount
rate. 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. Risk-free rates, and hence investment return
assumptions, are based on observable market data, with current market risk-free rates assumed to remain constant throughout the projection,
with no trending or mean reversion to longer-term assumptions. Different products will be sensitive to different assumptions, for example,
spread-based 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). The TVOG is determined by weighting the probability of outcomes across a large number of different economic scenarios, centred
around current historically low risk-free interest rates, and is typically less applicable to health and protection business that generally contains
more limited financial options or guarantees.
—— 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. Products with greater market exposure will have an appropriately higher risk discount rate, for example savings
and unit-linked products will typically have a higher allowance for market risk compared to health and protection products due to the
higher proportion of equity-type assets in the investment portfolio. Other product design and business features also affect the sensitivity
of shareholder cash flows to market returns. For example, the construct of UK-style with-profits funds in some business units reduce the
sensitivity of both policyholder and shareholder cash flows for participating products, and products where shareholder cash flows are based
on a fixed charging structure (rather than charges that are sensitive to investment performance) typically attract a lower allowance for market
risk. 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 31 December 2020 the total allowance for non-market risk in Asia is equivalent to a $(3.2) billion reduction,
or around (7) per cent of the Asia embedded value.


Prudential plc
323
Annual Report 2020
European Embedded Value (EEV) basis results / continued
EEV results highlights
Change compared to prior year % Change compared to prior year %

2020 $m CER AER
Group Group Group
excluding Group excluding Group excluding Group
US US total US US total US US total
note (iii) note (iii) note (iii)
New business profit 2,201 601 2,802 (38)% (32)% (37)% (38)% (32)% (36)%
Annual premium equivalent (APE) 3,696 1,923 5,619 (28)% (13)% (24)% (28)% (13)% (24)%
Present value of new business premiums
(PVNBP) 21,587 19,229 40,816 (26)% (14)% (21)% (26)% (14)% (21)%
New business margin (APE) (%) 60% 31% 50%
EEV operating profit note (i) 3,376 1,844 5,220 (34)% 4% (24)% (34)% 4% (24)%
EEV operating profit, net of
non-controlling interests note (i) 3,366 1,721 5,087 (34)% (3)% (26)% (34)% (3)% (26)%
Operating return on average EEV shareholders’
equity, net of non-controlling interests (%) 8% 12% 9%
Operating free surplus generated note (ii) 1,895 1,109 3,004 8% (1)% 4% 7% (1)% 4%
Closing EEV shareholders’ equity,

net of non-controlling interests 41,926 12,081 54,007 9% (26)% (1)%
Closing EEV shareholders’ equity,
net of non-controlling interests per share
(in cents) 1,607¢ 463¢ 2,070¢ 9% (26)% (2)%
Notes
(i) Group excluding US represents the Group EEV operating profit (which is stated after central expenditure, restructuring and IFRS 17 implementation costs) after deducting amounts
attributable to the US.
(ii) Long-term and asset management businesses only, before restructuring, IFRS 17 implementation costs, centrally incurred costs and eliminations (as described in note 5).
(iii) Segment results are attributed to the shareholders of the Group before deducting the amount attributable to non-controlling interests. This presentation is applied consistently
throughout the document.
324 Prudential plc

Group overview
Movement in Group EEV shareholders’ equity
2020 $m 2019 $m
Group Group
Asia US Other total total
Note note 5
Strategic report
New business profit 1 2,201 601 2,802 4,405
Profit from in-force long-term business 2 1,933 1,273 3,206 3,240
Long-term business 4,134 1,874 6,008 7,645
Asset management 253 6 259 275
Operating profit from long-term and asset management businesses 4,387 1,880 6,267 7,920
Other income and expenditure – – (858) (858) (923)
Operating profit (loss) before restructuring and IFRS 17 implementation costs 4,387 1,880 (858) 5,409 6,997
Governance
Operating profit (loss) for the year 4,299 1,844 (923) 5,220 6,905
Short-term fluctuations in investment returns 2 1,909 (230) 28 1,707 3,254
Effect of changes in economic assumptions 2 (996) (5,054) – (6,050) (1,868)
Impact of 2019 NAIC reform and related changes in the US note (i) – – – – (3,457)
Loss attaching to corporate transactions (91) (471) (30) (592) (207)

2
Mark-to-market value movements on core structural borrowings 6 – (5) (247) (252) (466)
Non-operating profit (loss) 822 (5,760) (249) (5,187) (2,744)
Profit (loss) for the year from continuing operations 5,121 (3,916) (1,172) 33 4,161
Loss for the year from discontinued operations note (ii) – – – – (4,797)
Profit (loss) for the year 5,121 (3,916) (1,172) 33 (636)
Non-controlling interests share of profit (11) 130 1 120 (9)
Profit (loss) for the year attributable to equity holders of the Company 5,110 (3,786) (1,171) 153 (645)
Foreign exchange movements on operations 561 – 2 563 666
Intra-group dividends and investment in operations note (iii) (741) – 741 – –
External dividends – – (814) (814) (1,634)
Mark-to-market value movements on US assets backing net worth – 552 – 552 206
Other movements 76 111 (207) (20) 95
Athene equity investment note (iv) – (1,112) – (1,112) –
Non-controlling interests share of other equity items – (26) – (26) –
Demerger dividend in specie of M&G plc note (ii) – – – – (7,379)
Net increase (decrease) in shareholders’ equity 5,006 (4,261) (1,449) (704) (8,691)
Shareholders’ equity at beginning of year 39,235 16,342 (866) 54,711 63,402

Shareholders’ equity at end of year 44,241 12,081 (2,315) 54,007 54,711

Prudential plc
325
Annual Report 2020
Movement in Group EEV shareholders’ equity continued
2020 $m 2019 $m
Group Group
Asia US Other total total
Note note 5
Contribution to Group EEV:

At end of year:
Long-term business 2 42,808 12,076 – 54,884 54,179
Asset management and other 5 635 5 (2,338) (1,698) (290)
Goodwill attributable to equity holders 798 – 23 821 822
EEV shareholders’ equity ($ million) 44,241 12,081 (2,315) 54,007 54,711
EEV shareholders’ equity per share (in cents) note (v) 1,696¢ 463¢ (89)¢ 2,070¢ 2,103¢
At beginning of year:
Long-term business 2 37,843 16,336 – 54,179 64,174
Asset management and other 5 596 6 (892) (290) (2,874)
Goodwill attributable to equity holders 796 – 26 822 2,102
EEV shareholders’ equity ($ million) 39,235 16,342 (866) 54,711 63,402
EEV shareholders’ equity per share (in cents) note (v) 1,508¢ 628¢ (33)¢ 2,103¢ 2,445¢
EEV basis basic earnings per share note (v) 2020 2019
Net of tax
Non- and non- Basic Basic
controlling controlling earnings earnings
Net of tax interests interests per share per share
$m $m $m cents cents
Based on operating profit from continuing operations after

non-controlling interests 5,220 (133) 5,087 195.5¢ 266.6¢
Based on profit for the year attributable to equity holders
of the Company:
From continuing operations 33 120 153 5.9¢ 160.5¢
From discontinued operations – (185.4)¢
5.9¢ (24.9)¢
Notes
(i) The $(3,457) million impact of NAIC reform and other related changes in the US in full year 2019 related to the implementation of the National Association of Insurance Commissioners’
(NAIC) changes to the US statutory reserve and capital framework for variable annuities, early-adopted by Jackson at 31 December 2019. As part of the implementation of these changes,
enhancements were made to the model used to allow for hedging within US statutory reporting, which were subsequently utilised within EEV to update the allowance for the long-term cost
of hedging under EEV economic assumptions, alongside a number of other changes following the NAIC reform with the objective of bringing the EEV free surplus more in line with the US
statutory basis of reporting. Subsequent changes to the approach to the long term cost of hedging allowance for EEV reporting in 2020 are included within economic assumption changes.
(ii) Discontinued operations for 2019 related to the UK and Europe operations (M&G plc) that were demerged from the Group in October 2019. The demerger dividend in specie of M&G plc
was recorded at the fair value of M&G plc at the date of the demerger on 18 October 2019. The difference between the fair value and its carrying value, together with profit earned up to
the date of the demerger were recorded as loss for the year from the discontinued UK and Europe operations in 2019.
(iii) Intra-group dividends represent dividends that have been declared in the year. Investment in operations reflects movements in share capital.
(iv) In 2020, the $(1,112) million relates to the equity investment by Athene into the US business as described in note D1.2 of the IFRS basis results.
(v) Based on the number of issued shares at 31 December 2020 of 2,609 million shares (31 December 2019: 2,601 million shares), and weighted average number of issued shares of 2,596 million
shares in 2020 (2019: 2,587 million shares).
The supplementary information on pages 323 to 347 was approved by the Board of Directors on 2 March 2021.

326 Prudential plc

Group overview
Movement in Group free surplus
For long-term business, free surplus is the excess of the regulatory basis net assets for EEV reporting purposes (total net worth) over the capital
required to support the covered business. Where appropriate, adjustments are made to total net worth so that backing assets are included at
market value, rather than at cost, to comply with the EEV Principles. In the Group’s Asia and US operations, assets deemed to be inadmissible
on a local regulatory basis are generally included in net worth, with the exception of deferred tax assets in the US that are inadmissible under
the local regulatory basis, which have been included in the value of in-force business (VIF) within the Group’s EEV results.
Strategic report
Free surplus for asset management and other non-insurance operations (including the Group’s central operations and Africa operations)
is taken to be IFRS basis shareholders’ equity, net of goodwill attributable to equity holders, with central Group debt shown on a market value
basis and subordinated debt recorded as free surplus to the extent that it is classified as available capital under the Group’s capital regime.
A reconciliation of EEV free surplus to the Group’s Local Capital Summation Method (LCSM) surplus over Group minimum capital requirements
is set out in note I(i) of the additional financial information.
2020 $m 2019 $m
Governance
Total
insurance
and asset Group Group
Asia US management Other total total
note 5
Expected transfer from in-force business 1,878 1,114 2,992 2,992 3,081
Expected return on existing free surplus 101 25 126 126 141
Changes in operating assumptions and experience variances 222 156 378 378 558

Operating free surplus generated from in-force long-term business note (i) 2,201 1,295 3,496 3,496 3,780
Investment in new business note (ii) (559) (192) (751) (751) (1,158)
Long-term business 1,642 1,103 2,745 2,745 2,622
Operating free surplus generated from long-term and asset
management businesses 1,895 1,109 3,004 3,004 2,897
Other income and expenditure – – – (858) (858) (923)
Operating free surplus generated before restructuring and IFRS 17
implementation costs 1,895 1,109 3,004 (858) 2,146 1,974
Restructuring and IFRS 17 implementation costs (82) (36) (118) (65) (183) (92)
Operating free surplus generated 1,813 1,073 2,886 (923) 1,963 1,882
Non-operating free surplus generated note (iii) 444 (2,046) (1,602) (128) (1,730) (1,016)
Free surplus generated from continuing operations 2,257 (973) 1,284 (1,051) 233 866
Free surplus generated from discontinued operations – – – – – 2,512
Free surplus generated 2,257 (973) 1,284 (1,051) 233 3,378
Non-controlling interests share of profit (11) 245 234 1 235 (9)
Free surplus generated attributable to equity holders

of the Company 2,246 (728) 1,518 (1,050) 468 3,369
Net cash flows paid to parent company note (iv) (716) – (716) 716 – –
External dividends – – – (814) (814) (1,634)
Demerger dividend in specie of M&G plc – – – – – (7,379)
Foreign exchange movements on operations 131 – 131 5 136 267
Mark-to-market value movements on US assets backing net worth – 552 552 – 552 206
Other movements and timing differences 49 111 160 (182) (22) (252)
Athene equity investment – 63 63 – 63 –
Non-controlling interests share of other equity items – (26) (26) – (26) –
Net movement in free surplus 1,710 (28) 1,682 (1,325) 357 (5,423)
Balance at beginning of year 4,220 1,777 5,997 3,739 9,736 15,159
Balance at end of year 5,930 1,749 7,679 2,414 10,093 9,736
Representing:
Free surplus excluding distribution rights and other intangibles 5,023 1,731 6,754 (686) 6,068 6,604
Distribution rights and other intangibles 907 18 925 3,100 4,025 3,132
5,930 1,749 7,679 2,414 10,093 9,736

Prudential plc
327
Annual Report 2020
Movement in Group free surplus continued
2020 $m 2019 $m
Total
insurance
and asset Group Group
Asia US management Other total total
note 5
Contribution to Group free surplus:

At end of year:
Long-term businessnote 2 5,295 1,744 7,039 – 7,039 5,395
Asset management and other 635 5 640 2,414 3,054 4,341
Free surplus 5,930 1,749 7,679 2,414 10,093 9,736
At beginning of year:
Long-term businessnote 2 3,624 1,771 5,395 – 5,395 9,587
Asset management and other 596 6 602 3,739 4,341 5,572
Free surplus 4,220 1,777 5,997 3,739 9,736 15,159
Notes
(i) US in-force free surplus generation in 2019 included a $355 million benefit from the release of incremental reserves in the first half of 2019 following the integration of the John Hancock
business.
(ii) Free surplus invested in new business primarily represents acquisition costs and amounts set aside for required capital.
(iii) Asia non-operating free surplus generation in 2020 includes a reinsurance commission of $770m received as part of a reinsurance transaction undertaken by our business in Hong Kong as
described in note D1 of the IFRS financial statements. Non-operating free surplus generated for other operations represents the post-tax IFRS basis short-term fluctuations in investment
returns for other entities, as shown in Note B1.2 of the IFRS Financial Statements, along with mark-to-market value movements on core structural borrowings (unless classified as available
capital under the Group’s capital regime).
(iv) Net cash flows to parent company for Asia operations reflect the flows 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 and other non-cash items.
328 Prudential plc

Notes on the EEV basis results
Group overview
1 Analysis of new business profit and EEV for long-term business operations
2020 $m
Present
New Annual value of New New
business premium new business business business Closing EEV
profit equivalent premiums margin margin shareholders’
(NBP) (APE) (PVNBP) (APE) (PVNBP) equity
note (i) note (ii)
Strategic report
Hong Kong 787 758 5,095 104% 15% 20,156
China JV 269 582 2,705 46% 10% 2,798
Indonesia 155 267 1,154 58% 13% 2,630
Malaysia 209 346 2,023 60% 10% 4,142
Singapore 341 610 5,354 56% 6% 8,160
Other 440 1,133 5,256 39% 8% 4,922
Total Asia insurance 2,201 3,696 21,587 60% 10% 42,808
Governance
US insurance 601 1,923 19,229 31% 3% 12,076
Total long-term business 2,802 5,619 40,816 50% 7% 54,884
2019 (AER) $m
Present
New Annual value of new New New

business premium business business business Closing EEV
note (i) note (ii)
Hong Kong 2,042 2,016 12,815 101% 16% 18,255

China JV 262 590 2,586 44% 10% 2,180
Indonesia 227 390 1,668 58% 14% 2,737
Malaysia 210 355 2,090 59% 10% 3,535
Singapore 387 660 4,711 59% 8% 7,337
Other 394 1,150 5,374 34% 7% 3,799
US insurance 883 2,223 22,231 40% 4% 16,336
2019 (CER) $m
Present
New Annual value of New New
business premium new business business business Closing EEV
note (i) note (ii)

Hong Kong 2,063 2,037 12,946 101% 16% 18,344
China JV 262 590 2,588 44% 10% 2,322
Indonesia 220 379 1,622 58% 14% 2,704
Malaysia 207 349 2,061 59% 10% 3,594
Singapore 383 653 4,659 59% 8% 7,464
Other 398 1,160 5,402 34% 7% 3,829
US insurance 883 2,223 22,231 40% 4% 16,336
Notes
(i) The movement in new business profit is analysed as follows:
Asia US Group
$m $m $m
2019 new business profit 3,522 883 4,405

Foreign exchange movement 11 – 11

Effect of changes in interest rates and other economic assumptions 2 (283) (281)
Sales volume (986) (73) (1,059)
Business mix, product mix and other items (348) 74 (274)
2020 new business profit 2,201 601 2,802
(ii) Long-term business only, excluding goodwill attributable to equity holders.

Prudential plc
Annual Report 2020329
Notes on the EEV basis results / continued
2 Analysis of movement in EEV for long-term business operations
2020 $m 2019 $m
Value of
Free Required Net in-force Embedded Embedded
surplus capital worth business value value
Total long-term business

Balance at beginning of year from continuing operations 5,395 6,891 12,286 41,893 54,179 49,643
New business contribution note 1 (751) 563 (188) 2,990 2,802 4,405
Existing business – transfer to net worth 2,992 (716) 2,276 (2,276) – –
Expected return on existing business note (ii) 126 186 312 1,646 1,958 2,270
Changes in operating assumptions and experience variances note (iii) 378 3 381 867 1,248 970
Operating profit before restructuring and IFRS 17 implementation costs 2,745 36 2,781 3,227 6,008 7,645
Restructuring and IFRS 17 implementation costs (92) – (92) (6) (98) (5)
Operating profit 2,653 36 2,689 3,221 5,910 7,640
Non-operating (loss) profit note (iv) (1,602) 320 (1,282) (3,656) (4,938) (1,840)
Profit (loss) for the year 1,051 356 1,407 (435) 972 5,800
Non-controlling interests share of profit 245 124 369 (239) 130 (1)
Profit (loss) for the year attributable to equity holders
of the Company 1,296 480 1,776 (674) 1,102 5,799
Foreign exchange movements 116 15 131 415 546 369
Intra-group dividends and investment in operations (582) – (582) – (582) (1,633)
Mark-to-market value movements on US assets backing net worth 552 – 552 – 552 206
Other movements note (v) 225 – 225 – 225 (205)
Athene equity investment 63 (548) (485) (627) (1,112) –
Non-controlling interests share of other equity items (26) – (26) – (26) –
Balance at end of year note (i) 7,039 6,838 13,877 41,007 54,884 54,179
Asia long-term business

New business contribution note 1 (559) 181 (378) 2,579 2,201 3,522
Existing business – transfer to net worth 1,878 (107) 1,771 (1,771) – –
Expected return on existing business note (ii) 101 62 163 1,238 1,401 1,542
Changes in operating assumptions and experience variances note (iii) 222 (38) 184 348 532 824
Operating profit before restructuring and IFRS 17 implementation costs 1,642 98 1,740 2,394 4,134 5,888
Restructuring and IFRS 17 implementation costs (63) – (63) (6) (69) –
Operating profit 1,579 98 1,677 2,388 4,065 5,888
Non-operating profit note (iv) 444 150 594 228 822 1,962
Profit for the year 2,023 248 2,271 2,616 4,887 7,850
Non-controlling interests share of profit – – – – – (1)
Profit for the year attributable to equity holders of the Company 2,023 248 2,271 2,616 4,887 7,849
Foreign exchange movements 116 15 131 415 546 369
Intra-group dividends and investment in operations (582) – (582) – (582) (1,108)
Other movements note (v) 114 – 114 – 114 (252)
330 Prudential plc

Group overview
2020 $m 2019 $m
Value of
Free Required Net in-force Embedded Embedded
surplus capital worth business value value
US long-term business
New business contribution note 1 (192) 382 190 411 601 883
Existing business – transfer to net worth 1,114 (609) 505 (505) – –
Strategic report
Expected return on existing business note (ii) 25 124 149 408 557 728
Changes in operating assumptions and experience variances note (iii) 156 41 197 519 716 146
Operating profit before restructuring and IFRS 17 implementation costs 1,103 (62) 1,041 833 1,874 1,757
Restructuring and IFRS 17 implementation costs (29) – (29) – (29) (5)
Operating profit 1,074 (62) 1,012 833 1,845 1,752
Non-operating (loss) profit note (iv) (2,046) 170 (1,876) (3,884) (5,760) (3,802)
Governance
(Loss) profit for the year (972) 108 (864) (3,051) (3,915) (2,050)
Non-controlling interests share of profit 245 124 369 (239) 130 –
(Loss) profit for the year attributable to equity holders
of the Company (727) 232 (495) (3,290) (3,785) (2,050)
Intra-group dividends and investment in operations – – – – – (525)
Mark-to-market value movements on US assets backing net worth 552 – 552 – 552 206

Other movements note (v) 111 – 111 – 111 47
Athene equity investment 63 (548) (485) (627) (1,112) –
Non-controlling interests share of other equity items (26) – (26) – (26) –
Notes
(i) The total embedded value for long-term business operations, excluding goodwill attributable to equity holders, can be summarised as follows:
31 Dec 2020 $m 31 Dec 2019 $m
Group Group
Asia US total Asia US total
Value of in-force business before deduction of cost of capital and time value
of options and guarantees 36,729 7,416 44,145 32,396 11,417 43,813
Cost of capital (749) (457) (1,206) (866) (370) (1,236)
Time value of options and guarantees* (1,912) (20) (1,932) (493) (191) (684)
Net value of in-force business 34,068 6,939 41,007 31,037 10,856 41,893
Free surplus 5,295 1,744 7,039 3,624 1,771 5,395
Required capital 3,445 3,393 6,838 3,182 3,709 6,891
Net worth 8,740 5,137 13,877 6,806 5,480 12,286
Embedded value 42,808 12,076 54,884 37,843 16,336 54,179

* 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 8(i)(d). The TVOG and the
outcome from the central scenario are linked; as the central scenario is updated for market conditions and the outcome reflects more or less of the guaranteed benefit payouts and associated
product charges, there will be consequential changes to the TVOG. At 31 December 2020 the TVOG for Asia operations is $(1,912) million, with the substantial majority arising in Hong Kong,
reflecting the variability of guaranteed benefit payouts across the range of economic scenarios around current low interest rates. The TVOG represents some of the market risk for the key
products in Hong Kong. As this market risk is explicitly allowed for via the TVOG, no further adjustment is made to allow for this within the EEV risk discount rate, as described in note 8(i)(h),
leading to a lower risk discount rate. The magnitude of the TVOG for Asia operations at 31 December 2020 would be approximately equivalent to a 30 basis point increase in the Asia weighted
average risk discount rate.
(ii) The expected return on existing business reflects the effect of changes in economic and operating assumptions in the current year, as described in note 8(ii)(c). The movement in this amount
compared to the prior year is analysed as follows:
Group
Asia US total
$m $m $m
2019 expected return on existing business 1,542 728 2,270

Foreign exchange movement (8) – (8)
Effect of changes in interest rates and other economic assumptions (312) (114) (426)
Growth in opening value of in-force business and other items 179 (57) 122
2020 expected return on existing business 1,401 557 1,958
(iii) The effect of changes in operating assumptions of $390 million (2019: $539 million) in Asia principally reflects the benefit of medical pricing actions, the introduction of a more simplified
framework for policyholder charges for guarantees in Hong Kong and the beneficial effect on the effective tax rate for Indonesia from changes to local tax legislation in the first half of 2020,
together with the outcome of the regular review of persistency, claims and expenses. Experience variances and other items of $142 million (2019: $285 million) has been driven by positive
mortality and morbidity experience in a number of local business units. In the US, the effect of changes in operating assumptions, experience variances and other items of $716 million
(2019: $146 million) mainly includes the effect of positive persistency experience and assumption changes and the regular amortisation of interest-related gains and losses.

Prudential plc
2 Analysis of movement in EEV for long-term business operations continued
(iv) The EEV non-operating profit (loss), can be summarised as follows:

31 Dec 2020 $m 31 Dec 2019 $m
Group Group
Short-term fluctuations in investment returns note (a) 1,909 (230) 1,679 2,451 876 3,327
Effect of changes in economic assumptions note (b) (996) (5,054) (6,050) (667) (1,201) (1,868)
Impact of 2019 NAIC reform and related changes in the US – – – – (3,457) (3,457)
Mark-to-market value movements on core structural borrowings note 6(iii) – (5) (5) – (18) (18)
Loss (gain) attaching to corporate transactions note (c) (91) (471) (562) 178 (2) 176
Non-operating profit (loss) 822 (5,760) (4,938) 1,962 (3,802) (1,840)
(a) The credit of $1,909 million in Asia for short-term fluctuations in investment returns mainly reflects higher than expected bond and equity returns, particularly in Hong Kong. In the US,
the charge of $(230) million mainly reflects losses arising from changes to the asset portfolio following the Athene transaction.
(b) The charge for economic assumption changes of $(996) million in Asia is mainly driven by Hong Kong and primarily arises from movements in long-term interest rates, resulting in lower
assumed fund earned rates that impact projected future cash flows across the majority of local business units, partially offset by lower risk discount rates. This impact includes a benefit
from a change to the calculation of the valuation interest rate used to value long-term insurance liabilities in Hong Kong and reflects the impact of changes to longer-term views on
economic assumptions as described in note 9(i). In the US, the charge of $(5,054) million largely reflects the effect of lower interest rates in the year, with the US 10 year Treasury falling
by 99 basis points over the course of 2020. Lower interest rates, have the effect of decreasing future separate account return and hence lowering future projected fee income, increasing
future projected hedging costs and reducing future reinvestment rates. These effects have been partially offset by lower risk discount rates and the increase in the US equity risk
premium as described in note 9(i). Further, the US charge includes the impact of refinements that Jackson implemented to its EEV hedge modelling as a result of the changes made for its
statutory reserves and capital that reduced EEV by $795 million as at 1 January 2020.
(c) The impact of corporate transactions in the year is as follows:
2020 $m 2019 $m
Loss on reinsurance of Jackson’s in-force fixed and fixed indexed annuity portfolio* (457) –
Gain on disposals† – 178
Other transactions ‡ (105) (2)
Total (562) 176
* In June 2020, the Group announced the reinsurance of substantially all of Jackson’s in-force portfolio of fixed and fixed indexed annuity business to Athene Life Re Ltd. Further details
are included in note D1.1 of the IFRS basis results. The effect on the EEV position largely reflects the loss of future profits recorded in the value of in-force business as a result of the
reinsurance and the loss of unrealised gains on assets passed to Athene, partly offset by the reinsurance commission received after deducting tax.
† In 2019, the gain on disposals principally related to profits arising from a 4 per cent reduction in the Group’s stake in its associate in India, ICICI Prudential Life Insurance Company,
and the disposal of Prudential Vietnam Finance Company Limited, a wholly-owned subsidiary that provides consumer finance.
‡In 2020, other transactions includes a loss of $(91) million from the reinsurance transaction undertaken by our business in Hong Kong described in note D1.1 of the IFRS financial
statements together with costs incurred by Jackson in relation to its proposed separation. Outside of the long-term business (and hence not included in the table above) central
operations incurred $30 million of costs associated with corporate transactions largely in relation to the proposed separation of Jackson.
(v) Other movements include reserve movements in respect of share capital subscribed, share-based payments, treasury shares, intra-group loans and other intra-group transfers between
operations that have no overall effect on the Group’s shareholders’ equity.
332 Prudential plc

Group overview
3 Sensitivity of results for long-term business operations to alternative assumptions
(i) Sensitivity analysis – economic assumptions

The tables below show the sensitivity of the embedded value and the new business profit for long-term business operations to:
—— 1 per cent and 2 per cent (for 2020 only) increases in interest rates, including consequential changes in assumed investment returns
for all asset classes, market values of fixed interest assets and local statutory reserves and capital requirements and risk discount rates
(but excluding changes in the allowance for market risk);
Strategic report
—— 0.5 per cent decrease in interest rates, including consequential changes in assumed investment returns for all asset classes, market values
of fixed interest assets and local statutory reserves and capital requirements and risk discount rates (but excluding changes in the allowance
for market risk);
—— 1 per cent rise in equity and property yields;
—— 20 per cent fall (10 per cent fall for 2019) in the market value of equity and property assets (embedded value only);
—— 1 per cent and 2 per cent (for 2020 only) increases in the risk discount rates. The main driver for changes in the risk discount rates from
year to year is changes in the risk-free rates, the impact of which is expected to be broadly offset by a corresponding change in assumed
Governance
investment returns, the effect of which is not included in these 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; and
—— The Group minimum capital requirements under the LCSM in contrast to EEV basis required capital (embedded value only).
The sensitivities shown below are for the impact of instantaneous and permanent changes (with no trending or mean reversion) on the
embedded value of long-term 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 sensitivities reflect the consequential impacts from market movements at the valuation
date. The results only allow for limited management actions such as 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 assets held at the valuation date is assumed when calculating
sensitivities. The sensitivity impacts are expected to be non-linear, to aid understanding of this non linearity, impacts of both a 1% and 2%
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 year, namely the effect of changes in economic assumptions and short-term fluctuations in investment returns.
In addition, for changes in interest rates, the effect shown below for the US (Jackson) would also be recorded within mark-to-market value
movements on Jackson assets backing surplus and required capital, which are taken directly to shareholders’ equity. In addition to the sensitivity
effects shown below, the other components of the profit for the following year would be calculated by reference to the altered assumptions,
for example new business profit and expected return on existing business, together with the effect of other changes such as altered corporate
bond spreads.
New business profit from long-term business
2020 $m 2019 $m
Group Group
New business profit 2,201 601 2,802 3,522 883 4,405

Interest rates and consequential effects – 2% increase 107 669 776 n/a n/a n/a

Interest rates and consequential effects – 1% increase 78 375 453 (46) 207 161
Interest rates and consequential effects – 0.5% decrease (98) (149) (247) (121) (123) (244)
Equity/property yields – 1% rise 140 88 228 210 70 280
Risk discount rates – 2% increase (626) 112 (514) n/a n/a n/a
Risk discount rates – 1% increase (372) 33 (339) (715) (22) (737)

Prudential plc
3 Sensitivity of results for long-term business operations to alternative assumptions continued
Embedded value of long-term business
31 Dec 2020 $m 31 Dec 2019 $m

Group Group
Embedded value 42,808 12,076 54,884 37,843 16,336 54,179

Interest rates and consequential effects – 2% increase (3,589) 2,275 (1,314) n/a n/a n/a
Interest rates and consequential effects – 1% increase (1,429) 1,667 238 (1,408) 798 (610)
Interest rates and consequential effects – 0.5% decrease 177 (162) 15 (28) (686) (714)
Equity/property yields – 1% rise 1,949 506 2,455 1,758 556 2,314
Equity/property market values – 10% fall n/a n/a n/a (810) (1,205) (2,015)
Equity/property market values – 20% fall (1,912) (2,173) (4,085) n/a n/a n/a
Risk discount rates – 2% increase (9,225) (568) (9,793) n/a n/a n/a
Risk discount rates – 1% increase (5,286) (286) (5,572) (5,263) (509) (5,772)
Group minimum capital requirements 150 275 425 175 221 396
Overall, the directional movements in the sensitivities from 31 December 2019 to 31 December 2020 reflect the generally lower government
bond yields and higher equity markets at 31 December 2020, and, in the case of the US, the actual hedging portfolio in place at both valuation
dates, which varies from year to year due to the nature of Jackson’s dynamic hedging programme.

Interest rate sensitivities for the Asia long-term business embedded value show broadly similar movements at 31 December 2020 as compared
to 31 December 2019. These interest rate sensitivities illustrate the impact of using different economic assumptions within our EEV framework.
For a 1 per cent increase in assumed interest rates the $(1,429) million negative effect comprises a $(5,286) million negative impact of increasing
the risk discount rate by 1 per cent, partially offset by a $3,857 million benefit from assuming 1 per cent higher investment returns. Similarly, for
a 2 per cent increase in assumed interest rates the $(3,589) million negative effect comprises a $(9,225) million negative impact of increasing the
risk discount rates by 2 per cent, partially offset by a $5,636 million benefit from higher assumed investment returns. Finally, for a 0.5 per cent
decrease in assumed interest rates there would be a $177 million positive effect from the 0.5 per cent reduction in assumed discount rates
being partially offset by lower assumed investment returns. For a 1 per cent increase in the assumed Asia equity risk premium and property
risk premium the EEV would increase by $1,949 million.
In order to illustrate the impact on EEV of varying specific economic assumptions, all other assumptions are held constant in the sensitivities
above, and therefore the actual changes in EEV were these economic effects to materialise may differ from the sensitivities shown. For example,
if interest rates decreased by 0.5 per cent, as well as changes to the risk free rate, market risk allowances would likely also be increased within
the risk discount rate, leading to a larger increase in the risk discount rate than 0.5 per cent, and a larger reduction in EEV of $(1,264) million
(compared to the $177 million benefit shown above from reducing both the earned rate and discount rate by 0.5 per cent). However, if interest
rates actually increased by 1 per cent the likely change in EEV would not materially differ to the impact of the 1 per cent interest rate sensitivity
shown above.
The interest rate and equity/property market values sensitivity movements provided in the table above are at a point in time and reflect the
hedging programme in place on the valuation date, while the actual impact on financial results would vary contingent upon a number of factors.
The sensitivity of the US long-term business embedded value to interest rates is driven by the change in assumed investment returns, and the
consequential impact on future fee income and projected benefit and dynamic hedging costs, offset by the impact of market value movements on
derivatives and other assets. At the lower interest rates at 31 December 2020, the positive impact from higher assumed investment returns from
a 1 per cent increase in risk-free rates is higher than at 31 December 2019. For a 0.5 per cent decrease in interest rates the increase in expected
benefit costs is offset by the hedging protection held to manage such a risk to a greater extent than in 2019.
The equity/property market values sensitivity is driven by a negative effect from lower future fee income and increased projected benefit and
dynamic hedging costs on variable annuity business, partially offset by market value movements on equity derivatives held at the valuation date.
334 Prudential plc

(ii) Sensitivity analysis – non-economic assumptions
Group overview
The tables below show the sensitivity of the embedded value and the new business profit for long-term business operations to:
—— 10 per cent proportionate decrease in maintenance expenses (for example, a 10 per cent sensitivity on a base assumption of $10 per annum
would represent an expense assumption of $9 per annum);
—— 10 per cent proportionate decrease in lapse rates (for example, a 10 per cent sensitivity on a base assumption of 5.0 per cent would represent
a lapse rate of 4.5 per cent per annum); and
—— 5 per cent proportionate decrease in base mortality (ie increased longevity) and morbidity rates.
Strategic report
New business profit from long-term business
2020 $m 2019 $m
Group Group
New business profit 2,201 601 2,802 3,522 883 4,405
Governance
Maintenance expenses – 10% decrease 47 18 65 67 15 82
Lapse rates – 10% decrease 156 (4) 152 211 24 235
Mortality and morbidity – 5% decrease 106 (12) 94 116 (2) 114
Embedded value of long-term business
31 Dec 2020 $m 31 Dec 2019 $m

Group Group
Embedded value 42,808 12,076 54,884 37,843 16,336 54,179

Maintenance expenses – 10% decrease 476 193 669 411 200 611
Lapse rates – 10% decrease 1,774 251 2,025 1,459 624 2,083
Mortality and morbidity – 5% decrease 1,689 (20) 1,669 1,323 94 1,417

Prudential plc
4 Expected transfer of value of in-force business and required capital to free surplus for Asia long-term business operations
on a discounted basis
The table below shows how the value of in-force business (VIF) and the associated required capital for Asia long-term business operations are
projected as emerging into free surplus over future years. Cash flows are projected on a deterministic basis and are discounted at the appropriate
risk discount rate. The modelled cash flows use the same methodology underpinning the Group’s EEV reporting and so are subject to the same
assumptions and sensitivities. The projected emergence of VIF and required capital into free surplus in 2021 will be the starting point for
expected free surplus generation next year, after updating for operating and economic assumption changes. See note I(vi) of the additional
financial information for further detail.
Post its separation from the Group, Jackson will no longer publish EEV results and so this section covers Asia only.
Expected period of conversion of future post-tax distributable earnings

Total and required capital flows to free surplus at 31 Dec
expected
emergence 1-5 years 6-10 years 11-15 years 16-20 years 21-40 years 40+ years
2020 ($m) 38,594 9,112 6,932 5,511 4,234 9,193 3,612

(%) 100% 24% 18% 14% 11% 24% 9%
2019 ($m) 34,295 8,561 6,335 4,394 3,398 7,715 3,892

(%) 100% 25% 18% 13% 10% 23% 11%
The required capital and value of in-force business for Asia long-term business operations can be reconciled to the total discounted emergence
of future free surplus shown above as follows:
31 Dec 2020 31 Dec 2019

$m $m
Required capital note 2 3,445 3,182

Value of in-force business (VIF) note 2 34,068 31,037
Other items* 1,081 76
Asia long-term business operations 38,594 34,295
* ‘Other items’ represent the impact of the time value of options and guarantees and amounts incorporated into VIF where there is no definitive time frame for when the payments will be made
or receipts received. These items are excluded from the expected free surplus generation profile above.
336 Prudential plc

Group overview
5 EEV basis results for other operations
EEV basis other income and expenditure represents the post-tax IFRS basis results for other operations (before restructuring and IFRS 17
implementation costs), together with an adjustment to deduct the unwind of expected margins on the internal management of the assets of
the covered business, as shown in the table below. It includes interest costs on core structural borrowings, corporate expenditure for head
office functions in London and Hong Kong that is not recharged/allocated to the insurance operations, and Africa operations.
In line with the EEV Principles, the allowance for the future cost of internal asset management services within the EEV basis results for
long-term insurance operations excludes the projected future profits or losses generated by any non-insurance entities within the Prudential
Strategic report
Group in providing those services (ie the EEV for long-term insurance operations assumes that the cost of internal asset management services will
be that incurred by the Group as a whole, not the cost that will be borne by the insurance business). The results of the Group’s asset management
operations include the current period profit from the management of both internal and external funds, consistent with their presentation within
the Group’s IFRS basis reporting. An adjustment is accordingly made to Group EEV operating profit, within the EEV basis results for other
operations, to deduct the expected profit anticipated to arise in the current period in the opening VIF from internal asset management services,
such that Group EEV operating profit includes the actual profit earned in respect of the management of these assets.
Any costs incurred within the head office functions in London and Hong Kong that are attributable to the long-term insurance (covered)
Governance
business are recharged/allocated to the insurance operations and recorded within the results for those operations. The assumed future expenses
within the value of in-force business for long-term insurance operations allow for amounts expected to be recharged/allocated by the head office
functions. Other costs that are not recharged/allocated to the insurance operations are shown as part of other income and expenditure for the
current year, and are not included within the projection of future expenses for in-force insurance business.
2020 $m 2019 $m
IFRS basis other income and expenditure* (748) (926)

Tax effects on IFRS basis results (17) 82
Less: unwind of expected profit on internal management of the assets of the Asia long-term business (68) (56)
Less: unwind of expected profit on internal management of the assets of the US long-term business (25) (23)
EEV basis other income and expenditure (858) (923)
* As recorded in note B1.1 of the IFRS Financial Statements.
The EEV basis shareholders’ equity for other operations is taken to be IFRS basis shareholders’ equity, with central Group debt shown on a market
value basis. Free surplus for other operations is taken to be IFRS basis shareholders’ equity, net of goodwill attributable to equity holders, with
central Group debt shown on a market value basis and subordinated debt recorded as free surplus to the extent that it is classified as available
capital under the Group’s capital regime. Shareholders’ equity for other operations can be compared across metrics as shown in the table below.
Other operations:
31 Dec 2020 31 Dec 2019
$m $m
IFRS basis shareholders’ equity* (1,520) (318)

Mark-to-market value adjustment on central borrowings note 6 (795) (548)
EEV basis shareholders’ equity (2,315) (866)

Record applicable subordinated debt as available capital note 6 4,752 4,631
Less: goodwill attributable to equity holders (23) (26)
Free surplus 2,414 3,739
* As recorded in note C1 of the IFRS Financial Statements.
For asset managers and other operations (including the Group’s central operations and Africa operations), EEV basis shareholders’ equity and
free surplus is identical to IFRS basis shareholders’ equity, net of goodwill attributable to equity holders as applicable.

Prudential plc
337
Annual Report 2020
6 Net core structural borrowings of shareholder-financed businesses
31 Dec 2020 $m 31 Dec 2019 $m

Mark-to- EEV Mark-to- EEV
market basis at market basis at
IFRS value market IFRS value market
basis adjustment value basis adjustment value
note (ii) note (iii) note (ii) note (iii)
Holding company cash and short-term investments note (i) (1,463) – (1,463) (2,207) – (2,207)
Central borrowings:
Subordinated debt 4,332 420 4,752 4,304 327 4,631
Senior debt 1,701 375 2,076 690 221 911
Bank loan 350 – 350 350 – 350
Total central borrowings 6,383 795 7,178 5,344 548 5,892
Total net central funds 4,920 795 5,715 3,137 548 3,685
Jackson Surplus Notes 250 90 340 250 85 335
Net core structural borrowings of
shareholder-financed businesses 5,170 885 6,055 3,387 633 4,020
Notes
(i) Holding company includes centrally managed group holding companies.
(ii) As recorded in note C5.1 of the IFRS Financial Statements.
(iii) The movement in the value of core structural borrowings includes foreign exchange effects for pounds sterling denominated debts, which are included in ‘Exchange movements on foreign
operations’. The movement in the mark-to-market value adjustment can be analysed as follows:
2020 $m 2019 $m
Mark-to-market value adjustment at beginning of year 633 233

Charge included in the income statement* 252 466
Movement on subordinated debt substituted to M&G plc and foreign exchange movements – (66)
Mark-to-market value adjustment at end of year 885 633
*Representing:
Total central borrowings 247 448
Jackson Surplus Notes 5 18
Total 252 466
7 Comparison of EEV basis shareholders’ equity with IFRS basis shareholders’ equity
31 Dec 2020 31 Dec 2019

$m $m
Assets less liabilities before deduction of insurance funds 421,987 396,241

Less insurance funds note (i)
Policyholder liabilities (net of reinsurers’ share) and unallocated surplus of with-profits funds (399,868) (376,572)
Shareholders’ accrued interest in the long-term business 33,129 35,234
(366,739) (341,338)
Less non-controlling interests (1,241) (192)
Total net assets attributable to equity holders of the Company 54,007 54,711
Share capital 173 172

Share premium 2,637 2,625
IFRS basis shareholders’ reserves 18,068 16,680
IFRS basis shareholders’ equity 20,878 19,477
Shareholders’ accrued interest in the long-term business 33,129 35,234
EEV basis shareholders’ equity note (ii) 54,007 54,711
Notes
(i) Including liabilities in respect of insurance products classified as investment contracts under IFRS 4.
(ii) Excluding non-controlling interests.
338 Prudential plc

Group overview
8 Methodology and accounting presentation
(i) 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 long-term insurance business (including the Group’s investments in joint venture and associate insurance operations), for which the
value of new and in-force contracts is attributable to shareholders.
The EEV basis results for the Group’s covered business are then combined with the post-tax IFRS basis results of the Group’s asset
Strategic report
management and other operations (including interest costs on core structural borrowings, corporate expenditure for head office functions in
London and Hong Kong that is not recharged/allocated to the insurance operations, and Africa 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.
The definition of long-term insurance business comprises those contracts falling under the definition for regulatory purposes together with,
for US operations, contracts that are in substance the same as guaranteed investment contracts (GICs) but do not fall under the technical definition.
Governance
(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 9(iii). 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 9(i), 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 year.
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 4. New business premiums for regular premium products are shown on an annualised basis.
New business profit represents profit determined by applying operating and economic assumptions as at the end of the year. New business
profitability is a key metric for the Group’s management of the development of the business. 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.
Valuation movements on investments

With the exception of debt securities held by Jackson, investment gains and losses during the year (to the extent that changes in capital values
do not directly match changes in liabilities) are included directly in the profit for the year and shareholders’ equity as they arise.

The results for the covered business conceptually reflect the aggregate of the post-tax IFRS basis results and the movements in the additional
shareholders’ interest recognised on an EEV basis. Therefore, the start point for the calculation of the EEV basis results for Jackson, as for other
businesses, reflects the market value movements recognised on an IFRS basis.
In determining the movements in the additional shareholders’ interest, for Jackson’s debt securities backing liabilities, the aggregate EEV
basis results reflect the fact that the value of in-force business incorporates the discounted value of expected future spread earnings. This value
is generally not affected by short-term market movements in debt securities that, broadly speaking, are held for the longer term. Consequently,
within EEV total net worth, Jackson’s debt securities backing liabilities are held on a statutory basis (largely at book value), while those backing
surplus and required capital are accounted for at market value. Consistent with the treatment applied under IFRS 4, for Jackson’s debt securities
classified as available-for-sale, movements in unrealised appreciation and depreciation on these securities are accounted for directly in equity
rather than in the income statement, as shown in ‘Mark-to-market value movements on Jackson assets backing surplus and required capital’
in the statement of movement in Group EEV shareholders’ equity.

Prudential plc
339
Annual Report 2020
8 Methodology and accounting presentation continued
(i) Methodology continued
(c) Cost of capital
A charge is deducted from the embedded value for the cost of locked-in required capital supporting the Group’s long-term 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 year to year, 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 in Prudential’s long-term business
Asia
Participating products in Asia, principally written in Hong Kong, Singapore and Malaysia, 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. During 2020
the approach to determining these charges was reviewed and simplified for certain whole-of-life products in Hong Kong; the charges will
now remain constant throughout varying economic conditions, rather than reducing as the economic environment improves and vice versa.
US
Jackson issues variable annuity contracts for which it contractually guarantees to the contract holder, subject to specific conditions, either:
a) a return of no less than total deposits made to the contract, adjusted for any partial withdrawals; b) total deposits made to the contract, adjusted
for any partial withdrawals plus a minimum return; or c) the highest contract value on a specified anniversary date, adjusted for any withdrawals
following the specified contract anniversary. These guarantees include benefits that are payable upon depletion of funds (Guaranteed Minimum
Withdrawal Benefits (GMWB)) or as death benefits (Guaranteed Minimum Death Benefits (GMDB)). These guarantees generally protect the
policyholder’s contract value in the event of poor equity market performance. Jackson hedges the GMWB and GMDB guarantees through the
use of hedge contracts, with an expected long-term future hedging cost allowed for within the EEV value of in-force business to reflect the
derivatives expected to be held based on the Group’s current dynamic hedging programme and consideration of past practice. Jackson also
historically issued a small amount of income benefits (Guaranteed Minimum Income Benefits (GMIB)), which are now materially fully reinsured.
In June 2020 the Group announced the reinsurance of substantially all of Jackson’s in-force portfolio of fixed and fixed indexed annuity
business to Athene Life Re Ltd. These contracts included some financial options and guarantees that are now materially fully reinsured as at
31 December 2020.
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, 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 9(ii).
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.
The time value of financial options and guarantees reflects how the market value of the assets (including derivatives) held to manage the
liability portfolios are expected to vary across the range of economic scenarios considered. In some economic scenarios the derivative portfolio
may project gains in excess of the cost of the underlying guarantees on an EEV basis. If the calculation of the time value of options and guarantees
results in a positive outcome for a particular product then the figure is capped at zero, reflecting the strong interaction between the outcome of
the central economic scenario and the time value of financial options and guarantees in these circumstances, and the reported value of in-force
business before deduction of cost of capital and time value of options and guarantees will reflect the outcome from the full stochastic valuation.
340 Prudential plc

(e) Level of required capital
Group overview
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 following capital requirements for long-term business apply:
—— Asia: the level of required capital has been set to an amount at least equal to local statutory notification requirements.
–– For Singapore life operations, from 31 March 2020 the level of net worth and required capital is based on the Tier 1 Capital position under
the new risk-based capital framework (RBC2), which removes certain negative reserves permitted to be recognised in the full RBC2
Strategic report
regulatory position applicable to the Group’s LCSM position, in order to better reflect free surplus and its generation;
–– For China JV life operations, 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; and
—— US: the level of required capital has been set at 250 per cent of the risk-based capital (RBC) required by the National Association of Insurance
Commissioners (NAIC) at the Company Action Level (CAL).
(f) With-profits business and the treatment of the estate

For the Group’s relevant Asia operations, the proportion of surplus allocated to shareholders from the with-profits funds has been based on the
Governance
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 Asia in excess of the available capital of the with-profits funds.
(g) Internal asset management

In line with the EEV Principles, the in-force and new business results from long-term business include the projected future profit or loss from

asset management and service companies that support the Group’s covered insurance businesses. The results of the Group’s asset management
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

Overview
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
throughout the projection, with no trending or mean reversion to longer-term assumptions that cannot be observed in the current market.
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.
Since 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, additional allowance for credit risk where appropriate, 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.

Prudential plc
341
Annual Report 2020
8 Methodology and accounting presentation continued
(i) Methodology continued
(h) Allowance for risk and risk discount rates continued
Additional credit risk allowance
The Group’s methodology allows for credit risk. The total allowance for credit risk covers expected long-term defaults, a credit risk premium
(to reflect the volatility in downgrade and default levels) and short-term downgrades and defaults.
These allowances are initially reflected in determining best estimate returns and through the market risk allowance described above.
However, for those businesses largely backed by holdings of debt securities, the allowances in the projected returns and market risk
allowances may not be sufficient and an additional allowance may be appropriate.
The practical application of the allowance for credit risk varies depending on the type of business as described below:
Asia
For Asia, the allowance for credit risk incorporated in the projected rates of return and the market risk allowance is considered to be sufficient.
Accordingly, no additional allowance for credit risk is required.
The projected rates of return for holdings of corporate bonds comprise the risk-free rate plus an assessment of a term-dependent spread
(net of an allowance for expected defaults) over the risk-free rate.
US
For Jackson, an allowance for long-term defaults, as shown in note 9(i)(b), is reflected in the risk margin reserve charge that is deducted
in determining the projected spread margin between the earned rate on the investments and the policyholder crediting rate.
The risk discount rate incorporates an additional allowance for the credit risk premium and short-term downgrades and defaults,
as shown in note 9(i)(b). In determining this allowance, a number of factors have been considered, in particular including:
—— How much of the credit spread on debt securities represents an increased short-term credit risk not reflected in the risk margin reserve
long-term default assumptions and how much is liquidity premium (which is the premium required by investors to compensate for the risk
of longer-term investments that cannot be easily converted into cash at the fair market value). In assessing this effect, consideration has been
given to a number of approaches to estimate the liquidity premium by considering recent statistical data; and
—— Policyholder benefits for certain lines of business are not fixed. It is possible, in adverse economic scenarios, to pass on a component of credit
losses to policyholders (subject to guarantee features), through lower investment returns credited to policyholders. Consequently, it is only
necessary to allow for the balance of the credit risk in the risk discount rate.
The level of the additional allowance is assessed at each reporting period to take account of prevailing credit conditions and as the business in
force alters over time. In 2020 the additional allowance for non-variable annuity business was increased by 50 basis points, primarily to reflect
additional market volatility over the year. The additional allowance for variable annuity business has been set at one-fifth of the additional
allowance for non-variable annuity business to reflect the long-term proportion of variable annuity business invested in general account
debt securities.
Allowance for non-diversifiable non-market risks

The majority of non-market and non-credit risks are considered to be diversifiable. An allowance for non-diversifiable non-market risks
is estimated as set out below.
A base level allowance of 50 basis points is applied to cover the non-diversifiable non-market risks associated with the Group’s covered
business. For the Group’s businesses in less mature markets (such as the Philippines and Thailand), additional allowances are applied for
emerging market risk ranging from 100 to 250 basis points. The level and application of these allowances are reviewed and updated based on
an assessment of the Group’s exposure and experience in the markets. For the Group’s business in more mature markets, no additional allowance
is necessary. At 31 December 2020 the total allowance for non-diversifiable non-market risk in Asia is equivalent to a $(3.2) billion reduction to
the Asia EEV, or around (7) per cent of the embedded value.
(i) Foreign currency translation

Foreign currency profits and losses have been translated at average exchange rates for the year. 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 financial statements.
(j) Taxation
In determining the post-tax profit for the year 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.
342 Prudential plc

(ii) Accounting presentation
Group overview
(a) Analysis of post-tax profit
To the extent applicable, the presentation of the EEV basis profit or loss for the year is consistent with the classification between operating
and non-operating results that the Group applies for the analysis of IFRS basis results. Operating results are determined as described in note (b)
below and incorporate the following:
—— New business profit, as defined in note (i)(b) above;
—— Expected return on existing business, as described in note (c) below;
Strategic report
—— 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;
Governance
—— Effect of changes in economic assumptions;
—— Impact of NAIC reform and other related changes in the US in full year 2019; and
—— The impact of corporate transactions undertaken in the year.
Total profit or loss in the year attributable to shareholders and basic earnings per share include these items, together with actual investment
returns. The Group believes that operating profit, as adjusted for these 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 long-term 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.
For the purpose of determining the long-term returns for debt securities of Jackson for general account business, a risk margin reserve charge
is included, which reflects the expected long-term rate of default based on the credit quality of the portfolio. For Jackson, interest-related realised
gains and losses are amortised to the operating results over the maturity period of the sold bonds; for equity-related investments, a long-term
rate of return is assumed (as shown in note 9(i)(b)), which reflects the aggregation of risk-free rates and the equity risk premium at the end of the
reporting period. For variable annuity separate account business, operating profit includes the expected return on existing business adjusted to
reflect projected rates of return at the end of the reporting period, with the excess or deficit of the actual return recognised within non-operating
results, together with related hedging activity variances.
(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 year, 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 year 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.

Prudential plc
9 Assumptions
(i) Principal economic assumptions

The EEV basis 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 all projected future cash flows. The risk-free rates of return are largely based on local government bond
yields and are assumed to remain constant throughout the projection, with no trending or mean reversion to longer-term assumptions that cannot
be observed in the current market. The risk-free rates of return are shown below for each of the Group’s insurance 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. Following the regular review of expected long-term returns across economies, equity risk premiums in the majority of business units were
reduced by 50 basis points at 31 December 2020 from those applied at 31 December 2019, and the US dollar equity risk premium was increased
by 60 basis points. Following an in-depth and more granular review of historic data across economies, long-term expected spreads (net of
expected defaults) on corporate bonds were increased compared to the prior year. The related expected returns on equity and corporate bond
assets and risk discount rates have been adjusted accordingly.
As described in note 8(i)(h), risk discount rates are set equal to the risk-free rate at the valuation date plus allowances for market risk, additional
credit 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),
are not included in the risk discount rates.
Given the linkage to current risk-free rates, which are at historically low levels, risk discount rates at 31 December 2020 are generally lower
than has historically been the case. Under our EEV methodology there is a corresponding reduction in assumed future investment returns,
which will also be lower than historical norms, countering the impact of the lower risk discount rates.
(a) Asia notes (1)(2)
Risk discount rate %

10-year government Equity return
New business In-force business bond yield % (geometric) %
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
2020 2019 2020 2019 2020 2019 2020 2019
China JV 7.7 8.2 7.7 8.2 3.2 3.2 7.2 7.7

Hong Kong note (1) 2.0 3.7 2.1 3.7 0.9 1.9 4.4 4.8
Indonesia 8.9 10.8 10.0 10.8 6.5 7.2 10.8 11.9
Malaysia 4.4 5.8 4.9 5.9 2.6 3.3 6.1 7.3
Philippines 10.3 12.3 10.3 12.3 3.1 4.6 7.3 9.3
Singapore 2.3 3.3 2.9 3.9 0.9 1.7 4.4 5.7
Taiwan 3.0 3.4 2.5 3.0 0.3 0.7 4.3 5.2
Thailand 8.5 9.2 8.5 9.2 1.3 1.5 5.5 6.2
Vietnam 4.3 5.3 4.5 5.5 2.6 3.4 6.8 8.1
Total weighted average (new business) note (3) 4.1 4.9 n/a n/a 2.1 2.6 5.8 6.1
Total weighted average (in-force business) note (3) n/a n/a 3.6 4.9 1.7 2.6 5.3 6.1
Notes
(1) For Hong Kong, the assumptions shown are for US dollar denominated business. For other businesses, the assumptions shown are for local currency denominated business.
(2) Expected long-term inflation assumptions in Asia range from 1.5 per cent to 5.5 per cent (31 December 2019: 1.5 per cent to 5.5 per cent).
(3) Total weighted average assumptions for Asia have been determined by weighting each business’s assumptions by reference to the EEV basis new business profit and the net closing value
of in-force business. The changes in the risk discount rates for individual Asia businesses reflect the movements in the local government bond yields, changes in the equity risk premiums,
changes in the allowance for market risk (including as a result of changes in asset mix) and changes in product mix.
344 Prudential plc

(b) US
Group overview
31 Dec 2020 % 31 Dec 2019 %
Risk discount rate:

Variable annuity note 6.0 6.5
Non-variable annuity note 3.2 3.7
New business weighted average 5.7 6.1
In-force business weighted average 5.8 6.2
Strategic report
Allowance for long-term defaults included in projected spread note 8(i)(h) 0.2 0.2
US 10-year treasury bond yield 0.9 1.9
Equity risk premium (geometric) 3.5 2.9
Pre-tax expected long-term nominal rate of return for US equities (geometric) 4.4 4.8
Expected long-term rate of inflation 3.0 2.9
S&P 500 equity return volatility note (ii)(b) 17.5 17.5
Governance
Note
Includes an additional allowance for credit risk of 0.3 per cent for variable annuity business and 1.5 per cent for non-variable annuity business (31 December 2019: 0.2 per cent and 1.0 per cent
respectively) as described in note 8(i)(h).
(ii) 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 8(i)(d).

(a) Asia
—— The stochastic cost of guarantees is primarily of significance for the Hong Kong, Malaysia, Singapore, Taiwan and Vietnam businesses;
—— The principal asset classes are government bonds, corporate bonds and equity;
—— Interest rates are projected using a stochastic interest rate model calibrated to the current market yields;
—— 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 18 per cent to 35 per cent for both years; and
—— The volatility of government bond yields ranges from 1.1 per cent to 2.0 per cent for both years.
(b) US (Jackson)
—— Interest rates and equity returns are projected using a log-normal generator reflecting historical market data;
—— Corporate bond returns are based on treasury yields plus a spread that reflects current market conditions;
—— The volatility of equity returns ranges from 17 per cent to 26 per cent for both years; and
—— The standard deviation of interest rates ranges from 1.7 per cent to 1.8 per cent (31 December 2019: from 3.1 per cent to 3.3 per cent).


Prudential plc
9 Assumptions continued
(iii) 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.
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.
Demographic assumptions
Persistency, mortality and morbidity assumptions are based on an analysis of recent experience, and reflect expected future experience.
Where relevant, when calculating the time value of financial options and guarantees, policyholder withdrawal rates vary in line with the emerging
investment conditions according to management’s expectations. 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.
Expense assumptions
Expense levels, including those of the service companies that support the Group’s long-term 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. An allowance is made for
short-term required expenses that are not representative of the longer-term expense loadings of the relevant businesses. At 31 December 2020
the allowance held for these costs across the Group was $128 million, arising in Asia. Expense overruns are reported where these are expected
to be short-lived, including businesses that are growing rapidly or are sub-scale.
For Asia, expenses comprise costs borne directly and costs recharged/allocated from the Group head office functions in London and
Hong Kong that are attributable to the long-term insurance (covered) business. The assumed future expenses for the long-term insurance
business allow for amounts expected to be recharged/allocated by the head office functions. Development expenses are allocated to Asia
covered business and are charged as incurred.
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/allocated to the long-term insurance or asset management operations, primarily for corporate
related activities that are charged as incurred, together with restructuring and IFRS 17 implementation costs incurred across the Group.
Tax rates
The assumed long-term effective tax rates for operations reflect the expected incidence of taxable profit and loss in the projected future cash
flows as explained in note 8(i)(j). The local standard corporate tax rates applicable for 2020 and 2019 are as follows:
Asia operations:
China JV 25.0
Hong Kong 16.5 per cent on 5 per cent of premium income
Indonesia note 2019: 25.0; 2020 and 2021: 22.0; from 2022: 20.0
Malaysia 24.0
Philippines 30.0
Singapore 17.0
Taiwan 20.0
Thailand 20.0
Vietnam 20.0
US operations 21.0
Note
Reflects a reduction from 25 per cent effective in the first half of 2020.
346 Prudential plc

Group overview
10 Insurance new business note (a)
Present value of new

Annual premium business premiums
Single premiums Regular premiums equivalent (APE) (PVNBP)
2020 $m 2019 $m 2020 $m 2019 $m 2020 $m 2019 $m 2020 $m 2019 $m
Asia
Strategic report
Cambodia – – 10 24 10 24 45 111
China JV note (b) 1,068 710 475 518 582 590 2,705 2,586
Hong Kong 184 387 741 1,977 758 2,016 5,095 12,815
India note (c) 225 155 154 245 177 260 902 1,179
Indonesia 226 292 244 361 267 390 1,154 1,668
Laos – – 1 – 1 – 3 –
Malaysia 90 209 337 333 346 355 2,023 2,090
Myanmar – – – – – – 1 –
Governance
Philippines 49 51 134 153 139 158 528 561
Singapore 1,496 1,217 460 539 610 660 5,354 4,711
Taiwan 201 544 367 278 387 332 1,445 1,418
Thailand 122 192 171 140 183 159 768 763
Vietnam 21 22 234 215 236 217 1,564 1,342
Total Asia 3,682 3,779 3,328 4,783 3,696 5,161 21,587 29,244

US
Variable annuities 14,564 12,692 – – 1,456 1,270 14,564 12,692
Elite Access (variable annuities) 2,057 2,002 – – 206 200 2,057 2,002
Fixed annuities 327 1,194 – – 33 119 327 1,194
Fixed indexed annuities 997 3,821 – – 100 382 997 3,821
Institutional 1,284 2,522 – – 128 252 1,284 2,522
Total US 19,229 22,231 – – 1,923 2,223 19,229 22,231
Group total note (d) 22,911 26,010 3,328 4,783 5,619 7,384 40,816 51,475
Notes
(a) The tables shown above are 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 premium income recorded in the Group IFRS income statement.
(b) New business in China JV is included at Prudential’s 50 per cent interest in the joint venture.
(c) New business in India is included at Prudential’s 22 per cent interest in the associate.
(d) In 2020, the Africa business sold new business APE of $112 million (2019: $82 million on an actual exchange rate basis, $74 million on a constant exchange rate basis). Given the relative
immaturity of the Africa business, it is incorporated into the Group’s EEV basis results on an IFRS basis and is excluded from new business sales and profit metrics.
11 Post balance sheet events

Subject to shareholder and regulatory approvals, the planned demerger is expected to complete in the second quarter of 2021 and would
lead to a significantly earlier separation of Jackson from the Group than would have been possible through a minority IPO and future sell-downs,

Prudential plc
Statement of Directors’ responsibilities in respect of the
European Embedded Value (EEV) basis supplementary information
The directors have chosen to prepare supplementary information

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 on the
EEV basis results.
When compliance with the EEV Principles is stated, those principles

require the directors to prepare supplementary information in
accordance with the Embedded Value Methodology (EVM) contained
in the EEV Principles and to disclose and explain any non-compliance
with the EEV guidance included in the EEV Principles.
In preparing the EEV supplementary information, the directors have:
—— Prepared the supplementary information in accordance with the

EEV Principles;
—— Identified and described the business covered by the EVM;
—— Applied the EVM consistently to the covered business;
—— Determined assumptions on a realistic basis, having regard to past,

current and expected future experience and to any relevant
external data, and then applied them consistently;
—— Made estimates that are reasonable and consistent; and
—— Described the basis on which business that is not covered business

has been included in the supplementary information, including any
material departures from the accounting framework applicable to
the Group’s financial statements.
348 Prudential plc

Independent auditor’s report to Prudential plc on the
European Embedded Value (EEV) basis supplementary information
Opinion We also considered less predictable but realistic second order impacts,
Group overview
We have audited the EEV basis supplementary information of such as failure of some of the Group’s counterparties (such as banks
Prudential plc (‘the Company’) for the year ended 31 December 2020 and reinsurers) to meet commitments, which could give rise to a
which comprise the EEV results highlights, movement in Group EEV negative impact on the Group’s financial position and liquidity, and
shareholders’ equity, movement in Group free surplus and related wider economic factors such as the Coronavirus pandemic’s impact
notes, including the basis of preparation on page 323. The EEV basis on economic volatility and market uncertainty in the period, and other
supplementary information should be read in conjunction with the such macroeconomic events.
Group financial statements.
Strategic report
We considered whether these risks could plausibly affect the liquidity
In our opinion, the EEV basis supplementary information of the or solvency in the going concern period by assessing the Directors’
Company for the year ended 31 December 2020 has been properly sensitivities over the level of available financial resources indicated
prepared, in all material respects, in accordance with the European by the Group’s cash flow forecasts taking account of severe but
Embedded Value Principles issued by the European Insurance CFO plausible adverse effects that could arise from these risks individually
Forum in 2016 (‘the EEV Principles’) using the methodology and and collectively.
assumptions set out in the Notes on the EEV basis results.
We assessed the completeness of the going concern disclosure.
Governance
Basis for opinion
Our conclusions based on this work:
We conducted our audit in accordance with International Standards on
Auditing (UK) (“ISAs (UK)”), including ISA (UK) 800, and the terms of —— we consider that the directors’ use of the going concern basis of
our engagement. Our responsibilities are described below. We have accounting in the preparation of the EEV basis supplementary
fulfilled our ethical responsibilities under, and are independent of the information is appropriate;
Company in accordance with, UK ethical requirements including the
FRC Ethical Standard. We believe that the audit evidence we have —— we have not identified, and concur with the directors’ assessment

obtained is a sufficient and appropriate basis for our opinion. that there is not, a material uncertainty related to events or
conditions that, individually or collectively, may cast significant
Emphasis of matter – special purpose basis of preparation doubt on the Group’s ability to continue as a going concern for the
We draw attention to page 323 of the EEV basis supplementary going concern period; and
information. As explained on that page, the EEV basis supplementary
information is prepared to provide additional information to users of the —— we found the going concern disclosure to be acceptable.
Group financial statements. As a result, the EEV basis supplementary
information may not be suitable for another purpose. Our opinion is However, as we cannot predict future events or conditions and as
not modified in respect of this matter. subsequent events may result in outcomes that are inconsistent with
judgements that were reasonable at the time they were made, the
above conclusions are not a guarantee that the Group will continue in
Going Concern
operation.
The Directors have prepared the EEV basis supplementary information
on the going concern basis as they do not intend to liquidate the Group
or to cease their operations, and as they have concluded that the
Group’s financial position means that this is realistic. They have also
concluded that there are no material uncertainties that could have cast
significant doubt over their ability to continue as a going concern for at
least a year from the date of approval of the EEV basis supplementary
information (“the going concern period”).
We used our knowledge of the Group, its industry, and the general

economic environment in which it operates to identify the inherent
risks to its business model and analysed how those risks might affect
the Group’s financial resources or ability to continue operations over
the going concern period. The risks that were considered most likely to
adversely affect the Group’s available financial resources over this
period were:
—— Adverse impacts arising from fluctuations or negative trends in the

economic environment which affect the valuations of the Group’s
investments, wider credit spreads and defaults and valuation of
EEV shareholders’ equity due to the impact of these market
movements;
—— The impact on regulatory capital solvency margins from

movements in interest rates; and
—— Severely adverse policyholder lapse or claims experience.

Prudential plc
349
Annual Report 2020
Independent auditor’s report to Prudential plc on the European Embedded Value (EEV)
basis supplementary information / continued
Fraud and breaches of laws and regulations – ability to detect To address the pervasive risk as it relates to management override,
Identifying and responding to risks of material misstatement we also performed procedures including:
due to fraud
—— Identifying journal entries to test for all in-scope components,
To identify risks of material misstatement due to fraud (“fraud risks”)
based on risk criteria and comparing the identified entries to
we assessed events or conditions that could indicate an incentive or
supporting documentation. These include unusual journal entries
pressure to commit fraud or provide an opportunity to commit fraud.
related to non-recurring transactions.
Our risk assessment procedures included:
—— Evaluating the business purpose of non-recurring transactions.
—— Enquiring of directors, the audit committee, internal audit, group
security, and inspecting key papers provided to those charged with —— Assessing significant accounting estimates for bias.
governance as to the high-level policies and procedures to prevent
and detect fraud, including the Group’s channel for
Identifying and responding to risks of material misstatement
“whistleblowing” and process for engaging local management
due to non-compliance with laws and regulations
to identify fraud risks specific to their business units, as well as
We identified areas of laws and regulations that could reasonably be
whether they have knowledge of any actual, suspected, or
expected to have a material effect on the EEV basis supplementary
alleged fraud.
information from our general commercial and sector experience,
—— Reading board and audit committee minutes. through discussion with the directors, and from inspection of the
Group’s regulatory and legal correspondence. We discussed with
—— Considering remuneration incentive schemes and performance the directors and other management the policies and procedures
targets for directors. regarding compliance with laws and regulation.
—— Consulted with professionals with forensic knowledge to assist us in As the Group is regulated, our assessment of risks involved gaining
identifying fraud risks based on discussions of the circumstances of an understanding of the control environment including the entity’s
the Group. procedures for complying with regulatory requirements.
We communicated identified fraud risks throughout the audit team We communicated identified laws and regulations throughout our
and remained alert to any indications of fraud throughout the audit. team and remained alert to any indications of non-compliance
This included communication from the group team to all component throughout the audit. This included communication from the group
audit teams in scope of relevant fraud risks identified at the Group level to all in-scope component audit teams of relevant laws and regulations
and requests to these audit teams to report to the Group audit team identified at the group level, and a request for these teams to report
any instances of fraud that could give rise to a material misstatement to the group any instances of non-compliance with said laws and
at Group. regulations, or any identified local laws and regulations, that could
give rise to a material misstatement at group.
As required by auditing standards, and taking into account possible
pressures to meet profit targets, we perform procedures to address The potential effect of these laws and regulations on the EEV basis
the risks of management override of controls, in particular the risk supplementary information varies considerably.
that group and component management may be in a position to make
inappropriate accounting entries and the risk of bias in accounting Firstly, the Group is subject to laws and regulations that directly affect
estimates and judgements. Accordingly, we identified a fraud risk the EEV basis supplementary information including taxation legislation
related to the selection of EEV operating assumptions given their and we assessed the extent of compliance with these laws and
direct impact on the Group’s embedded value, the opportunity regulations as part of our procedures on the related EEV basis
for management to manipulate assumptions due to the subjectivity supplementary information items.
involved and given the long-term nature of these assumptions which
Secondly, the Group is subject to many other laws and regulations
are more difficult to corroborate, and potential incentives for the group
where the consequences of non-compliance could have a material
to manipulate the embedded value of both the US and Asia businesses
effect on amounts or disclosures in the EEV basis supplementary
given the planned separation of the US business.
information, for instance through the imposition of fines or litigation
On this audit we do not consider there is a fraud risk related to revenue or the loss of the Group’s licence to operate. We identified the
recognition as there is limited management judgement involved in the area of regulatory capital as that most likely to have such an effect
determination of all material revenue streams as the amounts are recognising the financial and regulated nature of the Group’s activities.
contractually derived. Auditing standards limit the required audit procedures to identify
non-compliance with these laws and regulations to enquiry of the
In determining the audit procedures to address the identified fraud directors and other management and inspection of regulatory and
risks, we took into account the results of our evaluation and testing of legal correspondence, if any. Therefore, if a breach of operational
the operating effectiveness of the group-wide anti-fraud risk controls. regulations is not disclosed to us or evident from relevant
In order to address the risk of fraud specifically as it relates to the EEV correspondence, an audit will not detect that breach.
operating assumptions, we involved actuarial specialists to assist in our
challenge of management. We challenged management in relation to
the selection of assumptions and the appropriateness of the rationale
for any changes, the consistency of the selected assumptions across
different aspects of the financial reporting process and comparison
to our understanding of the product portfolio, trends in experience,
policyholder behaviour and economic conditions and also by
reference to market practice.
350 Prudential plc

Context of the ability of the audit to detect fraud or breaches The purpose of our audit work and to whom
Group overview
of law or regulation we owe our responsibilities
Owing to the inherent limitations of an audit, there is an unavoidable This report is made solely to the Company in accordance with the
risk that we may not have detected some material misstatements in the terms of our engagement. Our audit work has been undertaken so that
EEV basis supplementary information, even though we have properly we might state to the Company those matters we have been engaged
planned and performed our audit in accordance with auditing to state to it in this report and for no other purpose. To the fullest
standards. For example, the further removed non-compliance with extent permitted by law, we do not accept or assume responsibility to
laws and regulations (irregularities) is from the events and transactions anyone other than the Company for our audit work, for this report, or
Strategic report
reflected in the EEV basis supplementary information, the less likely for the opinions we have formed.
the inherently limited procedures required by auditing standards
would identify it.
In addition, as with any audit, there remained a higher risk of non-

detection of fraud, as these may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal controls. We Philip Smart
are not responsible for preventing non-compliance or fraud and cannot for and on behalf of KPMG LLP
Governance
be expected to detect non-compliance with all laws and regulations. Chartered Accountants
London
Other information
The directors are responsible for the other information presented in 2 March 2021
the Annual Report together with the EEV basis supplementary

information. Our opinion on the EEV basis supplementary information
does not cover the other information and, accordingly, we do not

express an audit opinion or any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so,

consider whether, based on our EEV basis supplementary information
audit work, the information therein is materially misstated or
inconsistent with the EEV basis supplementary information or our audit
knowledge. Based solely on that work, we have not identified material
misstatements in the other information.
Directors’ responsibilities
As explained more fully in their statement set out on page 348,
the directors are responsible for: the preparation of the EEV basis
supplementary information 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 on the EEV basis results.
They are also responsible for: such internal control as they determine
is necessary to enable the preparation of EEV basis supplementary
information that is free from material misstatement, whether due to
fraud or error; determining that the basis of preparation is acceptable
in the circumstances; 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 they
either intend to liquidate the Group or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the
EEV basis supplementary information as a whole is free from material
misstatement, whether due to fraud or error, and to issue our opinion
in an auditor’s report. Reasonable assurance is a high level of
assurance, but does not guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of the EEV basis supplementary information.
A fuller description of our responsibilities is provided on the FRC’s

website at www.frc.org.uk/auditorsresponsibilities.

Prudential plc
351
Annual Report 2020
Additional
information
Contents
354 Index to the additional unaudited financial information
379 Risk factors
391 Glossary
396 Shareholder information
399 How to contact us
352 Prudential plc

353
Annual Report 2020
Prudential plc

Index to the Additional unaudited financial information
Page
I Additional financial information
(i) Group capital position 355
(ii) Funds under management 359
(iii) Holding company cash flow 360
(iv) Analysis of adjusted operating profit by driver 361
(v) Asia operations – analysis of adjusted operating profit by business unit 365
(vi) Reconciliation of expected transfer of value of in-force business and required capital to free surplus for Asia long-term 367
business operations
(vii) Option schemes 369
(viii) Selected historical financial information of Prudential 371
II Calculation of alternative performance measures

(i) Reconciliation of adjusted operating profit to profit before tax 373
(ii) Calculation of IFRS net gearing ratio 373
(iii) Return on IFRS shareholders’ equity 374
(iv) Calculation of IFRS shareholders’ equity per share 375
(v) Calculation of asset management cost/income ratio 375
(vi) Reconciliation of Asia renewal insurance premium to gross premiums earned 375
(vii) Reconciliation of APE new business sales to gross premiums earned 376
(viii) Reconciliation between IFRS and EEV shareholders’ equity 376
(ix) Calculation of return on embedded value 377
(x) Calculation of EEV shareholders’ funds per share 378
354 Prudential plc

Additional unaudited financial information
Group overview
I Additional financial information
I(i) Group capital position

Overview
Prudential plc applies the local capital summation method (LCSM) that has been agreed with the Hong Kong Insurance Authority (IA) to
determine group regulatory capital requirements (both minimum and prescribed levels). Ultimately, Prudential will become subject to the
Group-wide Supervision (GWS) Framework. The primary legislation was enacted in July 2020 and will come into operation on 29 March 2021.
The relevant subsidiary legislation, including the Insurance (Group Capital) Rules, was tabled before the Legislative Council on 6 January 2021
Strategic report
and will also come into operation on 29 March 2021. The GWS Framework is expected to be effective for Prudential upon designation by the
Hong Kong IA in the second quarter of 2021, subject to transitional arrangements.
The GWS methodology is expected to be largely consistent with that applied under LCSM with the exception of the treatment of debt
instruments which will be subject to transitional arrangements under the GWS Framework. As agreed with the Hong Kong IA, only specific
bonds (being those subordinated debt instruments issued by Prudential plc at the date of demerger of M&G plc) are currently included as
eligible Group LCSM capital resources for the purposes of satisfying group minimum and prescribed capital requirements. Senior debt
instruments issued by Prudential plc have not been included as part of the Group capital resources and are treated as a liability in the
Governance
LCSM results. Under the GWS Framework, Prudential’s initial analysis indicates that all debt instruments (senior and subordinated) issued
by Prudential plc will meet the transitional conditions set by the Hong Kong IA and will be included as eligible Group capital resources.
If this were to be the case, the 31 December 2020 Group shareholder LCSM coverage ratio (over GMCR) presented below would increase
by 35 percentage points to 363 per cent. This is subject to final approval by the Hong Kong IA.
Further detail on the LCSM is included in the basis of preparation section below.
For regulated insurance entities, the capital resources and required capital included in the LCSM measure for Hong Kong IA Group regulatory
purposes are based on the local solvency regime applicable in each jurisdiction. At 31 December 2020, the Prudential Group’s total surplus of

capital resources over the regulatory Group Minimum Capital Requirement (GMCR), calculated using this LCSM was $26.4 billion, before
allowing for the payment of the 2020 second interim ordinary dividend, equating to a coverage ratio of 329%.
The Group holds material participating business in Hong Kong, Singapore and Malaysia. If the capital resources and minimum capital
requirement attributed to this policyholder business are excluded, then the Prudential Group shareholder LCSM surplus of capital resources
over the regulatory GMCR at 31 December 2020 was $11.0 billion, before allowing for the payment of the 2020 second interim ordinary dividend,
equating to a coverage ratio of 328%.
Estimated Group LCSM capital position based on Group Minimum Capital Requirement (GMCR)
31 Dec 2020 31 Dec 2019
Less Less
Amounts attributable to Prudential plc Total policyholder Shareholder Total policyholder Shareholder
Capital resources ($bn) 37.9 (22.1) 15.8 33.1 (19.1) 14.0

Group Minimum Capital Requirement ($bn) 11.5 (6.7) 4.8 9.5 (5.0) 4.5
LCSM surplus (over GMCR) ($bn) 26.4 (15.4) 11.0 23.6 (14.1) 9.5
LCSM ratio (over GMCR) (%) 329% 328% 348% 309%
The shareholder LCSM capital position by segment is presented below at 31 December 2020 and 31 December 2019 for comparison:

31 Dec 2020 $bn
Shareholder
Total Less Unallocated to
Amounts attributable to Prudential plc Asia policyholder Asia US a segment Group total
Capital resources 33.7 (22.1) 11.6 4.6 (0.4) 15.8

Group Minimum Capital Requirement 10.1 (6.7) 3.4 1.4 – 4.8
LCSM surplus (over GMCR) 23.6 (15.4) 8.2 3.2 (0.4) 11.0
31 Dec 2019 $bn
Shareholder
Total Less Unallocated to
Amounts attributable to Prudential plc Asia policyholder Asia US a segment Group total
Capital resources 26.8 (19.1) 7.7 5.3 1.0 14.0

Group Minimum Capital Requirement 8.0 (5.0) 3.0 1.5 – 4.5
LCSM surplus (over GMCR) 18.8 (14.1) 4.7 3.8 1.0 9.5
All the amounts above are presented excluding amounts attributable to non-controlling interests. For example, the US amounts relate solely
to Prudential’s 88.9 per cent economic interest in Jackson Financial Inc.

Prudential plc
355
Annual Report 2020
Additional unaudited financial information / continued
I Additional financial information continued
I(i) Group capital position continued

Sensitivity analysis
The estimated sensitivity of the Group shareholder LCSM capital position (based on GMCR) to significant changes in market conditions
is as follows:
31 Dec 2020 31 Dec 2019

LCSM surplus LCSM ratio LCSM surplus LCSM ratio
Impact of market sensitivities note (1) $bn % $bn %
Base position 11.0 328% 9.5 309%

Impact of:
10% instantaneous increase in equity markets 0.3 15% n/a n/a
20% instantaneous fall in equity markets 0.6 (13)% 1.5 (9)%
40% fall in equity markets note (2) (0.2) (23)% (0.2) (39)%
50 basis points reduction in interest rates (1.2) (39)% (0.2) (17)%
100 basis points increase in interest rates (1.0) 11% (1.3) (19)%
100 basis points increase in credit spreads note (3) 0.1 14% (1.6) (36)%
Notes
(1) The Group results consist of the combined impact from the movement in Asia and US LCSM surplus under these stresses. The equity fall and the interest rate reduction sensitivities consist
of positive surplus impacts from the US, driven by expected derivative gains, and negative surplus impacts from Asia, which for the interest rate reduction sensitivity is driven by Hong Kong
reflecting the accounting mismatch that exists under the current regulatory framework.
(2) Where hedges are dynamic, rebalancing is allowed for by assuming an instantaneous 20 per cent fall followed by a further 20 per cent fall over a four-week period.
(3) At 31 December 2019 the US RBC solvency position was included using a stress of 10 times expected credit defaults rather than the 100 basis points increase in credit spreads applied
at 31 December 2020.
The sensitivity results above assume instantaneous market movements and reflect all consequential impacts as at the valuation dates.
An exception to the instantaneous market movements assumed is the (40) per cent equity sensitivity where for Jackson an instantaneous
20 per cent market fall is assumed to be followed by a further market fall of 20 per cent over a four-week period with dynamic hedges assumed
to be rebalanced over the period. Aside from this assumed dynamic hedge rebalancing for Jackson in the (40) per cent equity sensitivity, the
sensitivity results only allow for limited management actions such as changes to future policyholder bonuses. If such economic conditions
persisted, the financial impacts may differ to the instantaneous impacts shown above. In this case management could also take additional actions
to help mitigate the impact of these stresses. These actions include, but are not limited to, rebalancing investment portfolios, further market risk
hedging, increased use of reinsurance, repricing of in-force benefits, changes to new business pricing and the mix of new business being sold.
Analysis of movement in Group shareholder LCSM surplus

A summary of the estimated movement in the Group shareholder LCSM surplus (based on GMCR) from $9.5 billion at 31 December 2019
to $11.0 billion at 31 December 2020 is set out in the table below.
2020 $bn 2019 $bn
Balance at 1 Jan 9.5 9.7

Operating:
Operating capital generation from the in-force business 2.2 2.5
Investment in new business (0.2) (0.6)
Operating capital generation 2.0 1.9
Non-operating and other capital movements:
Non-operating experience (including market movements) (2.0) (0.6)
Regulatory changes 2.2 0.1
Reinsurance of US fixed and fixed indexed annuity in-force portfolio to Athene 0.8 –
Athene US equity investment (0.2) –
US hedge modelling revision (0.4) –
Other corporate activities (0.1) (0.8)
M&G Demerger costs – (0.4)
Subordinated debt redemption – (0.5)
M&G Demerger related impacts – 1.0
Non-operating results 0.3 (1.2)
Remittances from discontinued operations (M&G plc) – 0.7
External dividends (0.8) (1.6)
Net dividend impact (0.8) (0.9)
Net movement in LCSM surplus 1.5 (0.2)
Balance at 31 Dec 11.0 9.5
356 Prudential plc

The estimated movement in the Group shareholder LCSM surplus over 2020 is driven by:
Group overview
—— Operating capital generation of $2.0 billion: generated by the expected return on in-force business partially offset by the strain
on new business written during the year;
—— Non-operating experience of $(2.0) billion: this includes the negative impact of higher equity markets on Jackson’s derivatives net
of policyholder reserves and required capital movements, and the negative impact of falling interest rates on the US and Asia surplus
over the year, partially offset by management actions, including the benefit from the change to the Hong Kong valuation interest rate
as granted by the regulator in July 2020;
Strategic report
—— Regulatory changes of $2.2 billion: reflecting the benefit from the new Singapore risk-based capital framework (RBC2) effective at
31 March 2020;
—— Reinsurance of US fixed and fixed indexed annuity in-force portfolio to Athene of $0.8 billion: the impact of the transaction, which was
effective at 1 June 2020, was an increase to LCSM surplus comprising of the ceding commission received and required capital released
less tax and adverse consequential effects on the US’s capital resources;
—— Athene equity investment $(0.2) billion: this is the net effect on LCSM surplus of Athene’s $500 million equity investment in Prudential’s
US business in return for an 11.1 per cent economic interest in that same business, which completed in July 2020;
—— US hedge modelling revision of $(0.4) billion: at 31 December 2019, Jackson early adopted the provisions of the National Association of
Governance
Insurance Commissioners Valuation Manual Minimum Standards No. VM-21. During 2020, Jackson determined that a simplifying modelling
assumption was not consistent with its intent in the adoption of VM-21 and the revised modelling adopted for calculating reserves and capital
reduced surplus by $390 million;
—— Other Corporate activities (excluding demerger items) of $(0.1) billion: this is the effect on LCSM surplus of other corporate transactions
in the period, which in 2020 comprised mainly of a $0.8 billion benefit from the reinsurance transaction in Hong Kong described in note D1.1
of the IFRS financial statements, offset by $(0.9) billion principally from the strategic bancassurance partnership with TMB in Thailand; and
—— Net dividend impact of $(0.8) billion: this is the payment of external dividends during 2020.

Reconciliation of Group shareholder LCSM surplus to EEV free surplus (excluding intangibles)
31 Dec 2019
31 Dec 2020 $bn $bn
Unallocated
Asia US to a segment Group total Group total
Estimated Group shareholder LCSM surplus (over GMCR) 8.2 3.2 (0.4) 11.0 9.5
Increase required capital for EEV free surplus note (1) (0.8) (2.0) – (2.8) (2.8)
Adjust surplus assets and core structural borrowings to market value note (2) 0.5 0.3 (0.4) 0.4 0.3
Add back inadmissible assets note (3) 0.2 0.1 – 0.3 0.2
Deductions applied to EEV free surplus note (4) (3.1) – – (3.1) (0.9)
Other – 0.1 0.2 0.3 0.3
EEV free surplus excluding intangibles* 5.0 1.7 (0.6) 6.1 6.6
* As per the ‘Free surplus excluding distribution rights and other intangibles’ shown in the statement of Movement in Group free surplus of the Group’s EEV basis results.
Notes
(1) Required capital under EEV is set at least equal to local statutory notification requirements for Asia and so can differ from the minimum capital requirement. Jackson required capital is set
at 250 per cent of the risk-based capital (RBC) required by the NAIC at the Company Action Level (CAL). This is higher than the solo legal entity statutory minimum capital requirement of

100 per cent CAL that is included in the LCSM surplus (over GMCR).
(2) The EEV Principles require surplus assets to be included at fair value and central core senior debt is held at market value. Within LCSM surplus, some local regulatory regimes value certain
assets at cost and core senior debt is held at amortised cost.
(3) LCSM restricts the valuation of certain sundry non-intangible assets. In most cases these assets are considered fully recognisable in free surplus. As an exception to this, both LCSM surplus
and EEV free surplus restrict the deferred tax asset held by Jackson to the level allowed to be admitted by the local regulator in local statutory capital resources.
(4) Deductions applied to EEV free surplus primarily include: the impact of reporting EEV free surplus for Singapore based on the Tier 1 requirements under the RBC2 framework, which removes
certain negative reserves permitted to be recognised in the full RBC 2 regulatory position used for LCSM, and applying the embedded value reporting approach issued by the China
Association of Actuaries (CAA) within EEV free surplus as compared to the C-ROSS surplus reported for local regulatory purposes (predominantly arising from the requirement under the
CAA embedded value methodology to establish a deferred profit liability within EEV net worth).

Prudential plc
357
Annual Report 2020
I(i) Group capital position continued

Reconciliation of Group IFRS shareholders’ equity to shareholder LCSM capital resources position
31 Dec 2020 31 Dec 2019

$bn $bn
Group IFRS shareholders’ equity 20.9 19.5

Remove DAC, goodwill and intangibles recognised on the IFRS statement of financial position (21.1) (18.2)
Add subordinated debt at IFRS book value note (1) 4.6 4.6
Valuation differences note (2) 11.3 8.6
Other note (3) 0.1 (0.5)
Estimated Group shareholder LCSM capital resources 15.8 14.0
Notes
(1) Subordinated debt is treated as capital resources under LCSM but as a liability under IFRS.
(2) Valuation differences reflect differences in the basis of valuing assets and liabilities between IFRS and local statutory valuation rules, including deductions for inadmissible assets. Material
differences arise in Jackson where IFRS variable annuity guarantee reserves are valued on a fair value basis compared to local statutory reserves which reflect long-term historic rates. Further,
local US statutory reserves are reduced by an expense allowance linked to surrender charges, whereas IFRS makes no such allowance but instead defers acquisition costs on the balance sheet
as a separate asset (which is not recognised on the statutory balance sheet). Other material differences include in Singapore where the local capital resources under RBC2 permits the
recognition of certain negative reserves in the local statutory position that are not recognised under IFRS.
(3) Other differences include the consequential impact on non-controlling interests arising from the other reconciling items.
In advance of the GWS Framework coming into force, Prudential applies the local capital summation method (LCSM) that has been agreed with
the Hong Kong IA to determine group regulatory capital requirements (both minimum and prescribed levels). The summation of local statutory
capital requirements across the Group is used to determine group regulatory capital requirements, with no allowance for diversification between
business operations. The Group capital resources is determined by the summation of capital resources across local solvency regimes for
regulated entities and IFRS net assets (with adjustments described below) for non-regulated entities.
In determining the LCSM capital resources and required capital the following principles have been applied:
—— For regulated insurance entities, capital resources and required capital are based on the local solvency regime applicable in each jurisdiction,
with minimum required capital set at the solo legal entity statutory minimum capital requirements. The treatment of participating funds
is consistent with the local basis;
—— For the US insurance entities, capital resources and required capital are based on the local US RBC framework set by the NAIC, with
minimum required capital set at 100 per cent of the CAL RBC;
—— For asset management operations and other regulated entities, the shareholder capital position is derived based on the sectoral basis
applicable in each jurisdiction, with minimum required capital based on the solo legal entity statutory minimum capital requirement;
—— For non-regulated entities, the capital resources is based on IFRS net assets after deducting intangible assets. No required capital is held
in respect of unregulated entities;
—— For entities where the Group’s shareholding is less than 100%, the contribution of the entity to the Group LCSM capital resources and
required capital represents the Group’s share of these amounts and excludes any amounts attributable to non-controlling interests;
—— Investments in subsidiaries, joint ventures and associates (including, if any, loans that are recognised as capital on the receiving entity’s
balance sheet) are eliminated from the relevant holding company to prevent the double counting of capital resources; and
—— The Hong Kong IA has agreed that specific bonds (being those subordinated debt instruments issued by Prudential plc at the date of
demerger of M&G plc) can be included as part of the Group’s capital resources for the purposes of satisfying group minimum and prescribed
capital requirements. Senior debt instruments issued by Prudential plc have not been included as part of the Group capital resources and are
treated as a liability in the LCSM results presented above.
358 Prudential plc

I(ii) Funds under management
Group overview
For Prudential’s asset management businesses, funds managed on behalf of third parties are not recorded on the statement of financial position.
They are, however, a driver of profitability. Prudential therefore analyses the movement in the funds under management each year, focusing on
those which are external to the Group and those primarily held by the Group’s insurance businesses. The table below analyses, by segment, the
funds of the Group held in the statement of financial position and the external funds that are managed by Prudential’s asset management
businesses.
31 Dec 2020 31 Dec 2019
Strategic report
$bn $bn
Asia operations:
Internal funds 171.4 141.9
Eastspring Investments external funds, including M&G plc* (as analysed in note I(v)) 109.6 124.7
281.0 266.6
US operations – internal funds 273.7 273.4
Other operations 3.6 3.9
Governance
Total Group funds under management 558.3 543.9
* Funds managed on behalf of M&G plc are presented as external rather than internal funds under management to align to the presentation since the demerger in October 2019.
Note
Total Group funds under management comprise:
31 Dec 2020 31 Dec 2019
$bn $bn

Total investments and cash and cash equivalents on the consolidated statement of financial position 437.4 412.6
External funds of Eastspring Investments, including M&G plc 109.6 124.7
Internally managed funds held in joint ventures and associate, excluding assets attributable to external unit holders of the consolidated
collective investment schemes and other adjustments 11.3 6.6
Total Group funds under management 558.3 543.9

Prudential plc
359
Annual Report 2020
I(iii) Holding company cash flow

The holding company cash flow describes the movement in the cash and short-term investments of the centrally managed group holding
companies and differs from the IFRS cash flow statement, which includes all cash flows in the year including those relating to both policyholder
and shareholder funds. The holding company cash flow is therefore a more meaningful indication of the Group’s central liquidity.
2020 $m 2019 $m
Net cash remitted by business units note (a):
From continuing operations

Asia note (b) 716 950
Jackson note (b) – 509
Other operations note (c) 55 6
Total continuing operations 771 1,465
From discontinued UK and Europe operations – 684
Net cash remittances by business units 771 2,149
Net interest paid note (d) (294) (527)
Tax received 94 265
Corporate activities (235) (260)
Total central outflows (435) (522)
Holding company cash flow before dividends and other movements 336 1,627
Dividends paid (814) (1,634)
Operating holding company cash flow after dividends but before other movements (478) (7)
Other movements
Issuance and redemption of debt for continuing operations 983 (504)
Other non-operating transactions relating to continuing operations note (e) (1,230) (338)
Transactions to effect the demerger, including debt substitution note (f) – (146)
Demerger costs associated with the discontinued UK and Europe operations (17) (424)
Early settlement of UK-inflation-linked derivative liability – (587)
Total other movements (264) (1,999)
Total holding company cash flow (742) (2,006)
Cash and short-term investments at 1 Jan 2,207 4,121
Foreign exchange movements (2) 92
Cash and short-term investments at 31 Dec 1,463 2,207
Notes
(a) Net cash remittances comprise dividends and other transfers from business units that are reflective of emerging earnings and capital generation.
(b) Significant cash remittances from business units were hedged into sterling using forward contracts during 2019 and these contracts determine the amount of sterling recorded in the holding
company cash flow for the relevant remittances. The implicit rates may therefore differ from that applied to present the holding company cash flow in US dollars (see note (g)).
(c) $55 million remittances from other operations reflects intragroup interest income which is not expected to recur.
(d) The net interest paid in 2019 included $231 million on debt substituted to M&G plc prior to its demerger in October 2019.
(e) Other corporate activities relating to continuing operations primarily reflect payments made for bancassurance arrangements including those with UOB and TMB Bank.
(f) Transactions to effect the demerger represented the effects on holding company cash flow of steps taken in 2019 as part of the preparation for the demerger of the UK and Europe operations
(M&G plc). These included the transfer of subsidiaries, settlement of intercompany loans, receipt of the pre-demerger dividend and the substitution of M&G plc as issuer of certain
subordinated debt in place of Prudential plc.
(g) At 31 December 2019, the Group changed its basis of managing central cash-holdings from sterling to US dollars. Accordingly, the 2020 holding company cash flow statement presented
above has been prepared directly in US dollars and 2019 amounts are re-presented from those previously published to reflect the change. 2019 comparatives were prepared in sterling,
reflecting the management of holding company cash at that time. Cash movements in the year were converted from sterling into US dollars by using the month-end sterling to US dollar
exchange rate for the month in which the transaction occurred. Cash balances at the start and end of the year were translated from sterling to US dollars using the spot rates at the beginning
and end of the year respectively. As an exception to the above, external dividends paid during 2019 were translated at the exchange rate relevant to the day they were paid to ensure
consistency with the financial statements.
360 Prudential plc

I(iv) Analysis of adjusted operating profit by driver
Group overview
This schedule classifies the Group’s adjusted operating profit from continuing operations into the underlying drivers using the following categories:
—— Spread income represents the difference between net investment income and amounts credited to certain policyholder accounts. It excludes
the operating investment return on shareholder net assets, which has been separately disclosed as expected return on shareholder assets.
—— Fee income represents profit driven by net investment performance, being fees that vary with the size of the underlying policyholder funds,
net of investment management expenses.
—— With-profits represents the pre-tax shareholders’ transfer from the with-profits business for the period.
Strategic report
—— Insurance margin primarily represents profit derived from the insurance risks of mortality and morbidity.
—— Margin on revenues primarily represents amounts deducted from premiums to cover acquisition costs and administration expenses
(see below).
—— Acquisition costs and administration expenses represent expenses incurred in the period attributable to shareholders. These exclude
items such as restructuring and IFRS 17 implementation costs, which are not included in the segment profit, as well as items that are more
appropriately included in other categories (eg investment expenses are netted against investment income as part of spread income or fee
income as appropriate).
—— DAC adjustments comprise DAC amortisation for the period, excluding amounts related to short-term fluctuations in investment returns,
Governance
net of costs deferred in respect of new business written in the period.
(a) Margin analysis
The following analysis expresses certain of the Group’s sources of adjusted operating profit as a margin of policyholder liabilities or other relevant
drivers. The 2019 comparative information has been presented at both AER and CER to eliminate the impact of exchange translation. CER results
are calculated by translating prior year results using the current year foreign exchange rates. All CER profit figures have been translated at current
year average rates. For Asia, CER average liabilities have been translated using the corresponding current year opening and closing or quarter-

end closing exchange rates.
2020
Group Average
Asia US total liability Margin
$m $m $m $m bps
note (b) note (c)
Spread income 296 521 817 86,596 94

Fee income 282 3,386 3,668 217,863 168
With-profits 117 – 117 73,375 16
Margin on revenues 2,936 – 2,936
Expenses:
Acquisition costs* (1,904) (991) (2,895) 5,619 (52)%
Administration expenses (1,539) (1,744) (3,283) 312,215 (105)
Expected return on shareholder assets 212 – 212
3,430 2,787 6,217
Share of related tax charges from joint ventures and associates (46) – (46)

Adjusted operating profit from long-term business 3,384 2,787 6,171
Adjusted operating profit from asset management 283 9 292
Total segment adjusted operating profit 3,667 2,796 6,463
* The ratio of acquisition costs is calculated as a percentage of APE sales in the year.

Prudential plc
361
Annual Report 2020
I(iv) Analysis of adjusted operating profit by driver continued
2019 AER
Group Average
$m $m $m $m bps
note (b) note (c)
Spread income 321 642 963 86,887 111

Fee income 286 3,292 3,578 208,353 172
With-profits 107 – 107 58,032 18
Expenses:
Acquisition costs* (2,156) (1,074) (3,230) 7,384 (44)%
Expected return on shareholder assets 194 26 220
3,024 3,038 6,062
2019 CER
Group Average
$m $m $m $m bps
note (b) note (c)
Spread income 319 642 961 87,413 110

Fee income 283 3,292 3,575 208,095 172
With-profits 107 – 107 58,492 18
Expenses:
Acquisition costs* (2,156) (1,074) (3,230) 7,391 (44)%
3,008 3,038 6,046
362 Prudential plc

(b) Margin analysis – Asia
Group overview
2020 2019 AER 2019 CER
Average Average Average
Profit liability Margin Profit liability Margin Profit liability Margin
$m $m bps $m $m bps $m $m bps
note (1) note (2) note (1) note (2) note (1) note (2)
Spread income 296 39,895 74 321 29,706 108 319 30,232 106
Fee income 282 28,014 101 286 27,413 104 283 27,155 104
Strategic report
With-profits 117 73,375 16 107 58,032 18 107 58,492 18
Margin on revenues 2,936 3,035 3,032
Expenses:
Acquisition costs note (3) (1,904) 3,696 (52)% (2,156) 5,161 (42)% (2,156) 5,168 (42)%
Administration expenses (1,539) 67,909 (227) (1,437) 57,119 (252) (1,430) 57,387 (249)
DAC adjustments note (4) 382 430 426
Governance
3,430 3,024 3,008
Share of related tax charges from joint ventures
and associates note (5) (46) (31) (30)
Adjusted operating profit from long-term
business 3,384 2,993 2,978

Adjusted operating profit from asset
management (Eastspring Investments) 283 283 278
Total Asia adjusted operating profit 3,667 3,276 3,256
Notes
(1) The calculation of average liabilities for Asia is generally derived from opening and closing balances. In 2020, given the significant market volatility in certain months during the year,
average liabilities used to derive the margin for fee income in Asia have been calculated using quarter-end balances throughout the year as opposed to opening and closing balances
only to provide a more meaningful analysis. The 2019 margins have been amended for consistency albeit impacts are minimal.
(2) Margin represents the operating return earned in the year as a proportion of the relevant class of policyholder liabilities excluding unallocated surplus.
(3) The ratio of acquisition costs is calculated as a percentage of APE sales including with-profits sales. Acquisition costs include only those relating to shareholder-backed business.
The ratio of shareholder acquisition cost to shareholder-related APE sales in 2020 (excluding with-profits) is 68 per cent (2019: 66 per cent).
(4) The DAC adjustments contain a credit of $73 million in respect of joint ventures and associates in 2020 (2019: credit of $72 million on an AER basis).
(5) Under IFRS, the Group’s share of results from its investments in joint ventures and associates accounted for using the equity method is included in the Group’s profit before tax
on a net of related tax basis. These tax charges are shown separately in the analysis of Asia operating profit drivers in order for the contribution from the joint ventures and associates
to be included in the margin analysis on a consistent basis with the rest of Asia operations.


Prudential plc
I(iv) Analysis of adjusted operating profit by driver continued

(c) Margin analysis – US
2020 2019
Average Average
Profit liability Margin Profit liability Margin
$m $m bps $m $m bps
note (1) note (2) note (1) note (2)
Spread income 521 46,701 112 642 57,181 112

Fee income 3,386 189,849 178 3,292 180,940 182
Insurance margin 1,298 1,317
Expenses
Acquisition costs note (3) (991) 1,923 (52)% (1,074) 2,223 (48)%
Administration expenses (1,744) 244,306 (71) (1,675) 246,220 (68)
DAC adjustments 317 510
Expected return on shareholder assets – 26
Adjusted operating profit from long-term business note (4) 2,787 3,038
Adjusted operating profit from asset management 9 32
Total US adjusted operating profit 2,796 3,070
Notes
(1) The calculation of average liabilities for the US is generally derived from month-end balances throughout the period as opposed to opening and closing balances only. The average liabilities
for fee income in the US have been calculated using daily balances instead of month-end balances in order to provide a more meaningful analysis of the fee income, which is charged on the
daily account balance. Average liabilities for spread income are based on the general account liabilities to which spread income is attached and exclude the liabilities reinsured to Athene since
the June 2020 month-end balance. Average liabilities used to calculate the administration expenses margin exclude the REALIC liabilities reinsured to third parties prior to the acquisition by
Jackson and the liabilities reinsured to Athene since the June 2020 month-end balance.
(2) Margin represents the operating return earned in the period as a proportion of the relevant class of policyholder liabilities.
(3) The ratio of acquisition costs is calculated as a percentage of APE sales relating to shareholder-backed business.
(4) Analysis of adjusted operating profit from long-term business before and after acquisition costs and DAC adjustments is shown below:
2020 $m
Before Acquisition costs After
acquisition and DAC adjustments acquisition
costs costs
and DAC and DAC
adjustments Incurred Deferred adjustments
Total adjusted operating profit before acquisition costs and DAC adjustments 3,461 – – 3,461
Acquisition costs – (991) 740 (251)
DAC adjustments – amortisation of previously deferred acquisition costs:
Normal – – (753) (753)
Deceleration – – 330 330
Total US adjusted operating profit – long-term business 3,461 (991) 317 2,787
2019 $m
Before Acquisition costs After
acquisition and DAC adjustments acquisition
costs costs
and DAC and DAC
adjustments Incurred Deferred adjustments
Total adjusted operating profit before acquisition costs and DAC adjustments 3,602 – – 3,602
Acquisition costs – (1,074) 807 (267)
DAC adjustments – amortisation of previously deferred acquisition costs:
Normal – – (577) (577)
Deceleration – – 280 280
Total US adjusted operating profit – long-term business 3,602 (1,074) 510 3,038
364 Prudential plc

I(v) Asia operations – analysis of adjusted operating profit by business unit
Group overview
(a) Analysis of adjusted operating profit by business unit
Adjusted operating profit for Asia operations are analysed below. The table below presents the 2019 results on both AER and CER bases
to eliminate the impact of exchange translation.
2020 $m 2019 $m 2020 vs 2019 %

AER CER AER CER
Strategic report
China JV 251 219 219 15% 15%
Hong Kong 891 734 742 21% 20%
Indonesia 519 540 525 (4)% (1)%
Malaysia 309 276 272 12% 14%
Philippines 95 73 76 30% 25%
Singapore 574 493 487 16% 18%
Taiwan 85 74 77 15% 10%
Thailand 210 170 169 24% 24%
Governance
Vietnam 270 237 237 14% 14%
Other 73 70 68 4% 7%
Non-recurrent items* 153 138 136 11% 13%
Total insurance operations 3,430 3,024 3,008 13% 14%
Share of related tax charges from joint ventures and associate (46) (31) (30) (48)% (53)%
Total long-term business 3,384 2,993 2,978 13% 14%

Asset management (Eastspring Investments) 283 283 278 – 2%
Total Asia adjusted operating profit 3,667 3,276 3,256 12% 13%
* Representing a number of small items that are not expected to reoccur.
(b) Analysis of Eastspring Investments adjusted operating profit
2020 $m 2019 $m
Operating income before performance-related fees note (1) 646 636

Performance-related fees 7 12
Operating income (net of commission) note (2) 653 648
Operating expense note (2) (336) (329)
Group’s share of tax on joint ventures’ operating profit (34) (36)
Adjusted operating profit 283 283
Average funds managed by Eastspring Investments $227.1bn $214.0bn

Margin based on operating income* 28bps 30bps
Cost/income ratio† 52% 52%

Notes
(1) Operating income before performance-related fees for Eastspring Investments can be further analysed as follows:
Retail Margin* Institutional‡ Margin* Total Margin*
$m bps $m bps $m bps
2020 390 52 256 17 646 28

2019 392 52 244 18 636 30
* Margin represents operating income before performance-related fees as a proportion of the related funds under management (FUM). Monthly closing internal and external funds managed
by Eastspring have been used to derive the average. Any funds held by the Group’s insurance operations that are managed by third parties outside the Prudential Group are excluded from
these amounts.
† Cost/income ratio represents cost as a percentage of operating income before performance-related fees.
‡ Institutional includes internal funds.
(2) Operating income and expense include the Group’s share of contribution from joint ventures and associates. In the consolidated income statement of the Group IFRS basis results, the net
income after tax from the joint ventures and associates is shown as a single line item.

Prudential plc
I(v) Asia operations – analysis of adjusted operating profit by business unit continued

(c) Eastspring Investments total funds under management
Eastspring Investments, the Group’s asset management business in Asia, manages funds from external parties and also funds for the Group’s
insurance operations. The table below analyses the total funds managed and Eastspring Investments.
31 Dec 2020 31 Dec 2019

$bn $bn
External funds under management, excluding funds managed on behalf of M&G plc note (1)
Retail 66.9 73.7
Institutional 13.8 11.0
Money market funds (MMF) 13.2 13.3
93.9 98.0
Funds managed on behalf of M&G plc note (2) 15.7 26.7
External funds under management including M&G plc 109.6 124.7
Internal funds under management 138.2 116.4
Total funds under management note (3) 247.8 241.1
Notes
(1) The movements of external funds under management, excluding those managed on behalf of M&G plc, are analysed below:
2020 $m 2019 $m
At 1 Jan 98,005 77,762

Market gross inflows 116,743 282,699
Redemptions (126,668) (276,215)
Market and other movements 5,783 13,759
At 31 Dec 93,863 98,005
The analysis of movements above includes $13,198 million relating to Asia Money Market Funds at 31 December 2020 (31 December 2019: $13,337 million). Investment flows for 2020 include
Eastspring Money Market Funds gross inflows of $76,317 million (2019: $236,603 million) and net inflows of $48 million (2019: net outflows of $(1,856) million).
(2) The movements of funds managed on behalf of M&G plc are analysed below:
2020 $m
At 1 Jan 26,717
Net flows (10,033)
Other (947)
At 31 Dec 15,737
(3) Total funds under management by asset class are analysed below:
31 Dec 2020 31 Dec 2019
$bn % of total $bn % of total
Equity 103.9 42% 107.0 44%

Fixed income 125.7 51% 116.2 48%
Alternatives 2.7 1% 3.4 2%
Money Market Funds 15.5 6% 14.5 6%
Total funds under management 247.8 100% 241.1 100%
366 Prudential plc

I(vi) Reconciliation of expected transfer of value of in-force business and required capital to free surplus
Group overview
for Asia long‑term business operations
The table below shows how the value of in-force business (VIF) and the associated required capital for Asia long-term business operations are
projected as emerging into free surplus over the next 40 years. Although circa 8 per cent of the embedded value for Asia operations emerges
after this date, analysis of cash flows emerging in the years shown is considered most meaningful. The modelled cash flows use the same
methodology underpinning the Group’s embedded value reporting and so are subject to the same assumptions and sensitivities used to
prepare our 2020 results.
Post its separation from the Group, Jackson will no longer publish EEV results and so this section covers Asia only.
Strategic report
In addition to showing the amounts, on both a discounted and undiscounted basis, expected to be generated from all in-force business
at 31 December 2020, the table also presents the future free surplus expected to be generated from the investment made in new business
during 2020 over the same 40-year period.
31 Dec 2020 $m
Asia long-term business operations
Expected generation from Expected generation from
Governance
all in-force business* new business written in 2020*
Expected period of emergence Undiscounted Discounted Undiscounted Discounted
2021 2,156 2,088 261 252

2022 2,084 1,924 184 166
2023 2,085 1,843 176 151
2024 1,978 1,679 158 130
2025 1,928 1,578 160 126

2026 1,895 1,495 149 114
2027 1,924 1,472 155 118
2028 1,938 1,440 154 112
2029 1,647 1,146 148 104
2030 1,953 1,379 151 103
2031 1,867 1,267 142 92
2032 1,794 1,169 140 87
2033 1,726 1,085 128 75
2034 1,679 1,022 122 68
2035 1,641 968 133 69
2036 1,592 916 111 58
2037 1,571 880 110 56
2038 1,558 846 109 53
2039 1,552 822 108 50
2040 1,507 770 117 50
2041-2045 7,008 3,315 510 208
2046-2050 6,287 2,589 485 162
2051-2055 5,218 1,878 433 124
2056-2060 4,488 1,411 398 96

Total free surplus expected to emerge in the next 40 years 59,076 34,982 4,742 2,624
* The analysis excludes amounts incorporated into VIF and required capital at 31 December 2020 where there is no definitive time frame for when the payments will be made or receipts received.
It also excludes any free surplus projected to emerge after 2060.

Prudential plc
I(vi) Reconciliation of expected transfer of value of in-force business and required capital to free surplus
for Asia long‑term business operations continued
The expected free surplus generation from new business written in 2020 can be reconciled to the new business profit as follows:
2020
$m
Undiscounted expected free surplus generation for years 2021 to 2060 4,742
Less: discount effect (2,118)
Discounted expected free surplus generation for years 2021 to 2060 2,624
Discounted expected free surplus generation for years after 2060 252
Discounted expected free surplus generation from new business written in 2020 2,876
Free surplus investment in new business (559)
Other items* (116)
New business profit 2,201
* Other items represent the impact of the time value of options and guarantees on new business, foreign exchange effects and other non-modelled items. Foreign exchange effects arise as EEV
new business profit amounts are translated at average exchange rates and the expected free surplus generation is translated at closing rates.
The discounted expected free surplus generation from in-force business can be reconciled to the embedded value for long-term business
operations as follows:
31 Dec 2020
$m
Discounted expected generation from all in-force business for years 2021 to 2060 34,982
Discounted expected generation from all in-force business for years after 2060 3,612
Discounted expected generation from all in-force business at 31 December 2020 38,594
Free surplus of long-term business operations at 31 December 2020 5,295
Other items* (1,081)
EEV for long-term business operations 42,808
* Other items represent the impact of the time value of options and guarantees and other non-modelled items.
The undiscounted expected free surplus generation from all in-force business at 31 December 2020 can be reconciled to the amount that was
expected to be generated at 31 December 2019 as follows:
2020 2021 2022 2023 2024 2025 Other Total

$m $m $m $m $m $m $m $m
2019 expected free surplus generation

for years 2020 to 2059 1,963 2,088 1,941 1,965 1,895 1,874 51,297 63,023
Less: Amounts expected to be realised
in the current year (1,963) – – – – – – (1,963)
Add: Expected free surplus to be generated
in year 2060 * – – – – – – 1,204 1,204
Foreign exchange differences – 23 24 23 21 20 652 763
New business – 261 184 176 158 160 3,803 4,742
Operating movements – 11 53 42 43 18
Non-operating and other movements – (227) (118) (121) (139) (144) (8,111) (8,693)
2020 expected free surplus generation
for years 2021 to 2060 – 2,156 2,084 2,085 1,978 1,928 48,845 59,076
* Excluding 2020 new business.
368 Prudential plc

At 31 December 2020, the total free surplus expected to be generated over the next five years (2021 to 2025 inclusive) for Asia long-term
Group overview
business operations, using the same assumptions and methodology as those underpinning our 2020 embedded value reporting, was
$10.2 billion (31 December 2019: $9.9 billion).
At 31 December 2020, the total free surplus expected to be generated on an undiscounted basis over the next 40 years for Asia long-term
business operations is $59.1 billion, $3.9 billion lower than the $63.0 billion expected at the end of 2019. In Asia, the effect of generally lower
interest rates across the region decreasing projected returns is partially offset by the increase from new business of $4.7 billion, together
with favourable foreign exchange gains and operating assumption updates following the annual review of experience.
Actual underlying free surplus generated in 2020 from Asia long-term business in force at the end of 2019, before restructuring and
Strategic report
IFRS 17 implementation costs, was $2.2 billion, including $0.2 billion of changes in operating assumptions and experience variances.
This compares with the expected 2020 realisation at the end of 2019 of $2.0 billion and can be analysed further as follows:
2020 $m
Expected transfer from in-force business to free surplus in 2020 1,878

Expected return on existing free surplus 101
Changes in operating assumptions and experience variances 222
Governance
Underlying free surplus generated from long-term business in force before restructuring and IFRS 17 implementation costs 2,201
2020 free surplus expected to be generated at 31 December 2019 1,963
I(vii) Option schemes
The Group presently grants share options through three schemes and exercises of the options are satisfied by the issue of new shares.
Executive Directors and eligible employees based in the UK may participate in the Prudential Savings-Related Share Option Scheme.

Executives and eligible employees based in Asia can participate in the Prudential International Savings-Related Share Option Scheme,
while agents based in certain regions of Asia can participate in the Prudential International Savings-Related Share Option Scheme for
Non‑Employees. Further details of the schemes and accounting policies are detailed in note B2.2 of the IFRS basis consolidated
financial statements.
All options were granted at nil consideration. No options have been granted to substantial shareholders, suppliers of goods or services
(excluding options granted to agents under the Prudential International Savings-Related Share Option Scheme for Non-Employees) or in excess
of the individual limit for the relevant scheme. The maximum share entitlement of each participant under the relevant scheme for each option
granted is limited to the total savings and any bonus or interest accumulated under that participant’s savings contract, divided by the exercise
price. At 31 December 2020, the maximum number of shares issued or issuable under the schemes, which were approved by shareholders,
to all participants would not exceed 1 per cent of the issued share capital of the Company in the preceding 12-month period.
The option schemes will terminate as follows, unless the Directors resolve to terminate the plans at an earlier date:
—— Prudential Savings-Related Share Option Scheme: 16 May 2023;
—— Prudential International Savings-Related Share Option Scheme: 19 May 2021; and
—— Prudential International Savings-Related Share Option Scheme for Non-Employees 2012: 12 May 2022.
The weighted average share price of Prudential plc for the year ended 31 December 2020 was £11.64 (2019: £15.05).
Particulars of options granted to Directors are included in the Directors’ remuneration report on page 191.
The closing prices of the shares immediately before the date on which the options were granted during the year were £11.00.
The following analyses show the movement in options for each of the option schemes for the year ended 31 December 2020.


Prudential plc
369
Annual Report 2020
I(vii) Option schemes continued

Prudential Savings-Related Share Option Scheme
Exercise period Number of options

Exercise Beginning End of
Date of grant price £ Beginning End of year Granted Exercised Cancelled Forfeited Lapsed year
23 Sep 14 11.55 01 Dec 19 31 May 20 135,963 – (80,914) – – (55,049) –

22 Sep 15 11.11 01 Dec 20 31 May 21 103,140 – (14,180) – – (80,914) 8,046
21 Sep 16 11.04 01 Dec 19 31 May 20 225,802 – (137,913) – (326) (87,563) –
21 Sep 16 11.04 01 Dec 21 31 May 22 77,244 – (8,135) – – (63,731) 5,378
21 Sep 17 14.55 01 Dec 20 31 May 21 502,136 – (3,283) (12,568) (3,731) (458,646) 23,908
21 Sep 17 14.55 01 Dec 22 31 May 23 92,940 – – – – (86,593) 6,347
29 Nov 19 11.18 01 Jan 23 30 Jun 23 92,823 – (692) (14,814) (180) (9,934) 67,203
29 Nov 19 11.18 01 Jan 25 30 Jun 25 21,464 – – (10,732) – (2,683) 8,049
22 Sep 20 9.64 01 Dec 23 31 May 24 – 74,308 – – – – 74,308
22 Sep 20 9.64 01 Dec 25 31 May 26 – 6,286 – – – – 6,286
1,251,512 80,594 (245,117) (38,114) (4,237) (845,113) 199,525
The total number of securities available for issue under the scheme is 199,525 which represents 0.008 per cent of the issued share capital
The weighted average closing price of the shares immediately before the dates on which the options were exercised during the current
period was £14.27.
The weighted average fair value of options granted under the plan in the period was £1.91.
Prudential International Savings-Related Share Option Scheme for Non-Employees
Exercise period Number of options

Exercise Beginning End of
Date of grant price £ Beginning End of year Granted Exercised Cancelled Forfeited Lapsed year
23 Sep 14 10 01 Dec 19 31 May 20 363,751 – (317,613) (15,579) – (30,559) –

22 Sep 15 9.62 01 Dec 18 31 May 19 935 – (935) – – – –
22 Sep 15 9.62 01 Dec 20 31 May 21 408,255 – (124,437) (3,739) – – 280,079
21 Sep 16 9.56 01 Dec 19 31 May 20 159,344 – (157,813) – – (1,531) –
21 Sep 16 9.56 01 Dec 21 31 May 22 218,293 – – (3,448) – – 214,845
21 Sep 17 12.59 01 Dec 20 31 May 21 290,365 – (37,338) (47,047) – – 205,980
21 Sep 17 12.59 01 Dec 22 31 May 23 194,316 – – (4,042) – – 190,274
18 Sep 18 12.07 01 Dec 21 31 May 22 199,159 – – (5,754) – – 193,405
18 Sep 18 12.07 01 Dec 23 31 May 24 130,182 – – (655) – – 129,527
02 Oct 19 9.62 01 Dec 22 31 May 23 355,276 – – (24,345) – – 330,931
02 Oct 19 9.62 01 Dec 24 31 May 25 234,059 – – (10,894) – – 223,165
22 Sep 20 9.64 01 Dec 23 31 May 24 – 205,552 – (6,753) – – 198,799
22 Sep 20 9.64 01 Dec 25 31 May 26 – 155,346 – (1,556) – – 153,790
2,553,935 360,898 (638,136) (123,812) – (32,090) 2,120,795
The total number of securities available for issue under the scheme is 2,120,795 which represents 0.081 per cent of the issued share capital
The weighted average closing price of the shares immediately before the dates on which the options were exercised during the current
period was £12.13.
The weighted average fair value of options granted under the plan in the period was £1.96.
370 Prudential plc

I(viii) Selected historical financial information of Prudential
Group overview
The following table sets forth Prudential’s selected consolidated financial data for the periods indicated, which is derived from Prudential’s
audited consolidated financial statements.
This table is only a summary and should be read in conjunction with Prudential’s consolidated financial statements and the related notes
included elsewhere in this document.
Income statement
Strategic report
IFRS basis results 2020 $m 2019 $m 2018 $m 2017 $m 2016 $m
Gross premiums earned 42,521 45,064 45,614 39,800 38,865
Outward reinsurance premiums (32,209) (1,583) (1,183) (1,304) (1,375)
Earned premiums, net of reinsurance 10,312 43,481 44,431 38,496 37,490
Investment return 44,991 49,555 (9,117) 35,574 13,839
Governance
Other income 670 700 531 1,319 1,387
Total revenue, net of reinsurance 55,973 93,736 35,845 75,389 52,716
Benefits and claims and movement in unallocated surplus
of with-profits funds, net of reinsurance (48,205) (83,905) (23,426) (63,808) (42,881)
Acquisition costs and other expenditure (5,481) (7,283) (8,527) (8,649) (7,846)
Finance costs: interest on core structural borrowings
of shareholder-financed businesses (337) (516) (547) (548) (488)

(Loss) gain attaching to corporate transactions (48) (142) (107) 292 (322)
Total charges, net of reinsurance (54,071) (91,846) (32,607) (72,713) (51,537)
Share of profits from joint ventures and associates net of related tax 517 397 319 233 200
Profit before tax (being tax attributable to shareholders’
and policyholders’ returns) note (i) 2,419 2,287 3,557 2,909 1,379
Tax charges attributable to policyholders’ returns (271) (365) (107) (321) (210)
Profit before tax attributable to shareholders’ returns 2,148 1,922 3,450 2,588 1,169
Tax credit (charges) attributable to shareholders’ returns 37 31 (569) (840) (119)
Profit from continuing operations 2,185 1,953 2,881 1,748 1,050
(Loss) profit from discontinued operations – (1,161) 1,142 1,333 1,552
Profit for the year 2,185 792 4,023 3,081 2,602
Based on profit from continuing operations for the year attributable
to the equity holders of the Company:
Basic earnings per share (in cents) 81.6¢ 75.1¢ 111.7¢ 68.0¢ 41.0¢
Diluted earnings per share (in cents) 81.6¢ 75.1¢ 111.7¢ 67.9¢ 40.9¢

2020 2019 2018 2017 2016
Dividend per share declared and paid in reporting period 31.34¢ 63.18¢ 64.34¢ 59.32¢ 69.72¢
Interim ordinary dividend/final ordinary dividend 31.34¢ 63.18¢ 64.34¢ 59.32¢ 55.20¢
Special dividend 14.52¢

Prudential plc
371
Annual Report 2020
I(viii) Selected historical financial information of Prudential continued

Supplementary IFRS income statement – continuing operations
2020 $m 2019 $m 2018 $m 2017 $m 2016 $m
Adjusted operating profit based on longer-term investment returns note (ii) 5,507 5,310 4,409 4,378 4,131
Non-operating items (3,359) (3,388) (959) (1,790) (2,962)
Profit before tax attributable to shareholders 2,148 1,922 3,450 2,588 1,169
Operating earnings per share after tax and non-controlling interest
(in cents) 175.5¢ 175.0¢ 145.2¢ 134.6¢ 126.5¢
Supplementary EEV financial information

EEV income statement – continuing operations
2020 $m 2019 $m 2018 $m 2017 $m 2016 $m
Operating profit based on longer-term investment returns note (ii) 5,220 6,905 7,866 6,753 6,137
Non-operating items (5,187) (2,744) (2,286) 1,808 (2,278)
Profit attributable to shareholders from continuing operations 33 4,161 5,580 8,561 3,859
Operating earnings per share (in cents) 195.9¢ 266.6¢ 305.3¢ 263.0¢ 239.7¢
2020 $bn 2019 $bn 2018 $bn 2017 $bn 2016 $bn
EEV shareholders’ equity, excluding non-controlling interests 54.0 54.7 63.4 60.5 48.2
New business contribution – continuing operations
2020 $m 2019 $m 2018 $m 2017 $m 2016 $m
Annual premium equivalent (APE) sales 5,619 7,384 7,058 7,046 6,989
EEV new business profit (NBP) (post-tax) 2,802 4,405 4,707 4,220 3,820
NBP margin (% of APE) 50% 60% 67% 60% 55%
Statement of financial position at 31 December
2020 $m 2019 $m 2018 $m 2017 $m 2016 $m
Total assets 516,097 454,214 647,810 668,203 581,394

Total policyholder liabilities and unallocated surplus of with-profits funds 446,463 390,428 541,466 579,261 498,374
Core structural borrowings of shareholder-financed businesses 6,633 5,594 9,761 8,496 8,400
Total liabilities 493,978 434,545 625,819 646,432 563,270
Total equity 22,119 19,669 21,991 21,771 18,124
Other financial information at 31 December
2020 $bn 2019 $bn 2018 $bn 2017 $bn 2016 $bn
Funds under management note (iii) 558.3 543.9 455.3 452 374.8
Group shareholder LCSM surplus note (iv) 11.0 9.5 9.7
Notes
(i) This measure is the formal profit (loss) before tax measure under IFRS. It is not the result attributable to shareholders.
(ii) Adjusted operating profit and EEV operating profit are determined on the basis of including longer-term investment returns, which are stated after excluding the effect of short-term
fluctuations in investment returns on shareholder-backed business and gain or loss attaching to corporate transactions. Separately, for IFRS basis results, adjusted operating profit also
excludes amortisation of acquisition accounting adjustments arising on the purchase of business. For EEV basis results, operating profit also excludes the effect of changes in economic
assumptions and the mark-to-market value movements on core structural borrowings for shareholder-financed operations.
(iii) Funds under management comprise funds of the Group held in the statement of financial position and external funds that are managed by the Group’s asset management operations.
(iv) The 2020 and 2019 surplus are estimated under the LCSM regime adopted by the Group in October 2019, with 2018 comparative information re-presented on this basis. Prior to that,
the Group was subject to the Solvency II capital requirements.
372 Prudential plc

Group overview
II Calculation of alternative performance measures
The annual report uses alternative performance measures (APMs) to provide more relevant explanations of the Group’s financial position
and performance. This section sets out explanations for each APM and reconciliations to relevant IFRS balances.
II(i) Reconciliation of adjusted operating profit to profit before tax

Adjusted operating profit presents the operating performance of the business. This measurement basis adjusts for the following
items within total IFRS profit before tax:
Strategic report
—— Short-term fluctuations in investment returns on shareholder-backed business;
—— Amortisation of acquisition accounting adjustments arising on the purchase of business. This comprises principally the charge
for the adjustments arising on the purchase of REALIC in 2012; and
—— Gain or loss on corporate transactions, as described in note D1.1 in the IFRS financial statements.
More details on how adjusted operating profit is determined are included in note B1.3 of the Group IFRS basis results. A full reconciliation
Governance
to profit after tax is given in note B1.1.
II(ii) Calculation of IFRS net gearing ratio

The IFRS net gearing ratio is calculated as net core structural borrowings of shareholder-financed businesses divided by closing IFRS
shareholders’ equity plus net core structural borrowings.
31 Dec 2020 31 Dec 2019

$m $m

Core structural borrowings of shareholder-financed businesses 6,633 5,594
Less holding company cash and short-term investments (1,463) (2,207)
Net core structural borrowings of shareholder-financed businesses 5,170 3,387
Closing shareholders’ equity 20,878 19,477
Closing shareholders’ equity plus net core structural borrowings 26,048 22,864
IFRS net gearing ratio 20% 15%

Prudential plc
373
Annual Report 2020
II Calculation of alternative performance measures continued
II(iii) Return on IFRS shareholders’ equity

As stated in the 2019 Annual Report, the Group has introduced a new return on equity performance measure for the Group’s 2020 Prudential
Long-Term Incentive Plan (PLTIP) awards alongside other metrics. This measure has been calculated as adjusted operating profit after tax, and
net of non-controlling interests, divided by average shareholders’ equity. Accordingly, the calculation of the return on IFRS shareholders’ equity
has been aligned to be based on average shareholders’ equity. The 2019 returns disclosed in the table below are consistent with those previously
published and use profit from continuing operations and closing shareholders’ equity. As supplementary information, 2019 Asia and US returns
on shareholders’ equity have also been presented on an average shareholders’ equity basis.
A detailed reconciliation of adjusted operating profit to IFRS profit before tax for the Group is shown in note B1.1 to the Group IFRS basis results.
2020 $m
Asia US Other Group
Adjusted operating profit 3,667 2,796 (956) 5,507

Tax on adjusted operating profit (495) (313) 8 (800)
Operating profit attributable to non-controlling interests (11) (138) 1 (148)
Adjusted operating profit, net of tax and non-controlling interests 3,161 2,345 (947) 4,559
Average shareholders’ equity 12,377 8,720 (919) 20,178
Operating return on average shareholders’ equity (%) 26% 27% n/a 23%
2019 $m
Adjusted
Group
Add back (excluding
demerger- demerger-
related related
Continuing operations Asia US Other Group items* items)
Adjusted operating profit 3,276 3,070 (1,036) 5,310 179 5,489

Tax on adjusted operating profit (436) (437) 100 (773) (34) (807)
Operating profit attributable to non-controlling interests (6) – (3) (9) – (9)
Adjusted operating profit, net of tax and non-controlling
interests 2,834 2,633 (939) 4,528 145 4,673
Closing shareholders’ equity 10,866 8,929 (318) 19,477 – 19,477
Operating return on closing shareholders’ equity (%) 26% 29% n/a 23% – 24%
Supplementary information:
Average shareholders’ equity 9,521 8,046
Operating return on average shareholders’ equity (%) 30% 33%
* Demerger-related items comprise interest on the subordinated debt that was substituted to M&G plc prior to the demerger ($179 million pre-tax) and one-off costs of the demerger
($407 million pre-tax).
Average shareholders’ equity has been based on opening and closing balances as follows:
2020 $m 2019 $m
Asia US Other Group Asia US
Balance at 1 Jan 10,866 8,929 (318) 19,477 8,175 7,163

Balance at 31 Dec 13,887 8,511 (1,520) 20,878 10,866 8,929
Average shareholders’ equity 12,377 8,720 (919) 20,178 9,521 8,046
374 Prudential plc

II(iv) Calculation of IFRS shareholders’ equity per share
Group overview
IFRS shareholders’ equity per share is calculated as closing IFRS shareholders’ equity divided by the number of issued shares
at 31 December 2020 of 2,609 million shares (31 December 2019: 2,601 million shares).
2020
Group
Asia US Other total
Closing IFRS shareholders’ equity ($ million) 13,887 8,511 (1,520) 20,878
Strategic report
Shareholders’ equity per share (cents) 532¢ 326¢ (58)¢ 800¢
2019
Group
Asia US Other total
Closing IFRS shareholders’ equity ($ million) 10,866 8,929 (318) 19,477

Shareholders’ equity per share (cents) 418¢ 343¢ (12)¢ 749¢
Governance
II(v) Calculation of asset management cost/income ratio
The asset management cost/income ratio is calculated as asset management operating expenses, adjusted for commission and joint venture
contribution, divided by asset management total IFRS revenue adjusted for commission, joint venture contribution, performance-related fees
and non-operating items.

Eastspring Investments
2020 $m 2019 $m
Operating income before performance-related fees note 646 636

Share of joint venture revenue (235) (244)
Commission 194 165
Performance-related fees 7 12
IFRS revenue 612 569
Operating expense 336 329

Share of joint venture expense (84) (102)
Commission 194 165
IFRS charges 446 392
Cost/income ratio: operating expense/operating income before performance-related fees 52% 52%
Note
IFRS revenue and charges for Eastspring Investments are included within the IFRS Income statement in ‘other income’ and ‘acquisition costs and other expenditure’ respectively. Operating income
and expense include the Group’s share of contribution from joint ventures and associates. In the consolidated income statement of the Group IFRS basis results, the net income after tax from the
joint ventures and associates is shown as a single line item.

II(vi) Reconciliation of Asia renewal insurance premium to gross premiums earned
Reconciliation of Asia renewal insurance premium to gross earned premiums and calculation of Asia Life weighted premium income.
2020 $m 2019 $m
AER CER
Asia renewal insurance premium 20,123 19,007 19,011

Add: General insurance premium 130 135 136
Add: IFRS gross earned premium from new regular and single premium business 5,045 6,386 6,404
Less: Renewal premiums from joint ventures (1,957) (1,771) (1,733)
Asia segment IFRS gross premiums earned 23,341 23,757 23,818
Asia renewal insurance premium (as above) 20,123 19,007 19,011

Asia APE 3,696 5,161 5,168
Asia life weighted premium income 23,819 24,168 24,179

Prudential plc
II(vii) Reconciliation of APE new business sales to gross premiums earned

The Group reports annual premiums equivalent (APE) as a measure of new business sales, which is a key metric for the Group’s management of
the development and growth of the business. APE is calculated as the aggregate of regular premiums and one-tenth of single premiums on new
business written during the year for all insurance products, including premiums for contracts designated as investment contracts under IFRS 4.
The use of the one-tenth of single premiums is to normalise policy premiums into the equivalent of regular annual payments. This measure is
commonly used in the insurance industry to allow comparisons of the amount of new business written in a period by life insurance companies,
particularly when the sales contain both single premium and regular premium business.
This differs from the IFRS measure of gross premiums earned as shown below:
2020 $m 2019 $m
Total Total
Asia US segment Asia US segment
note (a) note (a)
Gross premiums earned 23,341 19,026 42,367 23,757 21,209 44,966

Less: premiums from in-force renewal business note (b) (18,166) (845) (19,011) (17,236) (956) (18,192)
Adjustment to include 10% of single premiums note (c) (2,131) (17,306) (19,437) (2,606) (20,008) (22,614)
Add: deposit accounting for investment contracts note (d) – 1,284 1,284 255 2,522 2,777
Inclusion of APE Sales from joint ventures and associates
on equity accounting method note (e) 820 – 820 899 – 899
Other adjustments note (f) (168) (236) (404) 92 (544) (452)
Annual premium equivalents (APE) 3,696 1,923 5,619 5,161 2,223 7,384
Notes
(a) Gross premiums earned of $154 million (2019: $98 million) in the Group’s Africa operations are unallocated to a segment, giving total Group gross premiums earned of $42,521 million
(2019: $45,064 million) in the income statement. The Africa business sold new business APE of $112 million (2019: $82 million). Given the relative immaturity of the Africa business,
it is excluded from the APE metric.
(b) Gross premiums earned include premiums from existing in-force business as well as new business. The most significant amount is recorded in Asia, where a significant portion of regular
premium business is written.
(c) APE new business sales only include one-tenth of single premiums, recorded on policies sold in the year. Gross premiums earned include 100 per cent of such premiums.
(d) APE includes new policies written in the year which are classified as investment contracts without discretionary participation features under IFRS 4, arising mainly in Jackson for guaranteed
investment contracts. These are excluded from gross premiums earned and recorded as deposits;
(e) For the purpose of reporting APE new business sales, the Group’s share of amounts sold by the Group’s insurance joint ventures and associates are included. Under IFRS, joint ventures
and associates are equity accounted and so no amounts are included within gross premiums earned.
(f) APE new business sales are annualised while gross premiums earned are recorded only when revenues are due. Other adjustments also reflect the exclusion of general insurance and
reinsurance premiums earned on an IFRS basis.
II(viii) Reconciliation between IFRS and EEV shareholders’ equity

The table below shows the reconciliation of EEV shareholders’ equity and IFRS shareholders’ equity at the end of the year:
31 Dec 2020 31 Dec 2019

$m $m
EEV shareholders’ equity 54,007 54,711

Less: Value of in-force business of long-term business note (a) (41,007) (41,893)
Deferred acquisition costs assigned zero value for EEV purposes 16,216 14,239
Other note (b) (8,338) (7,580)
IFRS shareholders’ equity 20,878 19,477
Notes
(a) The EEV shareholders’ equity comprises the present value of the shareholders’ interest in the value of in-force business, total net worth of long-term business operations and IFRS
shareholders’ equity of asset management and other operations. The value of in-force business reflects the present value of expected future shareholder cash flows from long-term in-force
business which are not captured as shareholders’ interest on an IFRS basis. Total net worth represents the net assets for EEV reporting that reflect the regulatory basis position, with
adjustments to achieve consistency with the IFRS treatment of certain items as appropriate.
(b) Other adjustments represent asset and liability valuation differences between IFRS and the local regulatory reporting basis used to value total net worth for long-term insurance operations.
These also include the mark-to-market value movements of the Group’s core structural borrowings which are fair valued under EEV but are held at amortised cost under IFRS. The most
significant valuation differences relate to changes in the valuation of insurance liabilities. For example, in Jackson, IFRS liabilities are higher than the local regulatory basis as they are principally
based on policyholder account balances (with a deferred acquisition costs recognised as an asset), whereas the local regulatory basis used for EEV reporting is based on expected future cash
flows due to the policyholder on a prudent basis, with the consideration of an expense allowance, as applicable, but with no separate deferred acquisition cost asset.
376 Prudential plc

II(ix) Calculation of return on embedded value
Group overview
Operating return on embedded value is calculated as the post-tax EEV operating profit for the year as a percentage of average EEV basis
shareholders’ equity.
2020
Asia US Other Group
EEV basis operating profit (loss) for the year 4,387 1,880 (858) 5,409
Operating profit (loss) attributable to non-controlling interests (11) (123) 1 (133)
Strategic report
EEV basis operating profit (loss) for the year, net of non-controlling interest ($ million) 4,376 1,757 (857) 5,276
Restructuring and IFRS 17 implementation costs (88) (36) (65) (189)
EEV basis operating profit (loss) for the year, after restructuring and IFRS 17
implementation costs, net of non-controlling interests ($ million) 4,288 1,721 (922) 5,087
Average EEV basis shareholders’ equity ($ million) 41,738 14,212 (1,591) 54,359
Operating return on average shareholders’ equity, before restructuring
Governance
and IFRS 17 implementation costs (%) 10% 12% n/a 10%
Operating return on average shareholders’ equity, after restructuring
and IFRS 17 implementation costs (%) 10% 12% n/a 9%
2019
Asia US

EEV basis operating profit for the year 6,138 1,782
Operating profit attributable to non-controlling interests (6) –
EEV basis operating profit for the year, net of non-controlling interest ($ million) 6,132 1,782
Restructuring and IFRS 17 implementation costs (31) (5)
EEV basis operating profit for the year, after restructuring and IFRS 17
implementation costs, net of non-controlling interests ($ million) 6,101 1,777
Average EEV basis shareholders’ equity ($ million) 35,622 17,526
Operating return on average shareholders’ equity, before restructuring
and IFRS 17 implementation costs (%) 17% 10%
Operating return on average shareholders’ equity, after restructuring
and IFRS 17 implementation costs (%) 17% 10%
New business profit over embedded value is calculated as the post-tax EEV new business profit for the year as a percentage of average EEV basis
shareholders’ equity.
2020 2019
Asia US Asia US

New business profit ($ million)* 2,201 601 3,522 883
Average EEV basis shareholders’ equity ($ million) 41,738 14,212 35,622 17,526
New business profit over embedded value (%) 5% 4% 10% 5%
* New business profit is attributed to the shareholders of the Group before deducting the amount attributable to non-controlling interests.
Average EEV basis shareholders’ equity has been based on opening and closing balances as follows:
2020 $m 2019 $m
Asia US Other Group Asia US
Balance at beginning of year 39,235 16,342 (866) 54,711 32,008 18,709

Balance at end of year 44,241 12,081 (2,315) 54,007 39,235 16,342
Average EEV basis shareholders’ equity 41,738 14,212 (1,591) 54,359 35,622 17,526

Prudential plc
II(x) Calculation of EEV shareholders’ funds per share

EEV shareholders’ equity per share is calculated as closing EEV shareholders’ equity divided by the number of issued shares at 31 December
2020 of 2,609 million (31 December 2019: 2,601 million). EEV shareholders’ equity per share excluding goodwill attributable to equity holders
is calculated in the same manner, except goodwill attributable to equity holders is deducted from closing EEV shareholders’ equity.
31 Dec 2020
Group
Asia US Other total
Closing EEV shareholders’ equity ($ million) 44,241 12,081 (2,315) 54,007

Less: Goodwill attributable to equity holders ($ million) (798) – (23) (821)
Closing EEV shareholders’ equity excluding goodwill attributable to equity holders
($ million) 43,443 12,081 (2,338) 53,186
Shareholders’ equity per share (in cents) 1,696¢ 463¢ (89)¢ 2,070¢
Shareholders’ equity per share excluding goodwill attributable to equity holders
(in cents) 1,666¢ 463¢ (90)¢ 2,039¢
31 Dec 2019
Group
Asia US Other total
Closing EEV shareholders’ equity ($ million) 39,235 16,342 (866) 54,711

Less: Goodwill attributable to equity holders ($ million) (796) – (26) (822)
Closing EEV shareholders’ equity excluding goodwill attributable to equity holders
($ million) 38,439 16,342 (892) 53,889
Shareholders’ equity per share (in cents) 1,508¢ 628¢ (33)¢ 2,103¢
Shareholders’ equity per share excluding goodwill attributable to equity holders
(in cents) 1,478¢ 628¢ (34)¢ 2,072¢
378 Prudential plc

Risk factors
A number of risk factors may affect Prudential’s business, financial The Covid-19 pandemic, and measures to contain it, have slowed
Group overview
condition, results of operations and/or prospects and, accordingly, the economic and social activity in the Group’s geographical markets.
trading price of its shares. The risk factors mentioned below should not While these conditions persist, the level of sales activity in affected
be regarded as a complete and comprehensive statement of all potential markets has been, and will continue to be, adversely impacted through
risks and uncertainties. The information given is as of the date of this a reduction in travel and agency and bancassurance activity, which
document, and any forward-looking statements are made subject to may be prolonged in markets which continue to rely on containment
the reservations specified under ‘Forward-looking statements’. measures based on restrictions of movement rather than vaccine
deployment. The impact to economic activity and employment levels
Strategic report
Prudential’s approaches to managing risks are explained in the section may result in an elevated incidence of claims, lapses, or surrenders
of this document headed ‘Group Chief Risk and Compliance Officer’s of policies, and some policyholders may choose to defer or stop
report on the risks facing our business and how these are managed’. paying insurance premiums or reduce deposits into retirement
plans. The pandemic may also indirectly result in elevated claims
1. Risks relating to Prudential’s financial situation and policy lapses or surrenders, and with some delay in time before
1.1 The Covid-19 pandemic has had a significant impact on being felt by the Group, due to factors such as policyholders deferring
financial market volatility and global economic activity, increased medical treatment during the pandemic, or policyholders lapsing or
operational disruption risks to the Group and has adversely surrendering their policies on the expiry of grace periods for premium
Governance
impacted Prudential’s sales in affected markets and its financial payments provided by the Group’s businesses. Extended restrictions
condition, results of operations and prospects. The full extent of on movement in particular may adversely impact product persistency
the longer-term impacts from the pandemic remains uncertain in the Group’s Asia business. While these impacts to the Group have
The Covid-19 pandemic has significantly increased the volatility of not been material to date, the full extent of the impact of the Covid-19
equity markets, interest rates and credit spreads, reduced market pandemic is currently highly uncertain and the Group’s claims
liquidity and reduced global economic activity. The potential adverse experience to date and its current insurance assumptions cannot be
impacts to the Group of these effects are detailed in the Financial taken as an indicator of future potential experience from the Covid-19
Market and Economic Conditions risk factor detailed below. However,

pandemic which may deteriorate significantly and have a material
the full extent of the impact of the pandemic on financial markets and adverse effect on Prudential’s business, financial condition, results
economic growth remains highly uncertain and unpredictable and will of operations and prospects.
be influenced by the actions of governments, policymakers and the
public. This includes the duration and effectiveness of mitigating Disruption to Prudential’s operations may result where its employees,
measures against the current and future strains of the coronavirus, or those of its service partners and counterparties, contract the
including a continued reliance on restrictions of movement and the coronavirus or are affected by restrictions on movement; where office
deployment of vaccination programmes (which may occur over a closures and other measures impacting working practices are effected,
prolonged period of time), the effectiveness and timing of which such as the imposition of remote working arrangements; and where
remains uncertain across markets. Where these impacts are quarantine requirements and isolation measures under local laws
prolonged, this may affect the solvency position of Prudential’s apply, and as a result of social distancing and/or other psychosocial
subsidiaries and prevent or limit their ability to make remittances, impacts. While such measures are in place, there may be an increase
adversely impacting the financial condition and prospects of in attempts to compromise IT systems through phishing and social
the Group. engineering tactics.
The immediate regulatory and supervisory responses to the Covid-19 In some markets Prudential has implemented changes to its sales and
pandemic have been broad and have included increased scrutiny of distribution processes. These include virtual face-to-face sales of its
the operational resilience, liquidity and capital strength (including the products and the online recruitment, training and, where possible,
impact of making dividend payments) of financial services companies. licensing of agents. Such changes may increase or introduce new
Various governments have effected, or may effect, the postponement operational and regulatory risks, in particular those focused on
of elections and other constitutional or legislative processes in customer outcomes and conduct. A failure to implement appropriate

response to the pandemic, and this may result in an increase in governance and management of these new or incremental risks may
constitutional and political uncertainty in the markets in which the adversely impact Prudential’s reputation and brand and the results
Group operates. Governments are either starting or planning the of its operations. In markets where the level of sales under these new
roll-out of Covid-19 vaccination programmes, and accessibility to processes is material or where such processes become permanent
vaccine supplies has the potential to contribute to an increase in distribution channels, the commercial value of the Group’s existing
geopolitical tensions. The longer term political, regulatory and sale and distribution arrangements, such as bancassurance
supervisory developments resulting from the Covid-19 pandemic arrangements, may be adversely impacted.
remain highly uncertain. These may include changes to government
fiscal policies, laws or regulations aimed at increasing financial stability
and/or measures on businesses or specific industries to contribute to,
lessen or otherwise support, the financial cost to governments in
addressing the pandemic. This may include requirements on private
insurance companies and healthcare providers to cover the costs
associated with the treatment of Covid-19 beyond contractual or
policy terms.

Prudential plc
Risk factors / continued
1.2 Prudential’s businesses are inherently subject to market —— Estimates of the value of financial instruments becoming more
fluctuations and general economic conditions, each of which may difficult because in certain illiquid or closed markets, determining
adversely affect the Group’s business, financial condition, results the value at which financial instruments can be realised is highly
of operations and prospects subjective. Processes to ascertain such values require substantial
Uncertainty, fluctuations or negative trends in international economic elements of judgement, assumptions and estimates (which may
and investment climates could have a material adverse effect on change over time). Where the Group is required to sell its
Prudential’s business and profitability. Prudential operates in a investments within a defined timeframe, such market conditions
macroeconomic and global financial market environment that presents may result in the sale of these investments at below expected
significant uncertainties and potential challenges. For example, during or recorded prices.
2020 interest rates in the United States (‘US’) and some Asian countries
in which Prudential operates have decreased to historic lows driven by —— The Group holds certain investments that may lack liquidity, such as
the responses of central banks to mitigate the impact of the Covid-19 privately placed fixed maturity securities, mortgage loans, complex
pandemic. The transition to a lower carbon economy may also impact structured securities and alternative investments. If these investments
long-term asset valuations. were required to be liquidated on short notice, the Group may
experience difficulty in doing so and may be forced to sell them
Global financial markets are subject to uncertainty and volatility created at a lower price than it otherwise would have been able to realise.
by a variety of factors. These factors include slowdowns or reversals in
world economic growth (particularly where this is abrupt, as has been —— A reduction in revenue from the Group’s products where fee
the case with the impact of the Covid-19 pandemic), fluctuations in income is linked to account values or the market value of the funds
global energy prices, changes in monetary policy in China, the US under management. In particular, equity price falls impact the
and other jurisdictions together with their impact on the valuation of all amount of revenue derived from fees from the unit-linked products
asset classes and effect on interest rates and inflation expectations, and in the Group’s Asia business and from annuity contracts at Jackson,
concerns over sovereign debt. Other factors include the increased level where fees are charged on account and asset values.
of (geo)political risk and policy-related uncertainty (including the
broader market impacts resulting from the trade negotiations between —— Increased illiquidity, which includes the risk that expected cash
the US and China) and socio-political, climate-driven and pandemic inflows from investments and operations will not be adequate
events. The extent of financial market and economic impact of these to meet the Group’s anticipated short-term and long-term
factors may be highly uncertain and unpredictable and influenced by policyholder benefits and expense payment obligations. Increased
the actions, including the duration and effectiveness of mitigating illiquidity also adds to uncertainty over the accessibility of financial
measures of governments, policymakers and the public. resources which in extreme conditions can impact the functioning
of markets and may reduce capital resources as valuations decline.
The adverse effects of such factors could be felt principally through This could occur where external capital is unavailable at sustainable
the following items: cost, increased liquid assets are required to be held as collateral
under derivative transactions or redemption restrictions are placed
—— Lower interest rates and reduced investment returns arising on on Prudential’s investments in illiquid funds. In addition, significant
the Group’s portfolios including impairment of debt securities and redemption requests could also be made on Prudential’s issued
loans, which could reduce Prudential’s capital and impair its ability funds and while this may not have a direct impact on the Group’s
to write significant volumes of new business, increase the potential liquidity, it could result in reputational damage to Prudential. The
adverse impact of product guarantees included in Jackson’s potential impact of increased illiquidity is more uncertain than for
variable annuities and non-unit-linked products with a savings other risks such as interest rate or credit risk.
component in Asia, increase reinvestment risk for some of the
Group’s investments from accelerated prepayments and increased In general, upheavals in the financial markets may affect general levels
redemptions and/or have a negative impact on its assets under of economic activity, employment and customer behaviour. As a result,
management and profit. insurers may experience an elevated incidence of claims, lapses, or
surrenders of policies, and some policyholders may choose to defer
—— A reduction in the financial strength and flexibility of corporate or stop paying insurance premiums or reduce deposits into retirement
entities which may result in a deterioration of the credit rating plans. The demand for insurance products may also be adversely
profile and valuation of the Group’s invested credit portfolio (which affected. In addition, there may be a higher incidence of counterparty
may result in an increase in regulatory capital requirements for the failures. If sustained, this environment is likely to have a negative
Group or its businesses), as well as higher credit defaults and wider impact on the insurance sector over time and may consequently have
credit and liquidity spreads resulting in realised and unrealised a negative impact on Prudential’s business and its balance sheet and
credit losses. Similarly, mortgages and mortgage-backed securities profitability. For example, this could occur if the recoverable value
in the Group’s investment portfolio are subject to default risk and of intangible assets for bancassurance agreements and deferred
may be adversely impacted by delays or failures of borrowers to acquisition costs are reduced. New challenges related to market
make payments of principal and interest when due. fluctuations and general economic conditions may continue to emerge.
—— Failure of counterparties who have transactions with Prudential

(such as banks, reinsurers and counterparties to derivative
transactions) to meet commitments that could give rise to a
negative impact on Prudential’s financial position and on the
accessibility or recoverability of amounts due or, for derivative
transactions, adequate collateral not being in place. Concentrations
of counterparty credit risk could exacerbate the impact of these
events where they materialise.
380 Prudential plc

For some non-unit-linked products with a savings component, in In addition, Jackson hedges the guarantees on its variable annuity
Group overview
particular those written in some of the Group’s Asia operations, it may book on an economic basis (with consideration of the local regulatory
not be possible to hold assets which will provide cash flows to match position) and, thus, accepts variability in its accounting results in the
those relating to policyholder liabilities. This is particularly true in those short term in order to achieve the appropriate result on these bases.
countries where bond markets are less developed and in certain In particular, for Prudential’s Group International Financial Reporting
markets where regulated premium and claim values are set with Standards (‘IFRS’) reporting, the measurement of the Jackson variable
reference to the interest rate environment prevailing at the time annuity guarantees is typically less sensitive to market movements
of policy issue. This results in a mismatch due to the duration and than for the corresponding hedging derivatives, which are held at
Strategic report
uncertainty of the liability cash flows and the lack of sufficient assets market value. However, depending on the level of hedging conducted
of a suitable duration. While this residual asset/liability mismatch risk regarding a particular risk type, certain market movements can drive
can be managed, it cannot be eliminated. Where interest rates in these volatility in the economic or local regulatory results that may be less
markets remain lower than those used to calculate premium and claim significant under IFRS reporting.
values over a sustained period, this could have a material adverse
effect on Prudential’s reported profit and the solvency of its business Also, Jackson has a mix of spread-based and mortality business with
units. In addition, part of the profit from the Group’s Asia operations is assets invested in fixed-income securities and its results are therefore
related to bonuses for policyholders declared on with-profits products, affected by fluctuations in prevailing interest rates. In particular, stable
Governance
which are impacted by the difference between actual investment value products written by Jackson expose Prudential to the risk that
returns of the with-profits fund (which are broadly based on historical changes in interest rates, which are not fully reflected in the interest
and current rates of return on equity, real estate and fixed income rates credited to customers, will reduce spread. The spread is the
securities) and minimum guarantee rates offered to policyholders. difference between the rate of return Jackson is able to earn on the
This profit could be lower in particular in a sustained low interest assets backing the policyholders’ liabilities and the amounts that are
rate environment. credited to policyholders in the form of benefit increases, subject to
minimum crediting rates. Declines in spread from these products or
other spread businesses that Jackson conducts, and increases in

Jackson writes a significant amount of variable annuities that offer
capital or income protection guarantees. The value of these guarantees surrender levels arising from interest rate rises, could have a material
is affected by market factors (such as interest rates, equity values, bond impact on its businesses or results of operations.
spreads and realised volatility) and policyholder behaviour. Changes in
markets, or deviations in policyholder behaviour experience from Any of the foregoing factors and events, individually or together,
assumptions, may result in the need to hold additional reserves for could have a material adverse effect on Prudential’s business, financial
these products, which may impact Jackson’s liquidity, require it to raise condition, results of operations and prospects.
additional capital and/or adversely impact its net income. Jackson uses
a derivative hedging programme to reduce its exposure to market risks 1.3 As a holding company, Prudential is dependent upon its
arising on these guarantees. There may be circumstances where the subsidiaries to cover operating expenses and dividend payments
derivatives that Jackson enters into to hedge its market risks may not The Group’s insurance and investment management operations are
generally conducted through direct and indirect subsidiaries, which
sufficiently or effectively offset its exposures under the guarantees,
or where its exposures may be over-hedged. This includes are subject to the risks discussed elsewhere in this ‘Risk Factors’ section.
circumstances where:
As a holding company, Prudential’s principal sources of funds are
—— The derivative markets for the instruments which most remittances from subsidiaries, shareholder-backed funds, the
appropriately reflect the equity funds in which policyholders shareholder transfer from long-term funds and any amounts that may
have invested may not be of sufficient size or liquidity to effectively be raised through the issuance of equity, debt and commercial paper.
hedge these risks;
Certain of Prudential’s subsidiaries are subject to applicable insurance,
—— Operational errors occur in the execution of Jackson’s hedging foreign exchange and tax laws, rules and regulations (including in
relation to distributable profits) that can limit their ability to make

strategy; or
remittances. In some circumstances, including where there are
—— Actual experience materially deviates from the assumptions used changes to general market conditions, this could limit Prudential’s
in the models which inform Jackson’s hedging strategy. These ability to pay dividends to shareholders or to make available funds held
assumptions include, amongst others, mortality, lapse, surrender in certain subsidiaries to cover operating expenses of other members
and withdrawal rates and amounts of withdrawals, election rates, of the Group.
fund performance, equity market returns and volatility, interest
rate levels and correlation among various market movements. A material change in the financial condition of any of Prudential’s
subsidiaries may have a material effect on its business, financial
If the results from Jackson’s hedging programmes do not correlate condition, results of operations and prospects.
with the economic effect of changes in benefit exposures to
customers, it could experience economic losses and increased
volatility in its earnings which could adversely impact the Group’s
business, financial condition and results of operations. The cost of
any guarantees that remain unhedged will also affect Jackson’s results.
Periods of significant and sustained downturns in securities markets,

increased equity volatility, reduced interest rates, or deviations

in expected policyholder behaviour could also increase the cost
of hedging beyond that anticipated in the pricing of the products
being hedged and could produce losses not addressed by the risk
management techniques employed.

Prudential plc
1.4 (Geo)political risks and uncertainty may adversely impact 1.5 Prudential is subject to the risk of potential sovereign debt
economic conditions, increase market volatility, cause operational credit deterioration owing to the amounts of sovereign debt
disruption to the Group and impact its strategic plans, which could obligations held in its investment portfolio
have adverse effects on Prudential’s business, financial condition, Investing in sovereign debt creates exposure to the direct or indirect
results of operations and prospects consequences of political, social or economic changes (including
The Group is exposed to (geo)political risks and uncertainty in the changes in governments, heads of state or monarchs) in the countries in
markets in which it operates. Recent shifts in the focus of some which the issuers of such debt are located and to the creditworthiness
national governments toward more protectionist or restrictive of the sovereign. Investment in sovereign debt obligations involves risks
economic and trade policies with specific markets, and international not present in debt obligations of corporate issuers. In addition, the
trade disputes, could impact on the macroeconomic outlook and the issuer of the debt or the governmental authorities that control the
environment for global financial markets. This could take effect, for repayment of the debt may be unable or unwilling to repay principal or
example, through increased friction in cross-border trade, such as pay interest when due in accordance with the terms of such debt, and
implementation of trade tariffs or the withdrawal from existing trading Prudential may have limited recourse to compel payment in the event
blocs or agreements and the exercise of executive powers to restrict of a default. A sovereign debtor’s willingness or ability to repay principal
overseas trade, financial transactions, capital movements and/or and to pay interest in a timely manner may be affected by, among other
investment. The degree and nature of regulatory changes and factors, its cash flow situation, its relations with its central bank, the
Prudential’s competitive position in some geographic markets may extent of its foreign currency reserves, the availability of sufficient
also be impacted, for example, through measures favouring local foreign exchange on the date a payment is due, the relative size of the
enterprises, such as changes to the maximum level of non-domestic debt service burden to the economy as a whole, the sovereign debtor’s
ownership by foreign companies or differing treatment under policy toward local and international lenders, and the political
regulations and tax rules. constraints to which the sovereign debtor may be subject.
(Geo)political risks and political uncertainty may also adversely impact Moreover, governments may use a variety of techniques, such as
the Group’s operations and its operational resilience. Increased (geo) intervention by their central banks or imposition of regulatory controls
political tensions may increase cross-border cyber activity and or taxes, to devalue their currencies’ exchange rates, or may adopt
therefore increase cyber security risks. (Geo)political tensions monetary and other policies (including to manage their debt burdens)
may also lead to civil unrest and/or acts of civil disobedience. that have a similar effect, all of which could adversely impact the value
This includes the unrest in Hong Kong, where mass anti-government of an investment in sovereign debt even in the absence of a technical
demonstrations have given rise to increased disruption throughout the default. Periods of economic uncertainty may affect the volatility of
region. Such events could impact operational resilience by disrupting market prices of sovereign debt to a greater extent than the volatility
Prudential’s systems, operations, new business sales and renewals, inherent in debt obligations of other types of issuers.
distribution channels and services to customers, which may result in a
reduction in contributions from business units to the central cash In addition, if a sovereign default or other such events described above
balances and profit of the Group, decreased profitability, financial loss, were to occur as has happened on occasion in the past, other financial
adverse customer impacts and reputational damage and may impact institutions may also suffer losses or experience solvency or other
Prudential’s business, financial condition, results of operations concerns, which may result in Prudential facing additional risks relating
and prospects. to investments in such financial institutions that are held in the Group’s
investment portfolio. There is also risk that public perceptions about
Responses by the US, UK and other governments to the enactment the stability and creditworthiness of financial institutions and the
and application of the national security law in Hong Kong and other financial sector generally might be adversely affected, as might
constitutional or legislative changes in the territory, which continue to counterparty relationships between financial institutions.
develop, may adversely impact Hong Kong’s economy with potential
adverse sales, operational and product distribution impacts to the If a sovereign were to default on its obligations, or adopt policies that
Group due to the territory being a key market which also hosts regional devalued or otherwise altered the currencies in which its obligations
and head office functions. For internationally active groups such as were denominated, this could have a material adverse effect on
Prudential, operating across multiple jurisdictions, government Prudential’s business, financial condition, results of operations
measures and responses may also add to the complexity of legal and and prospects.
regulatory compliance and increase the risk of conflicts between the
requirements of one jurisdiction and another. See risk factor 3.1 below.
382 Prudential plc

1.6 Downgrades in Prudential’s financial strength and credit 2. Risks relating to Prudential’s business activities and industry
Group overview
ratings could significantly impact its competitive position and 2.1 The proposed demerger of Jackson carries with it execution
damage its relationships with creditors or trading counterparties risk and will require significant management attention
Prudential’s financial strength and credit ratings, which are used by the The proposed demerger of Jackson is subject to a number of factors
market to measure its ability to meet policyholder obligations, are an and dependencies, such as prevailing market and political conditions
important factor affecting public confidence in Prudential’s products, and external approvals (including those from regulators and
and as a result its competitiveness. Downgrades in Prudential’s ratings shareholders). In addition, preparing for and implementing the
as a result of, for example, decreased profitability, increased costs, proposed demerger of Jackson is expected to require significant time
Strategic report
increased indebtedness or other concerns could have an adverse from management, and management time will continue to be required
effect on its ability to market products, retain current policyholders, in respect of any future sale of Prudential’s remaining stake in Jackson.
and the Group’s ability to compete for acquisition and strategic Management’s attention may be diverted from other aspects of
opportunities. Downgrades may also impact the Group’s financial Prudential’s business as a result.
flexibility, including its ability to issue commercial paper at current
levels and pricing. The interest rates at which Prudential is able to Therefore, there can be no certainty that the demerger of Jackson will be
borrow funds are affected by its credit ratings, which are in place to implemented on the anticipated timetable, or that it will be completed as
measure the Group’s ability to meet its contractual obligations. proposed (or at all). Further, if the proposed demerger of Jackson is
Governance
completed, there can be no assurance that either Prudential or Jackson
In addition, changes in methodologies and criteria used by rating will realise the anticipated benefits of the transaction, or that the
agencies could result in downgrades that do not reflect changes in proposed demerger of Jackson and/or the future sale of Prudential’s
the general economic conditions or Prudential’s financial condition. remaining stake in Jackson will not adversely affect the trading value
or liquidity of the shares of either or both of the two businesses.
Any such downgrades could have a material adverse effect on
Prudential’s business, financial condition, results of operations and If the demerger of Jackson does complete, Prudential will continue
prospects. Prudential cannot predict what actions rating agencies may to hold shares in Jackson. The market price of Jackson shares may be

take, or what actions Prudential may therefore take in response to the volatile and can go down as well as up. It is therefore possible that the
actions of rating agencies, which could adversely affect its business. value of Prudential’s shareholding may be lower than anticipated, and
the gross proceeds due to Prudential from any future sale may be lower
1.7 Prudential is subject to the risk of exchange rate fluctuations than Prudential might otherwise achieve.
owing to the geographical diversity of its businesses
Due to the geographical diversity of Prudential’s businesses, Failure to complete the demerger of Jackson would result in the
Prudential is subject to the risk of exchange rate fluctuations. potential benefits of the separation not being realised and may have
Prudential’s operations generally write policies and invest in assets an adverse effect on the reputation of Prudential and on the external
denominated in local currencies. Although this practice limits the perception of its ability to implement large-scale projects successfully.
effect of exchange rate fluctuations on local operating results, it can This may be the case even where the failure to implement the demerger
lead to fluctuations in Prudential’s consolidated financial statements of Jackson is due to factors outside the control of Prudential. A failure
upon the translation of results into the Group’s presentation currency. to complete the demerger of Jackson may also result in increased
This exposure is not currently separately managed. The Group regulatory scrutiny on Prudential, in particular where the reasons for
presents its consolidated financial statements in US dollars, which is the demerger of Jackson not proceeding are internal to Prudential.
the currency in which a large proportion of the Group’s earnings and
assets and liabilities are denominated or to which they are linked (such 2.2 The implementation of large-scale transformation, including
as the Hong Kong dollar). There remain some entities within the Group complex strategic initiatives, gives rise to significant design and
the results of which are not denominated in or linked to the US dollar execution risks, may affect Prudential’s operational capability and
and transactions which are conducted in non-US dollar currencies. capacity, and may adversely impact the Group and the delivery
Prudential is subject to the risk of exchange rate fluctuations from the of its strategy if these initiatives fail to meet their objectives

translation of the results of these entities and transactions and the risks In order to implement its business strategies for growth, improve
from the maintenance of the Hong Kong dollar peg to the US dollar. customer experiences, strengthen operational resilience, meet
regulatory and industry requirements and maintain market
competitiveness, Prudential undertakes Group restructuring, large-
scale transformation and acquisitions and disposals across its business.
Many of these change initiatives are complex, interconnected and/or of
large scale, including a current focus on preparations for the proposed
demerger of Jackson, advancing the Group’s digital capability,
expanding strategic partnerships and industry and regulatory-driven
change. There may be a material adverse effect to Prudential’s business,
customers, financial condition, results of operations and prospects if
these initiatives incur unplanned costs, are subject to implementation
delays, or fail to fully meet their objectives. Additionally, there may be
adverse non-financial (including operational, regulatory, conduct and
reputational) implications for the Group. These initiatives inherently give
rise to design and execution risks, and may increase existing business
risks, such as placing additional strain on the operational capacity, or
weakening the control environment, of the Group.

Prudential plc
Implementing further initiatives related to significant regulatory 2.4 Adverse experience in the operational risks inherent in
changes, such as IFRS 17 and the transition to a legislative framework Prudential’s business, and those of its material outsourcing
in Hong Kong for the Group-wide supervision of insurance groups, partners, could disrupt its business functions and have a negative
may amplify these risks. Risks relating to these regulatory changes impact on its business, financial condition, results of operations
are explained in the ‘Legal and Regulatory Risk’ risk factor below. and prospects
Operational risks are present in all of Prudential’s businesses, including
The speed of technological change in the business could outpace the risk of direct or indirect loss resulting from inadequate or failed
the Group’s ability to anticipate all the unintended consequences that internal and external processes, systems or human error, fraud, the
may arise from such change. Innovative technologies, such as artificial effects of natural or man-made catastrophic events (such as natural
intelligence, expose Prudential to potential information security, disasters, pandemics, cyber-attacks, acts of terrorism, civil unrest and
operational, ethical and conduct risks which, if improperly managed, other catastrophes) or from other external events. These risks may also
could result in customer detriment and reputational damage. adversely impact Prudential through its partners which provide
bancassurance and product distribution, outsourcing, external
2.3 Prudential’s businesses are conducted in highly competitive technology, data hosting and other services.
environments with developing demographic trends and continued
profitability depends upon management’s ability to respond to Exposure to such events could impact Prudential’s operational
these pressures and trends resilience and ability to perform necessary business functions by
The markets for financial services in the US and Asia are highly disrupting its systems, operations, new business sales and renewals,
competitive, with several factors affecting Prudential’s ability to sell distribution channels and services to customers, or result in the loss
its products and continued profitability, including price and yields of confidential or proprietary data. Such events, as well as any
offered, financial strength and ratings, range of product lines and weaknesses in administration systems (such as those relating to
product quality, brand strength and name recognition, investment policyholder records) or actuarial reserving processes, may also
management performance and fund management trends, historical result in increased expenses, as well as legal and regulatory sanctions,
bonus levels, the ability to respond to developing demographic trends, decreased profitability, financial loss, customer conduct risk impacts
customer appetite for certain savings products and technological and may damage Prudential’s reputation and relationship with its
advances. In some of its markets, Prudential faces competitors that customers and business partners.
are larger, have greater financial resources or a greater market share,
offer a broader range of products or have higher bonus rates. Further, Prudential’s business is dependent on processing a large number
heightened competition for talented and skilled employees, agents of transactions for numerous and diverse products. It also employs a
and independent financial advisers may limit Prudential’s potential to large number of complex and interconnected IT and finance systems
grow its business as quickly as planned. Technological advances, and models, and user developed applications in its processes to
including the increased capability for gathering large volumes of perform a range of operational functions including the calculation
customer health data and developments in capabilities and tools in of regulatory or internal capital requirements, the valuation of assets
analysing and interpreting such data (such as artificial intelligence and and liabilities, determining hedging requirements, and in acquiring
machine learning), may result in increased competition to the Group, new business using artificial intelligence and digital applications.
both from within and outside the insurance industry, and may increase Some of these tools form an integral part of the information and
the competition risks resulting from a failure to be able to attract decision-making framework of Prudential and the risk of adverse
sufficient numbers of skilled staff. consequences arising from erroneous or misinterpreted tools used
in core business activities, decision making and reporting exists.
In Asia, the Group’s principal competitors include global life insurers Errors or limitations in these tools, or inappropriate usage, may lead
together with regional insurers and multinational asset managers. In to regulatory breaches, inappropriate decision-making, financial loss,
most Asia markets, there are also local companies that have a material or reputational damage. The long-term nature of much of the Group’s
market presence. business also means that accurate records have to be maintained
securely for significant time periods. Further, Prudential operates in an
Jackson’s competitors in the US include major stock and mutual extensive and evolving legal and regulatory environment (including in
insurance companies, mutual fund organisations, banks and other relation to tax) which adds to the complexity of the governance and
financial services companies. operation of its business processes and controls.
Prudential believes that competition will intensify across all regions The performance of the Group’s core business activities and the
in response to consumer demand, digital and other technological uninterrupted availability of services to customers rely significantly
advances (including the emergence of new distribution channels), on, and require significant investment in, IT infrastructure and security,
the need for economies of scale and the consequential impact of system development, data governance and management, compliance
consolidation, regulatory actions and other factors. Prudential’s and other operational systems, personnel, controls and processes.
ability to generate an appropriate return depends significantly upon its During times of significant change, the resilience and operational
capacity to anticipate and respond appropriately to these competitive effectiveness of these systems and processes at Prudential and/or
pressures. This includes managing the potential adverse impacts to its third party providers may be adversely impacted. In particular,
the commercial value of the Group’s existing sale and distribution Prudential and its business partners are making increasing use of
arrangements, such as bancassurance arrangements, in markets emerging technological tools and digital services, or forming strategic
where new distribution channels develop. partnerships with third parties to provide these capabilities. Automated
distribution channels to customers increase the criticality of providing
Failure to do so may negatively impact Prudential’s ability to attract and uninterrupted services. A failure to implement appropriate governance
retain customers and, importantly, may limit Prudential’s ability to take and management of the incremental operational risks from emerging
advantage of new business arising in the markets in which it operates, technologies may adversely impact Prudential’s reputation and brand,
which may have an adverse interest on the Group’s business, financial the results of its operations, its ability to attract and retain customers
condition, results of operations and prospects. and its ability to deliver on its long-term strategy and therefore its
competitiveness and long-term financial success.
384 Prudential plc

Although Prudential’s IT, compliance and other operational systems, expectations may be increased by the development and usage of
Group overview
models and processes incorporate governance and controls designed digital distribution and service channels, which can collect a broader
to manage and mitigate the operational and model risks associated range of personal and health-related data from individuals at increased
with its activities, there can be no assurance as to the resilience of scale, and the use of complex tools, machine learning and artificial
these systems and processes to disruption or that governance and intelligence technologies to process, analyse and interpret this data.
controls will always be effective. Due to human error, among other Regulatory developments in data protection worldwide (such as the
reasons, operational and model risk incidents do occur from time to implementation of EU General Data Protection Regulation that came
time and no system or process can entirely prevent them, although into force in 2018 and the California Consumer Protection Act that
Strategic report
Prudential has not, to date, identified any such incidents that have had came into force on 1 January 2020) may also increase the financial and
a material impact. Prudential’s legacy and other IT systems, data and reputational implications for Prudential following a significant breach
processes, as with operational systems and processes generally, of its (or its third-party suppliers’) IT systems or data. The international
may also be susceptible to failure or security/data breaches. transfer of data may, as a global organisation, increase regulatory risks
for the Group. Although Prudential has experienced or has been
In addition, Prudential relies on the performance and operations of a affected by cyber and data breaches, to date, it has not identified a
number of bancassurance, outsourcing (including external technology failure or breach, or an incident of data misuse in relation to its legacy
and data hosting) and service partners. These include back office and other IT systems and processes which has had a material impact.
Governance
support functions, such as those relating to IT infrastructure, However, Prudential has been, and likely will continue to be, subject
development and support and customer facing operations and services, to potential damage from computer viruses, unauthorised access and
such as product distribution and services (including through digital cyber-security attacks such as ‘denial of service’ attacks (which, for
channels) and investment operations. This creates reliance upon the example, can cause temporary disruption to websites and IT
resilient operational performance of these partners, and failure to networks), phishing and disruptive software campaigns.
adequately oversee the partner, or the failure of a partner (or of its IT and
operational systems and processes) could result in significant disruption Prudential is continually enhancing its IT environment to remain secure
against emerging threats, together with increasing its ability to detect

to business operations and customers, may have reputational or conduct
risk implications and which could have a material adverse effect on its system compromise and recover should such an incident occur.
business, financial condition, results of operations and prospects. However, there can be no assurance that such events will not take
place which may have material adverse consequential effects on
2.5 Attempts to access or disrupt Prudential’s IT systems, and Prudential’s business, financial condition, results of operations
loss or misuse of personal data, could result in loss of trust from and prospects.
Prudential’s customers and employees, reputational damage and
have material adverse effects on the Group’s business, financial 2.6 Prudential’s digital health application, Pulse, has seen
condition, results of operations and prospects increasing adoption in Asia and as the markets in which it
Prudential and its business partners are increasingly exposed to operates, its user base, features, partnerships and product
the risk that individuals (which includes connected persons such offerings develop, existing business risks to the Group may
as employees, contractors or representatives of Prudential or be increased and new risks may be introduced
its third-party service providers, and unconnected persons) or Prudential’s digital health application, Pulse, is subject to the risks
groups may intentionally or unintentionally disrupt the availability, discussed within this ‘Risk Factors’ section. In particular, these include
confidentiality and integrity of its IT systems or compromise the risks related to legal and regulatory compliance and the conduct of
integrity and security of data (both corporate and customer), which business; the execution of complex change initiatives; information
could result in disruption to key operations, make it difficult to recover security, cyber and data privacy; the use of models (including those
critical services or damage assets, any of which could result in loss using artificial intelligence) and personal data; the resilience and
of trust from Prudential’s customers and employees, reputational integrity of IT infrastructure and operations; and those related to the
damage and direct or indirect financial loss. The cyber-security management of third parties. These existing risks for the Group may
threat continues to evolve globally in sophistication and potential be increased due to a number of factors:

significance. Prudential’s increasing profile in its current markets and
those in which it is entering, growing customer interest in interacting —— The number of current and planned markets in which the
with their insurance providers and asset managers through the application operates, each with their own laws and regulations,
internet and social media, improved brand awareness and the 2016 regulatory and supervisory authorities, may increase regulatory
designation of Prudential as a G-SII could also increase the likelihood compliance risks.
of Prudential being considered a target by cyber criminals. Further,
there have been changes to the threat landscape in recent years —— The implementation of planned application features and offerings
and the risk from untargeted but sophisticated and automated may require the delivery of complex, inter-connected change
attacks has increased. initiatives across current and planned markets. This may give rise
to design and execution risks, which could be amplified where
There is an increasing requirement and expectation on Prudential these change initiatives are delivered concurrently.
and its business partners to not only hold customer, shareholder
and employee data securely, but also to ensure its ongoing accuracy —— The increased volume, breadth and sensitivity of data on which the
and that it is being used in a transparent, appropriate and ethical business model of the application is dependent and to which the
way, including in decision-making where automated processes are Group has access, holds, analyses and processes through its
employed. A failure to do so may result in regulatory scrutiny and models, which increases data security, privacy and usage risks.
The use of complex models, including where they use artificial
sanctions and may adversely impact the reputation and brand of the
Group, its ability to attract and retain customers, its ability to deliver intelligence for critical decision-making, in the application’s features
on its long-term strategy and therefore the results of its operations. and offerings may give rise to operational, conduct, litigation and
New and currently unforeseeable regulatory issues may also arise reputational risks where they do not function as intended.
from the increased use of emerging technology.
The risk to the Group of not meeting these requirements and

Prudential plc
—— The application and its services relies on a number of third party 2.8 Adverse experience relative to the assumptions used in pricing
partners and providers, which may vary according to market. products and reporting business results could significantly affect
This may increase operational disruption risks to the uninterrupted Prudential’s business, financial condition, results of operations
provision of services to customers, regulatory compliance and and prospects
conduct risks, and the potential for reputational risks. In common with other life insurers, the profitability of the Group’s
businesses depends on a mix of factors including mortality and
New product offerings may be developed and provided through morbidity levels and trends, policy surrenders and take-up rates
the application, some of which Prudential may have limited or no on guarantee features of products, investment performance and
experience in providing, which may introduce new regulatory, impairments, unit cost of administration and new business acquisition
operational, conduct and strategic risks for Group. expenses. The Group’s businesses are subject to inflation risk. In
particular, the Group’s medical insurance businesses in Asia are
A failure to implement appropriate governance and management also exposed to medical inflation risk.
of the incremental and new risks detailed above may adversely
impact Prudential’s reputation and brand, its ability to attract Prudential needs to make assumptions about a number of factors in
and retain customers, its competitiveness and its ability to deliver determining the pricing of its products, for setting reserves, and for
on its long-term strategy. reporting its capital levels and the results of its long-term business
operations.
2.7 Prudential operates in certain markets with joint venture
partners, minority shareholders and other third parties, resulting Assumptions about future expected levels of mortality are of relevance
in certain risks that Prudential does not face with respect to to the Guaranteed Minimum Withdrawal Benefit (‘GMWB’) of
its wholly-owned subsidiaries Jackson’s variable annuity business.
Prudential operates, and in certain markets is required by local
regulation to operate, through joint ventures and other joint ownership A further factor is the assumption that Prudential makes about future
or third-party arrangements. For such Group operations the level expected levels of the rates of early termination of products by its
of control exercisable by the Group depends on the terms of the customers (known as persistency). This is relevant to a number of lines
contractual agreements, in particular, those terms providing for the of business in the Group, especially for Jackson’s portfolio of variable
allocation of control among, and continued cooperation between, the annuities and across product lines in Asian markets. Prudential’s
participants. In addition, the level of control exercisable by the Group persistency assumptions reflect a combination of recent past
could be subject to changes in the maximum level of non-domestic experience for each relevant line of business and expert judgement,
ownership imposed on foreign companies in certain jurisdictions. especially where a lack of relevant and credible experience data exists.
Any expected change in future persistency is also reflected in the
Prudential may face financial, reputational and other exposure assumption. If actual levels of future persistency are significantly
(including regulatory censure) in the event that any of its partners different than assumed, the Group’s results of operations could be
fails or is unable to meet its obligations under the arrangements, adversely affected. Furthermore, Jackson’s variable annuity products
encounters financial difficulty, or fails to comply with local or are sensitive to other types of policyholder behaviour, such as the take-
international regulation and standards such as those pertaining to the up of its GMWB product features.
prevention of financial crime. In addition, a significant proportion of the
Group’s product distribution is carried out through arrangements with In addition, Prudential’s business may be adversely affected by
third parties not controlled by Prudential such as bancassurance and epidemics, pandemics and other effects that give rise to a large
agency arrangements in Asia and broker-dealer networks in the US number of deaths or additional sickness claims, as well as increases
and is therefore dependent upon continuation of these relationships. to the cost of medical claims. Pandemics, significant influenza and
A temporary or permanent disruption to these distribution other epidemics have occurred a number of times historically but the
arrangements, such as through significant deterioration in the likelihood, timing, or the severity of future events cannot be predicted.
reputation, financial position or other circumstances of the third party, The effectiveness of external parties, including governmental and non-
material failure in controls (such as those pertaining to the third-party governmental organisations, in combating the spread and severity of
system failure or the prevention of financial crime) or failure to any epidemics could have a material impact on the Group’s claims
meet any regulatory requirements could adversely affect experience. The risks to the Group resulting from the Covid-19
Prudential’s reputation and its business, financial condition, pandemic are included in the ‘Covid-19’ risk factor detailed in above.
results of operations and prospects.
Prudential uses reinsurance to selectively transfer mortality, morbidity
and other risks. This exposes the Group to the counterparty risk of a
reinsurer being unable to pay reinsurance claims or otherwise meet
their commitments; the risk that a reinsurer changes reinsurance terms
and conditions of coverage, or increases the price of reinsurance
which Prudential is unable to pass on to its customers; and the risk
of ambiguity in the reinsurance terms and conditions leading to
uncertainty whether an event is covered under a reinsurance contract.
Any of the foregoing, individually or together, could have a material

adverse effect on Prudential’s business, financial condition, results
of operations and prospects.
386 Prudential plc

2.9 Prudential is exposed to ongoing risks as a result Following the demerger of Jackson, these risks may become more
Group overview
of the demerger of M&G plc (the ‘M&G Demerger’) pronounced for the Group as markets with higher geopolitical risk
On 21 October 2019, Prudential completed the M&G Demerger and, exposure will form a larger proportion of Prudential’s operations.
in connection with this, Prudential entered into a demerger agreement
with M&G plc. Among other provisions, the demerger agreement Further information on specific areas of regulatory and supervisory
contains a customary indemnity under which Prudential has agreed to requirements and changes are included in the sub-sections below.
indemnify M&G plc against liabilities incurred by the M&G plc group
that relate to the business of the Group. Although it is not anticipated (a) Group-wide Supervision
With effect from 21 October 2019, the Group-wide supervisor of
Strategic report
that Prudential will be required to pay any substantial amount pursuant
to such indemnity obligations, if any amount payable thereunder is Prudential plc changed to the Hong Kong Insurance Authority (‘IA’).
substantial this could have a material adverse effect on Prudential’s To align Hong Kong’s regulatory regime with international standards
business, financial condition, results of operations and prospects. and practices, the Hong Kong IA has developed a new Group-wide
Supervision (‘GWS’) Framework for multinational insurance groups
3. Legal and regulatory risk under its supervision. The GWS Framework is based on a principle-
3.1 Prudential conducts its businesses subject to regulation and based and outcome-focused approach, and allows the Hong Kong
associated regulatory risks, including a change to the basis in the IA to exercise direct regulatory powers over the designated holding
Governance
regulatory supervision of the Group, the effects of changes in the companies of multinational insurance groups. On 24 July 2020 the
laws, regulations, policies and interpretations and any accounting Insurance (Amendment) (No. 2) Ordinance, being the enabling
standards in the markets in which it operates primary legislation providing for the GWS Framework, was enacted.
Changes in government policy and legislation (including in relation to This primary legislation is supported by subsidiary legislation and
tax), capital control measures on companies and individuals, regulation guidance material from the Hong Kong IA. The relevant subsidiary
or regulatory interpretation applying to companies in the financial legislation, including the Insurance (Group Capital) Rules, was tabled
services and insurance industries in any of the markets in which before the Legislative Council on 6 January 2021 and will come into
operation on 29 March 2021. The GWS Framework is expected to be

Prudential operates (including those related to the conduct of business
by Prudential or its third party distributors), or decisions taken by effective for Prudential upon designation by the Hong Kong IA in the
regulators in connection with their supervision of members of the Group, second quarter of 2021, subject to transitional arrangements. Prior
which in some circumstances may be applied retrospectively, may to the GWS Framework becoming effective for the Group, Prudential
adversely affect Prudential. The impact from any regulatory changes remains subject to the Regulatory Letter signed with the Hong Kong
may be material to Prudential, for example changes may be required to IA. This letter outlines the interim supervision arrangements from
its product range, distribution channels, handling and usage of data, 21 October 2019 when the Hong Kong IA became the Group-wide
competitiveness, profitability, capital requirements, risk management supervisor of the Group.
approaches, corporate or governance structure and, consequently,
reported results and financing requirements. Also, regulators in Although the GWS Framework is broadly consistent with the interim
jurisdictions in which Prudential operates may impose requirements supervision arrangements that currently apply to the Group under
the Regulatory Letter, until all elements of the GWS Framework
affecting the allocation of capital and liquidity between different
business units in the Group, whether on a geographic, legal entity, are finalised the Group cannot be certain of the nature and extent
product line or other basis. Regulators may also change solvency of differences between the interim principles agreed with the
requirements, methodologies for determining components of the Hong Kong IA and the specific regulatory requirements of the GWS
regulatory or statutory balance sheet including the reserves and the level Framework. The Group’s existing processes and resources may also
of capital required to be held by individual businesses (with implications need to change to comply with the final GWS Framework or any other
to the Group capital position), the regulation of selling practices, and requirements of the Hong Kong IA. The need to adapt to any such
could introduce changes that impact products sold or that may be sold. changes or to respond to any such requirements may lead to increased
Furthermore, as a result of interventions by governments in light of costs or otherwise impact the business, financial condition, results,
financial and global economic conditions, there may continue to be profitability and/or prospects of the Group.

changes in government regulation and supervision of the financial
With the agreement of the Hong Kong IA, Prudential currently
services industry, including the possibility of higher capital
applies the Local Capital Summation Method (the ‘LCSM’) to
requirements, restrictions on certain types of transactions
determine Group regulatory capital requirements under the
and enhancement of supervisory powers.
Regulatory Letter. Prudential currently expects the GWS methodology
In the markets in which it operates, Prudential is subject to regulatory to be largely consistent with these interim supervisory requirements,
requirements and obligations with respect to financial crime including with the exception of the treatment of debt instruments outlined
anti-money laundering and sanctions compliance, which may either below which will be subject to transitional arrangements under the
impose obligations on the Group to act in a certain manner or restrict GWS Framework, however any differences in the final requirements
the way that it can act in respect of specified individuals, organisations, adopted under the GWS Framework may lead to changes to the way
businesses and/or governments. A failure to do so may adversely in which capital requirements are calculated and to the eligibility
impact the reputation of Prudential and/or result in the imposition of of the capital instruments issued by Prudential to satisfy such
legal or regulatory sanctions for the Group. For internationally active capital requirements.
groups such as Prudential, operating across multiple jurisdictions
increases the complexity of legal and regulatory compliance.
Compliance with Prudential’s legal or regulatory obligations in one
jurisdiction may conflict with the law or policy objectives of another

jurisdiction, or may be seen as supporting the law or policy
objectives of that jurisdiction over another, creating additional
legal, regulatory compliance and reputational risks for the Group.
These risks may be increased where uncertainty exists on the
scope of regulatory requirements and obligations, and where
the complexity of specific cases applicable to the Group is high.

Prudential plc
The Hong Kong IA has agreed that the subordinated debt instruments Consultations on a phase 2 liquidity metric, as well as on
issued by Prudential at the date of the demerger of M&G plc can be macroeconomic elements of the HF, are expected to follow. The FSB
included as part of the Group’s capital resources for the purposes published its 2020 Resolution Report in November 2020, highlighting
of satisfying the capital requirements imposed under the interim intra-group connectedness and funding in resolution as key areas of
LCSM principles agreed with the Hong Kong IA. Senior debt attention for its work on resolution planning. Resolution will continue
instruments issued by Prudential are not included as part of the to be a near term focus in the FSB’s financial stability work and may
Group capital resources under the LCSM. Under the GWS inform decisions around the reformed G-SII designation in 2022.
Framework, Prudential’s initial analysis indicates that all debt
instruments (senior and subordinated) issued by Prudential will The IAIS continues to develop the ICS as part of ComFrame.
meet the transitional conditions set by the Hong Kong IA and will The implementation of ICS will be conducted in two phases –
be included as eligible Group capital resources, although this will a five‑year monitoring phase followed by an implementation phase.
be subject to approval by the Hong Kong IA. If the Hong Kong IA does
not approve the subordinated debt instruments Prudential has in issue (c) IFRS 17
as part of the Group’s eligible capital resources for the purposes The Group’s accounts are prepared in accordance with current IFRS
of satisfying the capital requirements imposed under the GWS applicable to the insurance industry. The International Accounting
Framework, Prudential may have less eligible capital resources Standards Board (the ‘IASB’) introduced a framework that it described
compared to under the LCSM and may need to raise additional debt as Phase I which, under its standard IFRS 4, permitted insurers to
instruments, which may in turn lead to increased costs for the Group. continue to use the statutory basis of accounting for insurance assets
and liabilities that existed in their jurisdictions prior to January 2005.
(b) Global regulatory requirements and systematic risk regulation In May 2017, the IASB published its replacement standard on
Currently there are also a number of other global regulatory insurance accounting (IFRS 17, ‘Insurance Contracts’). Some targeted
developments which could impact Prudential’s businesses in the amendments to this standard, including to the effective date, were
many jurisdictions in which they operate. These include the Dodd- issued in June 2020. IFRS 17, ‘Insurance Contracts’, as amended, will
Frank Wall Street Reform and Consumer Protection Act (‘Dodd-Frank have the effect of introducing fundamental changes to the statutory
Act’) and its subsequent amendments in the US which provided for a reporting of insurance entities that prepare accounts according to
comprehensive overhaul of the financial services industry within the US IFRS from 2023. The standard is subject to endorsement in the UK
including reforms to financial services entities, products and markets, via the UK Endorsement Board which is currently being established.
the work of the Financial Stability Board (the ‘FSB’) in the area of Prudential has a Group-wide implementation programme underway
systemic risk including the reassessment of the designation of Global to implement this new standard. The effect of changes required to
Systemically Important Insurers (‘G-SIIs’), and the Insurance Capital the Group’s accounting policies as a result of implementing the new
Standard (the ‘ICS’) being developed by the International Association standard is currently uncertain particularly as amendments were
of Insurance Supervisors (the ‘IAIS’). In addition, regulators in a number issued by the IASB in June 2020, but these changes can be expected
of jurisdictions in which the Group operates are further developing their to, amongst other things, alter the timing of IFRS profit recognition.
local capital regimes. Across Asia this includes China, Hong Kong, The implementation of this standard will involve significant
Singapore, Thailand and India. There remains a high degree of enhancements to IT, actuarial and finance systems of the Group.
uncertainty over the potential impact of such changes on the Group.
Any changes or modification of IFRS accounting policies may require a
In November 2019 the IAIS adopted the Common Framework change in the way in which future results will be determined and/or a
(‘ComFrame’) which establishes supervisory standards and guidance retrospective adjustment of reported results to ensure consistency.
focusing on the effective group-wide supervision of Internationally
Active Insurance Groups (‘IAIGs’). The ComFrame proposals, which (d) Inter-bank offered rate (‘IBOR’) reforms
include the ICS, could result in enhanced capital and regulatory In July 2014, the FSB announced widespread reforms to address the
measures for IAIGs. Prudential was included in the first register of integrity and reliability of IBORs. The discontinuation of IBORs in their
IAIGs released by the IAIS on 1 July 2020 and was designated an IAIG current form and their replacement with alternative risk-free reference
by the Hong Kong IA following an assessment against the established rates such as the Sterling Overnight Index Average benchmark
criteria in ComFrame. (‘SONIA’) in the UK and the Secured Overnight Financing Rate
(‘SOFR’) in the US could, among other things, impact the Group
In November 2019 the FSB endorsed a new Holistic Framework (‘HF’), through an adverse effect on the value of Prudential’s assets and
intended for the assessment and mitigation of systemic risk in the liabilities which are linked to or which reference IBORs, a reduction
insurance sector, for implementation by the IAIS in 2020 and has in market liquidity during any period of transition and increased legal
suspended G-SII designations until completion of a review to be and conduct risks to the Group arising from changes required to
undertaken in 2022. Many of the previous G-SII measures have already documentation and its related obligations to its stakeholders.
been adopted into the Insurance Core Principles (‘ICPs’) and ComFrame.
As an IAIG, Prudential is expected to be subject to these measures. The (e) Investor contribution schemes
HF also includes a monitoring element for the identification of a build-up Various jurisdictions in which Prudential operates have created
of systemic risk and to enable supervisors to take action where investor compensation schemes that require mandatory contributions
appropriate. As a result of the Covid-19 pandemic, this monitoring from market participants in some instances in the event of a failure of a
requirement has been replaced with a Covid-19-focused exercise for market participant. As a major participant in the majority of its chosen
2020, with annual monitoring expected to recommence in 2021. In markets, circumstances could arise in which Prudential, along with
November 2020 the IAIS launched a public consultation on phase 1 other companies, may be required to make such contributions.
of a proposed liquidity metric to be used as an ancillary indicator
in the monitoring of the build-up of systemic risk. This followed
a more general consultation on liquidity metrics earlier in 2020.
388 Prudential plc

3.2 The resolution of several issues affecting the financial services 3.4 Changes in tax legislation may result in adverse tax
Group overview
industry could have a negative impact on Prudential’s business, consequences for the Group’s business, financial condition,
financial condition, results of operations and prospects or on results of operations and prospects
its relations with current and potential customers Tax rules, including those relating to the insurance industry, and their
Prudential is, and in the future may continue to be, subject to legal interpretation may change, possibly with retrospective effect, in any of
and regulatory actions in the ordinary course of its business on matters the jurisdictions in which Prudential operates. Significant tax disputes
relevant to the delivery of customer outcomes. Such actions relate, with tax authorities, and any change in the tax status of any member of
and could in the future relate, to the application of current regulations the Group or in taxation legislation or its scope or interpretation could
Strategic report
or the failure to implement new regulations (including those relating affect Prudential’s business, financial condition, results of operations
to the conduct of business), regulatory reviews of broader industry and prospects.
practices and products sold (including in relation to lines of business
already closed) in the past under acceptable industry or market 4. Environmental, social and governance risks
practices at the time and changes to the tax regime affecting products. 4.1 The failure to understand and respond effectively to the risks
Regulators may also focus on the approach that product providers use associated with environmental, social or governance (‘ESG’)
to select third-party distributors and to monitor the appropriateness factors could adversely affect Prudential’s achievement
of sales made by them. In some cases, product providers can be held of its long‑term strategy
Governance
responsible for the deficiencies of third-party distributors. The purpose of a business and the way in which it operates in achieving
its objectives, including in relation to ESG-related matters, are an
In the US, there has been significant attention on the different regulatory increasingly material consideration for key stakeholders in achieving
standards applied to investment advice delivered to retail customers their own objectives and aims. ESG-related risks may directly or
by different sectors of the industry. As a result of reports relating to indirectly impact Prudential’s business and the achievement of its
perceptions of industry abuses, there have been numerous regulatory strategy and consequently those of its key stakeholders, which range
inquiries and proposals for legislative and regulatory reforms. This from customers, institutional investors, employees and suppliers, to
policymakers, regulators, industry organisations and local communities.

includes focus on the suitability of sales of certain products, alternative
investments and the widening of the circumstances under which a A failure to transparently and consistently implement the Group’s ESG
person or entity providing investment advice with respect to certain strategy, in its key markets and across operational, underwriting and
employee benefit and pension plans would be considered a fiduciary investment activities, may adversely impact the financial condition
subjecting the person or entity to certain regulatory requirements. and reputation of the Group and may negatively impact the Group’s
There is a risk that new regulations introduced may have a material stakeholders, who all have expectations, concerns and aims related to
adverse effect on the sales of the products by Prudential and increase ESG matters, which may differ. In its investment activities, Prudential’s
Prudential’s exposure to legal risks. stakeholders increasingly place reliance on an approach to responsible
investment that demonstrates how ESG considerations are effectively
Any regulatory action arising out of the Group’s position as a product integrated into investment decisions and the performance of fiduciary
provider could have an adverse impact on the Group’s business, and stewardship duties, including voting and active engagement
financial condition, results of operations and prospects, or otherwise decisions with respect to investee companies, as both an asset owner
harm its reputation. and an asset manager.
3.3 Litigation, disputes and regulatory investigations may A failure to manage the material risks associated with key ESG themes
adversely affect Prudential’s business, financial condition, cash detailed below may adversely impact the reputation and brand of the
flows, results of operations and prospects Group, its ability to attract and retain customers and staff, its ability
Prudential is, and may in the future be, subject to legal actions, to deliver on its long-term strategy and therefore the results of its
disputes and regulatory investigations in various contexts, including operations and long-term financial success.
in the ordinary course of its insurance, investment management
and other business operations. These legal actions, disputes and (a) Environmental risks

investigations may relate to aspects of Prudential’s businesses and Environmental concerns, notably those associated with climate
operations that are specific to Prudential, or that are common to change, pose significant risks to Prudential and its customers.
companies that operate in Prudential’s markets. Legal actions and Prudential’s investment horizons are long term and it is therefore
disputes may arise under contracts, regulations (including tax) or exposed to the potential long-term impact of climate change risks,
from a course of conduct taken by Prudential, and may be class which include the financial and non-financial impact of transition,
actions. Although Prudential believes that it has adequately provided physical and litigation risks. A failure to understand, manage and
in all material respects for the costs of litigation and regulatory matters, provide greater transparency of its exposure to these climate-related
no assurance can be provided that such provisions are sufficient. risks may have increasing adverse implications for Prudential and its
Given the large or indeterminate amounts of damages sometimes stakeholders.
sought, other sanctions that might be imposed and the inherent
unpredictability of litigation and disputes, it is possible that an
adverse outcome could have an adverse effect on Prudential’s
business, financial condition, cash flows, results of operations
and prospects.

Prudential plc
The global transition to a lower carbon economy may have an adverse (c) Governance risks
impact on investment valuations as the financial assets of carbon- A failure to maintain high standards of corporate governance may
intensive companies re-price, and this could result in some asset sectors adversely impact the Group and its customers, staff and employees,
facing significantly higher costs and a reduction in demand for their through poor decision-making and a lack of oversight of its key risks.
products and services. The speed of this transition, and the extent to Poor governance may arise where key governance committees have
which it is orderly and managed, will be influenced by factors such as insufficient independence, a lack of diversity, skills or experience in
public policy, technology and changes in market or investor sentiment. their members, or unclear (or insufficient) oversight responsibilities
This climate-related transition risk may adversely impact the valuation and mandates. Inadequate oversight over remuneration increases
of investments held by the Group, and the potential broader economic the risk of poor senior management behaviours. Prudential operates
impact may adversely affect customer demand for the Group’s across multiple jurisdictions and has a group and subsidiary
products. Prudential’s stakeholders increasingly expect and/or rely on governance structure which may add further complexity to these
the Group to support an orderly transition based on an understanding considerations. Participation in joint ventures or partnerships where
of relevant country and company-level transition plans and which takes Prudential does not have direct overall control and the use of third
into consideration the impact on the economies, businesses and party suppliers increase the potential for reputational risks arising
customers in the markets in which it operates and invests. The Group’s from poor governance.
ability to sufficiently understand and appropriately react to transition
risk may be limited by insufficient or unreliable data on carbon exposure
and transition plans for the assets in which it invests. The direct physical
impacts of climate change, driven by both specific short-term climate-
related events such as natural disasters and longer-term changes to
climate and the natural environment, will increasingly influence the
longevity, mortality and morbidity risk assessments for the Group’s
life insurance product underwriting and offerings and their associated
claims profiles. Climate-driven events in countries in which Prudential
or its key third parties operate could impact the Group’s operational
resilience and its customers.
(b) Social risks

Social risks that could impact Prudential may arise from a failure to
consider the rights, diversity, wellbeing, and interests of people and
communities in which the Group or its third parties operate. These
risks are increased as Prudential operates in multiple jurisdictions with
distinct local cultures and considerations. As an employer, the Group
is also exposed to the risk of being unable to attract, retain and develop
highly-skilled staff, which may increase if Prudential does not have in
place responsible working practices or fails to recognise the benefits of
diversity or promote a culture of inclusion. The potential for reputational
risk extends to the Group’s supply chains, which may be exposed to
factors such as poor labour standards and abuses of human rights by
third parties. Emerging population risks associated with public health
trends (such as an increase in obesity) and demographic changes
(such as population urbanisation and ageing) may affect customer
lifestyles and therefore may impact claims against the Group’s
insurance product offerings. As a provider of insurance and investment
services, the Group is increasingly focused on digital innovation,
technologies and distribution methods for a broadening range of
products and services. As a result, Prudential has access to extensive
amounts of customer personal data, including data related to personal
health, and an increasing ability to analyse and interpret this data
through the use of complex tools, machine learning and artificial
intelligence technologies. The Group is therefore exposed to the
regulatory, ethical and reputational risks associated with customer
data misuse or security breaches. These risks are explained above.
The increasing digitalisation of products, services and processes
may also result in new and unforeseen regulatory requirements and
stakeholder expectations, including those related to how the Group
supports its customers through this transformation.
390 Prudential plc

Glossary
A Asset-backed security (ABS)

C
Group overview
A security whose value and income payments
Acquisition expenses are derived from and collateralised (or Cash remittances
Acquisition expenses include the initial ‘backed’) by a specified pool of underlying Amounts paid by our business units to the
expenses and commissions incurred in writing assets. The pool of assets is typically a group Group comprising dividends and other
new business less deferred costs. of small and illiquid assets that are unable to transfers net of capital injections, which are
be sold individually. reflective of emerging earnings and capital
Actual exchange rates (AER) generation.
Strategic report
Actual historical exchange rates for the Assets under management (AUM)
specific accounting period, being the average Assets under management represent all Cash surrender value
rates over the period for the income assets managed or administered by or on The amount of cash available to a policy
statement and the closing rates at the balance behalf of the Group, including those assets holder on the surrender of or withdrawal from
sheet date for the balance sheet. managed by third parties. Assets under a life insurance policy or annuity contract.
management include managed assets that are
Administration expenses included within the Group’s statement of Ceding commission
Administration expenses are expenses and financial position and those assets belonging In a reinsurance arrangement, an allowance
Governance
renewal commissions incurred in managing to external clients outside the Prudential (usually a percentage of the reinsurance
existing business. Group, which are therefore not included in premium) can be made by the reinsurer for
the Group’s statement of financial position. part or all of a ceding company’s acquisition
Alternative performance measures (APMs) These are also referred to as ‘funds under and other costs.
Alternative performance measures (APMs) management (FUM)’.
are non-GAAP measures used by the Closed-book life insurance business
Prudential Group within its annual reports to Available for sale (AFS) A ‘closed book’ is essentially a group of
supplement disclosures prepared in Securities that have been acquired neither for insurance policies that are no longer sold, but

accordance with widely accepted guideline short-term sale nor to be held to maturity. AFS are still featured on the books of a life insurer
and principles established by accounting securities are measured at fair value on the as a premium-paying policy. The insurance
standard setters, such as International statement of financial position with unrealised company has ‘closed the books’ on new
Financial Reporting Standards (IFRS). These gains and losses being booked in Other sales of these products which will remain in
measures provide useful information to Comprehensive Income instead of the run-off until the policies expire and all claims
enhance the understanding of the Group’s income statement. are settled.
financial performance. A reconciliation of
these APMs to IFRS metrics is provided in Collective investment schemes (CIS)
additional financial information section of the B CIS is an open-ended investment fund of
annual report. pooled assets in which an investor can buy
Bancassurance and sell units that are issued in the form
American Depositary Receipts (ADRs) An agreement with a bank to offer insurance of shares.
The stocks of most foreign companies that and investment products to the bank’s
trade in the US markets are traded as customers. Constant exchange rates (CER)
American Depositary Receipts (ADRs). US Prudential plc reports its results at both actual
Bonuses exchange rates (AER) to reflect actual results
depositary banks issue these stocks. Each
Bonuses refer to the non-guaranteed benefit and also constant exchange rates (CER) to
ADR represents one or more shares of foreign
added to participating life insurance policies eliminate the impact from exchange
stock or a fraction of a share. The price of an
and are the way in which policyholders translation. CER results are calculated by
ADR corresponds to the price of the foreign
receive their share of the profits of the translating prior year results using current
stock in its home market, adjusted to the ratio
policies. These include regular bonus and period foreign currency exchange rates ie

of the ADRs to foreign company shares.
final bonus and the rates may vary from current period average rates for the income
Annual premium equivalent (APE) period to period. statements and current period closing rate for
A measure of new business sales, which is a the balance sheet.
key metric for the Group’s management of the
development and growth of the business. Core structural borrowings
APE is calculated as the aggregate of Borrowings which Prudential considers
annualised regular premiums from new forming part of its core capital structure and
business and one-tenth of single premiums on excludes operational borrowings.
new business written during the period for all
insurance products, including premiums for Credit risk
contracts designated as investment contracts The risk of loss if another party fails to meet its
under IFRS 4. obligations, or fails to do so in a timely fashion.
Currency risk
The risk that asset or liability values, cash
flows, income or expenses will be affected by
changes in exchange rates. Also referred to as

foreign exchange risk.

Prudential plc
Glossary / continued
D Environmental, Social and

Governance (ESG)
G
Deferred acquisition costs (DAC) ESG refers to the three central factors in Group free surplus
Acquisition costs are expenses of an insurer measuring the sustainability and societal Group free surplus at the end of the period
which are incurred in connection with the impact of an investment in a company or comprises free surplus for the insurance
acquisition of new insurance contracts or the business, which is qualitative and non- businesses, representing the excess of the net
renewal of existing insurance policies. They financial and not readily quantifiable in worth over the required capital included in the
include commissions and other variable sales monetary terms. The key features of EEV results and IFRS net assets for the asset
inducements and the direct costs of issuing Prudential ESG framework are its three management and other businesses, excluding
the policy, such as underwriting and other strategic pillars: 1) making health and financial goodwill. The free surplus generated during
policy issue expenses. Typically, under IFRS, security accessible; 2) stewarding the human the period comprises the movement in this
an element of acquisition costs is deferred impacts of climate change; and 3) building balance excluding foreign exchange, capital
ie not expensed in the year incurred, and social capital. and other reserve movements. Specifically, it
instead amortised in the income statement includes amounts maturing from the in-force
in line with the emergence of surpluses on operations during the period less the
the related contracts. F investment in new business, the effect of
Fixed annuities (FA) market movements and other one-off items.
Discretionary participation features (DPF)
Fixed annuity contracts written in the US
A contractual right to receive, as a supplement Group pay-out annuities
which allow for tax-deferred accumulation of
to guaranteed benefits, additional benefits: These are a closed block of defined benefit
funds, are used for asset accumulation in
annuity plans assumed from John Hancock
—— That are likely to be a significant portion retirement planning and for providing income
USA and John Hancock New York in October
of the total contractual benefits; in retirement and offer flexible pay-out
2018, in which a single premium payment
options. The contract holder pays the insurer
from an employer (contract holder) funds
—— Whose amount or timing is contractually a premium, which is credited to the contract
the pension benefits for its employees
at the discretion of the issuer; and holders’ account. Periodically, interest is
(participants).
credited to the contract holders’ account
—— That are contractually based on asset, and administrative charges are deducted, Group-wide Supervision (GWS) Framework
fund, company or other entity as appropriate. Regulatory framework developed by the
performance. Hong Kong Insurance Authority (see below)
Fixed indexed annuities (FIA)
for multinational insurance groups under its
Dividend cover These are similar to fixed annuities in that the
supervision. The GWS Framework is based
Dividend cover is calculated as operating contract holder pays the insurer a premium,
on a principle-based and outcome-focused
profit after tax on an IFRS basis, divided by which is credited to the contract holders’
approach, and allows the Hong Kong
the current year interim dividend plus the account and, periodically, interest is credited
Insurance Authority to exercise direct
proposed final dividend. to the contract holders’ account and
regulatory powers over the designated
administrative charges are deducted, as
holding companies of multinational insurance
appropriate. An annual minimum interest rate
E may be guaranteed, although actual interest
groups. The GWS Framework is expected to
be effective for Prudential upon designation
credited may be higher and is linked to an
Endowment product by the Hong Kong IA in the second quarter of
equity index over its indexed option period.
An ordinary individual life insurance product 2021. The primary legislation was enacted in
that provides the insured party with various Funds under management (FUM) July 2020 and will come into operation on
guaranteed benefits if it survives specific See ‘assets under management (AUM)’ above. 29 March 2021.
maturity dates or periods stated in the policy.
Upon the death of the insured party within Guaranteed annuities
the coverage period, a designated beneficiary Policies that pay out a fixed amount of benefit
receives the face value of the policy. for a defined period.
European Embedded Value (EEV) Guaranteed investment contracts (GICs) (US)

Financial results that are prepared on Investment contracts between an insurance
a supplementary basis to the Group’s company and an institutional investor, which
consolidated IFRS results and which provide a stated rate of return on deposits
are prepared in accordance with a set over a specified period of time. They typically
of Principles issued by the CFO Forum provide for partial or total withdrawals at book
of European Insurance Companies in 2016. value if needed for certain liquidity needs of
Embedded value is a way of measuring the the plan.
current value to shareholders of the future
profits from life business written based on
a set of assumptions.
392 Prudential plc

H Investment-linked products or contracts
M
Group overview
Insurance products where the surrender
Health and protection (H&P) products value of the policy is linked to the value of Million Dollar Round Table (MDRT)
(also referred to as accident and health underlying investments (such as collective MDRT is a global, independent association
(A&H) products) investment schemes, internal investment of life insurance and financial services
These comprise health and personal accident pools or other property) or fluctuations in professionals that recognises professional
insurance products, which provide morbidity the value of underlying investment or indices. knowledge, strict ethical conduct and
or sickness benefits and include health, Investment risk associated with the product is outstanding client service. MDRT
Strategic report
disability, critical illness and accident coverage. usually borne by the policyholder. Insurance membership is recognised internationally as
Health and protection products are sold both coverage, investment and administration the standard of excellence in the life insurance
as standalone policies and as riders that can be services are provided for which the charges and financial services business.
attached to life insurance products. Health and are deducted from the investment fund
protection riders are presented together with assets. Benefits payable will depend on the Money Market Fund (MMF)
ordinary individual life insurance products price of the units prevailing at the time of An MMF is a type of mutual fund that has
for the purposes of disclosure of financial surrender, death or the maturity of the relatively low risks compared to other mutual
information. product, subject to surrender charges. funds and most other investments and
Governance
These are also referred to as unit-linked historically has had lower returns. MMF
Hong Kong Insurance Authority (IA) products or unit-linked contracts. invests in high quality, short-term debt
The Hong Kong IA is an insurance regulatory securities and pay dividends that generally
body responsible for the regulation reflect short-term interest rates. The purpose
and supervision of the Hong Kong K of an MMF is to provide investors with a safe
insurance industry. place to store cash or as an alternative to
Key performance indicators (KPIs)
investing in the stock market.
These are measures by which the

I development, performance or position of the
business can be measured effectively. The
Mortality rate
Rate of death, varying by such parameters as
International Association of Insurance Group Board reviews the KPIs annually and age, gender and health, used in pricing and
Supervisors (IAIS) updates them where appropriate. computing liabilities for future policyholders
The IAIS is a voluntary membership of life and annuity products, which contain
organisation of insurance supervisors and
regulators. It is the international standard- L mortality risks.
setting body responsible for developing and Morbidity rate
Liquidity coverage ratio (LCR)
assisting in the implementation of principles, Rate of sickness, varying by such parameters
Prudential calculates this as assets and
standards and other supporting material for as age, gender and health, used in pricing
resources available to us that are readily
the supervision of the insurance sector.
convertible to cash to cover corporate and computing liabilities for future
obligations in a prescribed stress scenario. policyholders of health products,
In-force which contain morbidity risks.
An insurance policy or contract reflected on We calculate this ratio over a range of time
records that has not expired, matured or horizons extending to twelve months.
otherwise been surrendered or terminated.
Liquidity premium N
International Financial Reporting Standards This comprises the premium that is required National Association of Insurance
(IFRS Standards) to compensate for the lower liquidity of Commissioners (NAIC)
Accounting standards and practices that are corporate bonds relative to swaps and the The NAIC is the US standard setting and
developed and issued by the IFRS Foundation mark to market risk premium that is required regulatory support organisation created and

and the International Accounting Standards to compensate for the potential volatility in governed by the chief insurance regulators
Board (IASB). corporate bond spreads (and hence market from the 50 states, the District of Columbia
values) at the time of sale. and five US territories.
Investment grade
Investments rated BBB- or above for S&P Local Capital Summation Method (LCSM) Net premiums
and Baa3 or above for Moody’s. Generally, LCSM is the methodology used for the Life insurance premiums, net of reinsurance
they are bonds that are judged by the rating calculation of the Group’s regulatory capital ceded to third-party reinsurers.
agency as likely enough to meet payment requirements (both minimum and prescribed
obligations that banks are allowed to invest levels) together with related governance Net worth
in them. requirements. Net assets for EEV reporting purposes that
reflect the regulatory basis position, sometimes
with adjustments to achieve consistency with
the IFRS treatment of certain items.
New business margin

New business margin is expressed as the
value of new business profit as a percentage

of annual premium equivalent (APE) and the
present value of new business premiums
(PVNBP) expected to be received on an
EEV basis.

Prudential plc
Glossary / continued
New business profit

The profits, calculated in accordance with
Persistency
The percentage of policies remaining in force
S
European Embedded Value Principles, from from period to period. Separate account
business sold in the financial reporting period A separate account is a pool of investments
under consideration. Present value of new business premiums held by an insurance company not in or
(PVNBP) ‘separate’ from its general account. The
Non-participating business The present value of new business premiums returns from the separate account generally
A life insurance policy where the policyholder is calculated as the aggregate of single accrue to the policyholder. A separate
is not entitled to a share of the company’s premiums and the present value of expected account allows an investor to choose an
profits and surplus, but receives certain future premiums from regular premium new investment category according to his
guaranteed benefits. Examples include pure business, allowing for lapses and other individual risk tolerance, and desire for
risk policies (eg fixed annuities, term assumptions made in determining the EEV performance.
insurance, critical illness) and unit-linked new business contribution.
insurance contracts. Single premiums
Single premium policies of insurance are
R those that require only a single lump sum
O Regular premium product payment from the policyholder.
Operational borrowings A life insurance product with regular periodic
Stochastic techniques
Borrowings which arise in the normal course premium payments.
Stochastic techniques incorporate results
of the business, including all lease liabilities
Rider from repeated simulations using key financial
under IFRS 16.
A supplemental plan that can be attached to a parameters which are subject to random
basic insurance policy, typically with payment variations and are projected into the future.
P of additional premiums.
Subordinated debt
Participating funds Risk-based capital (RBC) framework A fixed interest issue or debt that ranks below
Distinct portfolios where the policyholders RBC is a method of measuring the minimum other debt in order of priority for repayment
have a contractual right to receive at the amount of capital set by regulators as if the issuer is liquidated. Holders are
discretion of the insurer additional benefits appropriate for a reporting entity to support its compensated for the added risk through
based on factors such as the performance of a overall business operations in consideration of higher rates of interest.
pool of assets held within the fund, as a its size and the level of risk it is faced. RBC limits
supplement to any guaranteed benefits. The Surrender
the amount of risk a company can take and act
insurer may either have discretion as to the The termination of a life insurance policy
as a cushion to protect a company from
timing of the allocation of those benefits to or annuity contract at the request of the
insolvency. RBC is intended to be a minimum
participating policyholders or may have policyholder after which the policyholder
regulatory capital standard and not necessarily
discretion as to the timing and the amount of receives the cash surrender value, if any,
the full amount of capital that an insurer would
the additional benefits. For Prudential the of the contract.
want to hold to meet its safety and competitive
most significant participating funds are for objectives. In addition, RBC is not designed to
business written in Hong Kong, Malaysia Surrender charge or surrender fee
be used as a stand-alone tool in determining The fee charged to a policyholder when a
and Singapore. financial solvency of an insurance company; life insurance policy or annuity contract is
rather it is one of the tools that give regulators surrendered for its cash surrender value prior
Participating policies or legal authority to take control of an insurance
participating business to the end of the surrender charge period.
company.
Contracts of insurance where the
policyholders have a contractual right to Risk margin reserve (RMR)
receive, at the discretion of the insurer, An RMR is included within operating profit
additional benefits based on factors such as based on longer-term investment returns and
investment performance, as a supplement to represents a charge for long-term expected
any guaranteed benefits. This is also referred defaults of debt securities, determined by
to as with-profits business. reference to the credit quality of the portfolio.
394 Prudential plc

T V
Group overview
Takaful Variable annuity (VA) (US)
Insurance that is compliant with Islamic An annuity whose value is determined by
principles of mutual assistance and risk the performance of underlying investment
sharing. options that frequently includes securities.
A variable annuity’s value is not guaranteed
Term life contracts and will fluctuate, depending on the value
Strategic report
These contracts provide protection for a of its underlying investments. The holder
defined period and a benefit that is payable of a variable annuity assumes the investment
to a designated beneficiary upon death of risk and the funds backing a variable annuity
the insured. are held in the insurance companies
separate account.
Time value of options and guarantees
(TVOG) Value of in-force business (VIF)
The value of financial options and guarantees The present value of future shareholder
Governance
comprises two parts, the intrinsic value and cash flows projected to emerge from the
the time value. The intrinsic value is given assets backing liabilities of the in-force
by a deterministic valuation on best estimate covered business.
assumptions. The time value is the additional
value arising from the variability of economic
outcomes in the future. W
Total shareholder return (TSR) Whole life contracts

TSR represents the growth in the value A type of life insurance policy that provides
of a share plus the value of dividends paid, lifetime protection; premiums must usually
assuming that the dividends are reinvested in be paid for life. The sum assured is paid out
the Company’s shares on the ex-dividend date. whenever death occurs. Commonly used for
estate planning purposes.
U With-profits funds
See ‘participating funds’ above.
Unallocated surplus
Unallocated surplus is recorded wholly as a With-profits contracts
liability and represents the excess of assets For Prudential, the most significant with-
over policyholder liabilities for Prudential’s profits contracts are written in Hong Kong,
with-profits funds. The balance retained in Malaysia and Singapore. See ‘participating
the unallocated surplus represents cumulative policies or participating business’ above.
income arising on the with-profits business
that has not been allocated to policyholders
or shareholders. Y
Unit-linked products or unit-linked Yield
contracts A measure of the rate of return received
See ‘investment-linked products from an investment in percentage terms by

or contracts’ above. comparing annual income (and any change
in capital) to the price paid for the investment.
Universal life
An insurance product where the customer Yield curve
pays flexible premiums, subject to specified A line graph that shows the relative yields on
limits, which are accumulated in an account debt over a range of maturities typically from
and are credited with interest (at a rate either three months to 30 years. Investors, analysts
set by the insurer or reflecting returns on and economists use yield curves to evaluate
a pool of matching assets). The customer bond markets and interest rate expectations.
may vary the death benefit and the contract
may permit the customer to withdraw the
account balance, typically subject to a
surrender charge.

Prudential plc
Shareholder information
Communication with shareholders Company constitution

The Group maintains a corporate website containing a wide range of Prudential is governed by the Companies Act 2006, other applicable
information relevant for private and institutional investors, including legislation and regulations, and provisions in its Articles of Association
the Group’s financial calendar: www.prudentialplc.com (Articles). Any change to the Articles must be approved by special
resolution of the shareholders. There were no changes to the
Shareholder Meetings constitutional documents during 2020. The current Memorandum
The 2021 Annual General Meeting (AGM) will be held on Thursday and Articles are available on the Company’s website.
13 May 2021 at 11.00am. Arrangements for attendance remain under
review given the ongoing restrictions arising from the Covid-19 Share capital
pandemic. To ensure shareholders are able to participate fully in the Issued share capital
AGM this year, we will provide an option to link digitally to the Meeting The issued share capital as at 31 December 2020 consisted of
and would encourage shareholders to make use of this option. The 2,609,489,702 (2019: 2,601,159,949) ordinary shares of 5 pence each,
AGM notice will provide more details on arrangements and how to all fully paid up and listed on the London Stock Exchange and the Hong
participate. Shareholders are encouraged to watch the Company’s Kong Stock Exchange. As at 31 December 2020, there were 45,176
website, regulatory news and other published notifications for any (2019: 46,847) accounts on the register. Further information can be
further updates in relation to the AGM arrangements. found in note C8 on page 282.
Prudential will continue its practice of calling a poll on all resolutions Prudential also maintains secondary listings on the New York Stock
and the voting results, including all proxies lodged prior to the meeting, Exchange (in the form of American Depositary Receipts which are
will be displayed during the meeting and subsequently published on referenced to ordinary shares on the main UK register) and the
the Company’s website. Singapore Stock Exchange.
Details of the 2020 AGM, including the major items discussed Prudential has maintained a sufficiency of public float throughout
at the meeting and the results of the voting, can be found on the the reporting period as required by the Hong Kong Listing Rules.
Company’s website.
In accordance with relevant legislation, shareholders holding

5 per cent or more of the fully paid up issued share capital are able to
require the Directors to hold a general meeting. Written shareholder
requests should be addressed to the Company Secretary at the
registered office.
Analysis of shareholder accounts as at 31 December 2020

% of total
Number of number of % of total
shareholder shareholder Number number of
Size of shareholding accounts accounts of shares shares
1,000,001 upwards 315 0.70 2,312,491,466 88.62

500,001–1,000,000 139 0.31 98,178,861 3.76
100,001–500,000 501 1.11 117,828,227 4.52
10,001–100,000 1,377 3.05 41,001,145 1.57
5,001–10,000 1,466 3.25 10,142,436 0.39
1,001–5,000 9,881 21.87 21,528,855 0.83
1–1,000 31,497 69.72 8,318,712 0.32
Total 45,176 100.00 2,609,489,702 100.00
396 Prudential plc

Major shareholders but only if such refusal does not prevent dealings in the shares from
Group overview
The table below shows the holdings of major shareholders in the taking place on an open and proper basis. If the Directors make use of
Company’s issued ordinary share capital, as at 31 December 2020, as that power, they must send the transferee notice of the refusal within
notified and disclosed to the Company in accordance with the two months.
Disclosure Guidance and Transparency Rules.
Certain restrictions may be imposed from time to time by applicable
% of total laws and regulations (for example, insider trading laws) and pursuant
As at 31 December 2020 voting rights
to the Listing Rules of both the Financial Conduct Authority and the
Strategic report
BlackRock, Inc 5.08 Hong Kong Stock Exchange, as well as under the rules of some of the
Group’s employee share plans.
Third Point LLC 5.04
All Directors are required to hold a minimum number of shares under
On 2 October 2019 Capital Group Companies, Inc notified that its guidelines approved by the Board, which they would also be expected
holding had decreased to less than 5 per cent of the Company’s issued to retain as described on page 197 of the Directors’ remuneration
share capital. report.
Governance
No notifications have been received from year end to 2 March 2021. Authority to issue shares
The Directors require authority from shareholders in relation to the
Rights and obligations issue of shares. Whenever shares are issued, these must be offered to
The rights and obligations attaching to the Company’s shares are set existing shareholders pro rata to their holdings unless the Directors
out in full in the Articles. There are currently no voting restrictions have been given authority by shareholders to issue shares without
on the ordinary shares, all of which are fully paid, and each share offering them first to existing shareholders. Prudential seeks authority
carries one vote on a poll. If votes are cast on a show of hands, from its shareholders on an annual basis to issue shares up to a
each shareholder present in person or by proxy, or in the case of a maximum amount, of which a defined number may be issued without

corporation, each of its duly authorised corporate representatives, has pre-emption. Disapplication of statutory pre-emption procedures is
one vote except that if a proxy is appointed by more than one member, also sought for rights issues. The existing authorities to issue shares,
the proxy has one vote for and one vote against if instructed by one or and to do so without observing pre-emption rights, are due to expire
more members to vote for the resolution and by one or more members at the end of this year’s AGM. Relevant resolutions to authorise
to vote against the resolution. share capital issuances will be put to shareholders at the AGM
on 13 May 2021.
Where, under an employee share scheme, participants are the
beneficial owners of the shares but not the registered owners, the Details of shares issued during 2020 and 2019 are given in note C8
voting rights are normally exercisable by the trustee on behalf of the on page 282.
registered owner in accordance with the relevant plan rules. The
Trustees would not usually vote any unallocated shares held in trust In accordance with the terms of a waiver granted by the Hong Kong
but they may do so at their discretion provided it would be considered Stock Exchange, Prudential confirms that it complies with the
to be in the best interests of the beneficiaries of the trust and permitted applicable law and regulation in the UK in relation to the holding of
under the relevant trust deed. shares in treasury and with the conditions of the waiver in connection
with the purchase of own shares and any treasury shares it may hold.
As at 2 March 2021, Trustees held 0.40 per cent of the issued share
capital under the various plans in operation. Authority to purchase own shares
The Directors also require authority from shareholders in relation to
Rights to dividends under the various schemes are set out on pages the purchase of the Company’s own shares. Prudential seeks authority
170 to 205. by special resolution on an annual basis for the buy-back of its own
shares in accordance with the relevant provisions of the Companies

Restrictions on transfer Act 2006 and other related guidance. This authority has not been used
In accordance with English company law, shares may be transferred since it was last granted at the AGM in 2020. This existing authority is
by an instrument of transfer or through an electronic system (currently due to expire at the end of this year’s AGM and a special resolution to
CREST) and any transfer is not restricted except that the Directors renew the authority will be put to shareholders at the AGM on
may, in certain circumstances, refuse to register transfers of shares 13 May 2021.
Dividend information
Shareholders Shareholders with
registered on Holders of US ordinary shares
the UK register American standing to the
and Hong Kong Depositary credit of their CDP
2020 second interim dividend branch register Receipts securities accounts
Ex-dividend date 25 March 2021 – 25 March 2021

Record date 26 March 2021 26 March 2021 26 March 2021
On or about
Payment date 14 May 2021 14 May 2021 21 May 2021
A number of dividend waivers are in place in respect of shares issued but not allocated under the Group’s employee share plans. These shares are
held by the Trustees and will, in due course, be used to satisfy requirements under the Group’s employee share plans. The dividends waived
represent less than 1 per cent of the value of dividends paid during the year.

Prudential plc
Shareholder information / continued
Shareholder enquiries
For enquiries about shareholdings, including dividends and lost share certificates, please contact the Company’s registrars:
Register By post By telephone
UK register Equiniti Limited, Aspect House, Spencer Road, Lancing, Tel 0371 384 2035*
West Sussex BN99 6DA, UK. Textel 0371 384 2255
(for hard of hearing).
Lines are open from 8.30am to 5pm
(UK), Monday to Friday.
*Please use the country code when
calling from outside the UK
Hong Kong register Computershare Hong Kong Investor Services Limited, Tel +852 2862 8555
17M Floor, Hopewell Centre, 183 Queen’s Road East,
Wan Chai, Hong Kong.
Singapore register Shareholders who have shares standing to the credit of Tel +65 6535 7511
their securities accounts with The Central Depository
(PTE) Limited (CDP) in Singapore may refer queries to
the CDP at 11 North Buona Vista Drive, #01-19/20 The
Metropolis Tower 2, Singapore 138589. Enquiries
regarding shares held in Depository Agent Sub-accounts
should be directed to your Depository Agent or broker.
ADRs JPMorgan Chase Bank N.A, PO Box 64504, St. Paul, MN Tel +1 800 990 1135,
55164-0504, USA. or from outside the USA
+1 651 453 2128 or log on
to www.adr.com
Dividend mandates Electronic communications

Shareholders may have their dividends paid directly to their bank Shareholders are encouraged to elect to receive shareholder
or building society account. If you wish to take advantage of this documents electronically by registering with Shareview at
facility, please call Equiniti and request a Cash Dividend Mandate www.shareview.co.uk This will save on printing and distribution
form. Alternatively, shareholders may download the form from costs, and create environmental benefits. Shareholders who have
www.prudentialplc.com/investors/shareholder-information/forms registered will be sent an email notification whenever shareholder
documents are available on the Company’s website and a link will
Shareholders on the UK or Hong Kong registers have the option to be provided to that information. When registering, shareholders
elect to receive their dividend in US dollars instead of pounds sterling will need their shareholder reference number which can be found
or Hong Kong dollars respectively. More information may be found on their share certificate or proxy form. The option to receive
on our website www.prudentialplc.com/investors/shareholder- shareholder documents electronically is not available to shareholders
information/dividend/dividend-currency-election holding shares through CDP. Please contact Equiniti if you require any
assistance or further information.
Cash dividend alternative
The Company operates a Dividend Re-investment Plan (DRIP). Share dealing services
Shareholders who have elected for the DRIP will automatically receive The Company’s registrars, Equiniti, offer a postal dealing facility
shares for all future dividends in respect of which a DRIP alternative is for buying and selling Prudential plc ordinary shares; please see
offered. The election may be cancelled at any time by the shareholder. the Equiniti address or telephone 0371 384 2248. They also offer a
Further details of the DRIP and the timetable are available at telephone and internet dealing service, Shareview, which provides a
www.shareview.co.uk/4/Info/Portfolio/default/en/home/ simple and convenient way of selling Prudential shares. For telephone
shareholders/Pages/ReinvestDividends.aspx sales, call 0345 603 7037 between 8.00am and 5pm, Monday to
Friday, and for internet sales log on to www.shareview.co.uk/dealing
ShareGift
Shareholders who have only a small number of shares, the value
of which makes them uneconomic to sell, may wish to consider
donating them to ShareGift (Registered Charity 1052686). The
relevant share transfer form may be downloaded from our website
www.prudentialplc.com/investors/shareholder-information/forms
or from Equiniti. Further information about ShareGift may be
obtained on +44 (0)20 7930 3737 or from www.ShareGift.org
398 Prudential plc

How to contact us
Prudential plc Media enquiries
Group overview
1 Angel Court Tel +44 (0)20 3977 9760
London EC2R 7AG Email: media.relations@prudentialplc.com
Tel +44 (0)20 7220 7588

www.prudentialplc.com
Strategic report
Board
Shriti Vadera
Chair
Governance
Group Executive Committee
Philip Remnant
Senior Independent Director Executive Directors Jolene Chen
Jeremy Anderson Mike Wells Group Human Resources Director
David Law Group Chief Executive Nic Nicandrou
Kai Nargolwala Chief Executive,
Mark FitzPatrick

Anthony Nightingale Prudential Corporation Asia
Group Chief Financial Officer
Alice Schroeder
and Chief Operating Officer Laura Prieskorn
Tom Watjen
Fields Wicker-Miurin James Turner Chief Executive Officer,
Amy Yip Group Chief Risk and Jackson Holdings LLC
Compliance Officer Al-Noor Ramji
Group Chief Digital Officer
Business units Shareholder contacts
Prudential Corporation Asia Jackson Holdings LLC Tel +44 (0)20 3977 9720
13th Floor 1 Corporate Way Email: investor.relations@prudentialplc.com
One International Finance Centre Lansing
1 Harbour View Street Michigan 48951 UK Register private shareholder
Central USA enquiries

Hong Kong Tel 0371 384 2035*
Tel +1 517 381 5500
Tel +852 2918 6300 www.jackson.com *Please use the country code when
www.prudentialcorporation-asia.com calling from outside the UK
Nic Nicandrou Laura Prieskorn Hong Kong Branch Register
Chief Executive, Chief Executive Officer, private shareholder enquiries
Prudential Corporation Asia Jackson Holdings LLC Tel +852 2862 8555
US American Depositary Receipts

holder enquiries
Tel +1 651 453 2128
The Central Depository (Pte)

Limited shareholder enquiries
Tel +65 6535 7511

Prudential plc
Forward-looking statements particular, mortality and morbidity trends, lapse rates and policy
This document may contain ‘forward-looking statements’ with respect renewal rates; the physical, social and financial impacts of climate
to certain of Prudential’s plans and its goals and expectations relating change and global health crises on Prudential’s business and
to its and Jackson’s future financial condition, performance, results, operations; the timing, impact and other uncertainties of future
strategy and objectives. Statements that are not historical facts, acquisitions or combinations within relevant industries; the impact of
including statements about Prudential’s beliefs and expectations and internal transformation projects and other strategic actions failing to
including, without limitation, statements containing the words ‘may’, meet their objectives; the effectiveness of reinsurance for Prudential’s
‘will’, ‘should’, ‘continue’, ‘aims’, ‘estimates’, ‘projects’, ‘believes’, businesses; the risk that Prudential’s operational resilience (or that of
‘intends’, ‘expects’, ‘plans’, ‘seeks’ and ‘anticipates’, and words of its suppliers and partners) may prove to be inadequate, including in
similar meaning, are forward-looking statements. These statements relation to operational disruption due to external events; disruption
are based on plans, estimates and projections as at the time they to the availability, confidentiality or integrity of Prudential’s information
are made, and therefore undue reliance should not be placed on technology, digital systems and data (or those of its suppliers and
them. By their nature, all forward-looking statements involve risk partners); any ongoing impact on Prudential of the demerger of M&G
and uncertainty. plc and, if and when completed, the demerger of Jackson Financial Inc.;
the impact of changes in capital, solvency standards, accounting
A number of important factors could cause Prudential’s and Jackson’s standards or relevant regulatory frameworks, and tax and other
actual future financial condition or performance or other indicated legislation and regulations in the jurisdictions in which Prudential
results of the entity referred to in any forward-looking statement and its affiliates operate; the impact of legal and regulatory actions,
to differ materially from those indicated in such forward-looking investigations and disputes; and the impact of not adequately
statement. Such factors include, but are not limited to, the ability responding to environmental, social and governance issues.
to complete the proposed demerger of Jackson Financial Inc. on These and other important factors may, for example, result in
the anticipated time frame or at all; the ability of the management changes to assumptions used for determining results of operations
of Jackson Financial Inc. and its group to deliver on its business or re-estimations of reserves for future policy benefits. Further
plan post-separation; the impact of the current Covid-19 pandemic, discussion of these and other important factors that could cause
including adverse financial market and liquidity impacts, responses Prudential’s actual future financial condition or performance or
and actions taken by regulators and supervisors, the impact to sales, other indicated results of the entity referred to in any forward-looking
claims and assumptions and increased product lapses, disruption to statements to differ, possibly materially, from those anticipated
Prudential’s operations (and those of its suppliers and partners), risks in Prudential’s forward-looking statements can be found under
associated with new sales processes and information security risks; the ‘Risk Factors’ heading of this document.
future market conditions, including fluctuations in interest rates
and exchange rates, the potential for a sustained low-interest rate Any forward-looking statements contained in this document speak
environment, and the impact of economic uncertainty, asset valuation only as of the date on which they are made. Prudential expressly
impacts from the transition to a lower carbon economy, derivative disclaims any obligation to update any of the forward-looking
instruments not effectively hedging exposures arising from product statements contained in this document or any other forward-looking
guarantees, inflation and deflation and the performance of financial statements it may make, whether as a result of future events, new
markets generally; global political uncertainties, including the potential information or otherwise except as required pursuant to the UK
for increased friction in cross-border trade and the exercise of executive Prospectus Rules, the UK Listing Rules, the UK Disclosure and
powers to restrict trade, financial transactions, capital movements and/ Transparency Rules, the Hong Kong Listing Rules, the SGX-ST
or investment; the policies and actions of regulatory authorities, listing rules or other applicable laws and regulations.
including, in particular, the policies and actions of the Hong Kong
Insurance Authority, as Prudential’s Group-wide supervisor, as Cautionary statements
well as new government initiatives generally; given its designation This document does not constitute or form part of any offer or
as an Internationally Active Insurance Group (‘IAIG’), the impact invitation to purchase, acquire, subscribe for, sell, dispose of or issue,
on Prudential of systemic risk and other group supervision policy or any solicitation of any offer to purchase, acquire, subscribe for, sell
standards adopted by the International Association of Insurance or dispose of, any securities in any jurisdiction nor shall it (or any part
Supervisors; the impact of competition and fast-paced technological of it) or the fact of its distribution, form the basis of, or be relied on in
change; the effect on Prudential’s business and results from, in connection with, any contract therefor.
400 Prudential plc

Prudential public limited company
Incorporated and registered
in England and Wales
Registered office
1 Angel Court
London
EC2R 7AG
Registered number 1397169
www.prudentialplc.com
Principal place of business

in Hong Kong
13th Floor
One International Finance Centre
1 Harbour View Street
Central
Hong Kong
Prudential plc is a holding company, some of whose

subsidiaries are authorised and regulated, as applicable,
by the Hong Kong Insurance Authority and other
regulatory authorities.
Prudential plc is not affiliated in any manner with

Prudential Financial, Inc., a company whose principal
place of business is in the United States of America
or with The Prudential Assurance Company Limited,
a subsidiary of M&G plc, a company incorporated
in the United Kingdom.
Printed on Revive 100 Silk, a paper made from fibre

derived from 100 per cent recycled pre- and post-
consumer waste; and Revive 100 Offset, which is
made from 100 per cent recycled post-consumer
waste. All material used in this report has been
independently certified according to the rules of the
Forest Stewardship Council (FSC). All pulps used are
elemental chlorine free, and the inks used are vegetable
oil based. The manufacturing mills and the printer are
registered to the Environmental Management System
ISO 14001 and are FSC chain-of-custody certified.
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Printed in the UK by CPI Colour

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Prudential plc Annual Report 2020

170 Directors’ remuneration report

206 Financial statements

320 European Embedded Value (EEV) basis results

352 Additional information

The UK Corporate Governance Code requires that we

Directors’ remuneration report

$2,802m (36)% (37)%

4% 4% 4 ‘Adjusted operating profit’ refers to

European Embedded Value (EEV) basis results

$2,185m 12% 12%

$54.0bn 2,070¢ $54.7bn 2,103¢ 6 Shareholder surplus over Group

Singapore and Malaysia. Further

I took over as Chair of Prudential

Directors’ remuneration report

European Embedded Value (EEV) basis results

In Asia, people are growing more prosperous and populations are

South-east Asia, and significantly lower in some markets in the region.

We are well placed

Directors’ remuneration report

Like all businesses, we faced

Directors’ remuneration report

European Embedded Value (EEV) basis results

Our most significant market by new business profit and embedded

Directors’ remuneration report

Nevertheless, we are confident that the demand for our products

Prudential plc is an Asia-led group

growth in APE sales

Top 3 position in Distribution Our purpose

Directors’ remuneration report

excluding Japan Courageous

US separation Our strategy

European Embedded Value (EEV) basis results

—— The attractiveness of Jackson’s product

Americans to reach customers

operate model Markets

Operating with discipline Building sustainable business

to our customers in respect of

Directors’ remuneration report

Pulse by Prudential is our health and

Engaging our stakeholders Living by our principles

Measuring our financial performance

EEV operating profit6 $m Group EEV operating profit in 2020 decreased

Directors’ remuneration report

European Embedded Value (EEV) basis results

Prudential’s differentiated product and geographic portfolio is

Group overview Asia and Africa

Directors’ remuneration report

European Embedded Value (EEV) basis results

We have significant investment appetite in Asia in the future that is

in the largest economies of China, India, Indonesia and Thailand.

Cambodia Japan Taiwan

Directors’ remuneration report

In Indonesia, we continue to strengthen our market leadership, including

European Embedded Value (EEV) basis results

Thailand $210m 6% 24%

In our other high-potential growth markets of Vietnam, the Philippines,

320 European Embedded Value (EEV) basis results

Cambodia Japan Taiwan