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PRU Prudential Plc

676.40
-11.80 (-1.71%)
11 Oct 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Prudential Plc LSE:PRU London Ordinary Share GB0007099541 ORD 5P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -11.80 -1.71% 676.40 675.00 675.40 687.00 670.60 685.60 9,212,559 16:35:28
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Life Insurance 12.19B 1.7B 0.6236 10.83 18.77B

Prudential PLC Prudential plc – HY24 Results – IFRS

28/08/2024 7:00am

RNS Regulatory News


RNS Number : 8981B
Prudential PLC
28 August 2024
 

IFRS disclosures

Prudential plc Half Year 2024 results

International Financial Reporting Standards (IFRS) financial results

Condensed consolidated income statement

 

 

2024 $m

 

2023 $m

 

Note

Half year

 

Half year

Full year

Insurance revenue

B1.4

4,961

 

4,591

9,371

Insurance service expense

 

(3,638)

 

(3,489)

(7,113)

Net expense from reinsurance contracts held

 

(252)

 

(83)

(171)

Insurance service result

 

1,071

 

1,019

2,087

Investment return

B1.4

2,495

 

7,171

9,763

Fair value movements on investment contract liabilities

 

(54)

 

(23)

(24)

Net insurance and reinsurance finance (expense) income

 

(2,274)

 

(6,496)

(8,648)

Net investment result

 

167

 

652

1,091

Other revenue

B1.4

197

 

176

369

Non-insurance expenditure

 

(532)

 

(446)

(990)

Finance costs: interest on core structural borrowings of shareholder-financed businesses

 

(85)

 

(85)

(172)

Loss attaching to corporate transactions

B1.1

(69)

 

-

(22)

Share of loss from joint ventures and associates, net of related tax

 

(243)

 

(73)

(91)

Profit before tax (being tax attributable to shareholders' and policyholders' returns) note

 

506

 

1,243

2,272

Tax charge attributable to policyholders' returns

 

(112)

 

(68)

(175)

Profit before tax attributable to shareholders' returns

B1.1

394

 

1,175

2,097

Total tax charge attributable to shareholders' and policyholders' returns

B2

(324)

 

(296)

(560)

Remove tax charge attributable to policyholders' returns

 

112

 

68

175

Tax charge attributable to shareholders' returns

 

(212)

 

(228)

(385)

Profit for the period

 

182

 

947

1,712

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

Equity holders of the Company

 

120

 

944

1,701

Non-controlling interests

 

62

 

3

11

Profit for the period

 

182

 

947

1,712

 

Earnings per share (in cents)

 

2024

 

2023

 

Note

Half year

 

Half year

Full year

Based on profit attributable to equity holders of the Company:

B3

 

 

 

 

Basic

 

4.4¢

 

34.5¢

62.1¢

Diluted

 

4.4¢

 

34.5¢

61.9¢

Note

This measure is the formal profit before tax measure under IFRS. It is not the result attributable to shareholders principally because total corporate tax of the Group includes those taxes on the income of consolidated with-profits and unit-linked funds that, through adjustments to benefits, are borne by policyholders. These amounts are required to be included in the tax charge under IAS 12. Consequently, the IFRS profit before tax measure is not representative of pre-tax profit attributable to shareholders.

Dividends per share (in cents)

 

 

2024

 

2023

 

Note

Half year

 

Half year

Full year

Dividends relating to reporting period:

B4

 

 

 

 

First interim dividend

 

6.84¢

 

6.26¢

6.26¢

Second interim dividend

 

-

 

-

14.21¢

Total relating to reporting period

 

6.84¢

 

6.26¢

20.47¢

Dividends paid in reporting period:

B4

 

 

 

 

Current year first interim dividend

 

-

 

-

6.26¢

Second interim dividend for prior year

 

14.21¢

 

13.04¢

13.04¢

Total paid in reporting period

 

14.21¢

 

13.04¢

19.30¢

 

Condensed consolidated statement of comprehensive income

 

2024 $m

 

2023 $m

 

Half year

 

Half year

Full year

Profit for the period

182

 

947

1,712

Other comprehensive (loss) income

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

Exchange movements arising during the period

(413)

 

(199)

(135)

Items that will not be reclassified subsequently to profit or loss:

 

 

 

 

Valuation movements on retained interest in Jackson classified as FVOCI securities note

-

 

8

8

Total comprehensive (loss) income for the period

(231)

 

756

1,585

 

 

 

 

 

Attributable to:

 

 

 

 

Equity holders of the Company

(254)

 

767

1,585

Non-controlling interests

23

 

(11)

-

Total comprehensive (loss) income for the period

(231)

 

756

1,585

Note

On the adoption of IFRS 9 at 1 January 2023, the Group elected to measure its retained interest in the equity securities of Jackson at fair value through other comprehensive income (FVOCI). The Group subsequently disposed of its remaining interest in Jackson in 2023.

 

Condensed consolidated statement of changes in equity

 

 

Period ended 30 Jun 2024 $m

 

Note

Share

capital

Share

premium

Retained

earnings

Translation reserve

Share-holders'

equity

Non-

controlling

interests

Total

equity

Reserves

 

 

 

 

 

 

 

 

Profit for the period

 

-

-

120

-

120

62

182

Other comprehensive income (loss)

 

-

-

-

(374)

(374)

(39)

(413)

Total comprehensive income (loss) for the period

 

-

-

120

(374)

(254)

23

(231)

Transactions with owners of the Company

 

 

 

 

 

 

 

 

Dividends

B4

-

-

(390)

-

(390)

(4)

(394)

Reserve movements in respect of share-based payments

 

-

-

(38)

-

(38)

-

(38)

Adjustment to non-controlling interest for Malaysia conventional life business

D2

 

 

(857)

 

(857)

886

29

Effect of transactions relating to other non-controlling interests

 

-

-

14

-

14

-

14

New share capital subscribed

C7

-

-

-

-

-

-

-

Share repurchases/buybacks*

C7

-

-

(123)

-

(123)

-

(123)

Movement in own shares in respect of share-based payment plans

 

-

-

(4)

-

(4)

-

(4)

Net increase (decrease) in equity

 

-

-

(1,278)

(374)

(1,652)

905

(747)

Balance at beginning of period

 

183

5,009

11,928

703

17,823

160

17,983

Balance at end of period

 

183

5,009

10,650

329

16,171

1,065

17,236

*      In the first half year 2024, the Group completed two repurchase programmes in January and June 2024 to neutralise the dilutive effect of share scheme issuance and is currently conducting the share buyback programme it announced in June 2024 to return capital to shareholders. See note C7 for further details. 

 

 

Period ended 30 Jun 2023 $m

 

Note

Share

capital

Share

premium

Retained

earnings

Translation

reserve

Fair value

reserve

Share-holders'

equity

Non-

controlling

interests

Total

equity

Reserves

 

 

 

 

 

 

 

 

 

Profit for the period

 

-

-

944

-

-

944

3

947

Other comprehensive (loss) income

 

-

-

-

(185)

8

(177)

(14)

(191)

Total comprehensive income (loss) for the period

 

-

-

944

(185)

8

767

(11)

756

Transactions with owners of the Company

 

 

 

 

 

 

 

 

 

Dividends

B4

-

-

(361)

-

-

(361)

(4)

(365)

Transfer of fair value reserve following disposal of investment in Jackson

 

-

-

71

-

(71)

-

-

-

Reserve movements in respect of share-based payments

 

-

-

(6)

-

-

(6)

-

(6)

Effect of transactions relating to non-controlling interests

 

-

-

(9)

-

-

(9)

-

(9)

New share capital subscribed

C7

1

3

-

-

-

4

-

4

Movement in own shares in respect of share-based payment plans

 

-

-

33

-

-

33

-

33

Net increase (decrease) in equity

 

1

3

672

(185)

(63)

428

(15)

413

Balance at beginning of period

 

182

5,006

10,653

827

63

16,731

167

16,898

Balance at end of period

 

183

5,009

11,325

642

-

17,159

152

17,311

 

Condensed consolidated statement of changes in equity continued

 

 

Year ended 31 Dec 2023 $m

 

Note

Share

capital

Share

premium

Retained

earnings

Translation

reserve

Fair value

reserve

Share-

holders'

equity

Non-

controlling

 interests

Total

equity

Reserves

 

 

 

 

 

 

 

 

 

Profit for the year

 

-

-

1,701

-

-

1,701

11

1,712

Other comprehensive (loss) income

 

-

-

-

(124)

8

(116)

(11)

(127)

Total comprehensive income (loss) for the year

 

-

-

1,701

(124)

8

1,585

-

1,585

Transactions with owners of the Company

 

 

 

 

 

 

 

 

 

Dividends

B4

-

-

(533)

-

-

(533)

(7)

(540)

Transfer of fair value reserve following disposal of investment in Jackson

 

-

-

71

-

(71)

-

-

-

Reserve movements in respect of share-based payments

 

-

-

(5)

-

-

(5)

-

(5)

Effect of transactions relating to non-controlling interests

 

-

-

16

-

-

16

-

16

New share capital subscribed

C7

1

3

-

-

-

4

-

4

Movement in own shares in respect of share-based payment plans

 

-

-

25

-

-

25

-

25

Net increase (decrease) in equity

 

1

3

1,275

(124)

(63)

1,092

(7)

1,085

Balance at beginning of year

 

182

5,006

10,653

827

63

16,731

167

16,898

Balance at end of year

 

183

5,009

11,928

703

-

17,823

160

17,983

 

Condensed consolidated statement of financial position

 

 

2024 $m

 

2023 $m

Note

30 Jun

 

30 Jun

31 Dec

Assets

 

 

 

 

 

Goodwill

C4.1

819

 

879

896

Other intangible assets

C4.2

3,758

 

3,686

3,986

Property, plant and equipment

C1.2

390

 

396

374

Insurance contract assets

C3.1

1,131

 

1,167

1,180

Reinsurance contract assets

C3.1

3,200

 

2,023

2,426

Deferred tax assets

 

155

 

168

156

Current tax recoverable

 

25

 

25

34

Investments in joint ventures and associates accounted for using the equity method

 

1,781

 

2,078

1,940

Investment properties

C1.1

3

 

38

39

Loans

C1.1

543

 

574

578

Equity securities and holdings in collective investment schemes note

C1.1

73,110

 

60,508

64,753

Debt securities note

C1.1

74,543

 

80,430

83,064

Derivative assets

C1.1

276

 

458

1,855

Deposits

C1.1

5,284

 

5,056

5,870

Accrued investment income

C1.2

960

 

1,017

1,003

Other debtors

C1.2

2,440

 

1,035

1,161

Assets held for sale

C1.2

291

 

-

-

Cash and cash equivalents

C1.1

5,978

 

5,920

4,751

Total assets

 

174,687

 

165,458

174,066

 

 

 

 

 

 

Equity

 

 

 

 

 

Shareholders' equity

C3.1

16,171

 

17,159

17,823

Non-controlling interests

 

1,065

 

152

160

Total equity

 

17,236

 

17,311

17,983

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Insurance contract liabilities

C3.1

141,099

 

134,096

139,840

Reinsurance contract liabilities

C3.1

1,379

 

950

1,151

Investment contract liabilities without discretionary participation features

C2.2

819

 

716

769

Core structural borrowings of shareholder-financed businesses

C5.1

3,930

 

3,949

3,933

Operational borrowings

C5.2

961

 

802

941

Obligations under funding, securities lending and sale and repurchase agreements

 

576

 

617

716

Net asset value attributable to unit holders of consolidated investment funds

C2.2

2,921

 

2,683

2,711

Deferred tax liabilities

 

1,339

 

1,214

1,250

Current tax liabilities

 

231

 

247

275

Accruals, deferred income and other creditors

C1.2

3,395

 

2,277

4,035

Provisions

 

137

 

129

224

Derivative liabilities

C2.2

426

 

467

238

Liabilities held for sale

C1.2

238

 

-

-

Total liabilities

 

157,451

 

148,147

156,083

Total equity and liabilities

 

174,687

 

165,458

174,066

Note

Included within equity securities and holdings in collective investment schemes and debt securities as at 30 June 2024 are $1,680 million of lent securities and assets subject to repurchase agreements (30 June 2023: $1,556 million; 31 December 2023: $2,001 million).

 

Condensed consolidated statement of cash flows

 

 

2024 $m

 

2023 $m

 

Note

Half year

 

Half year

Full year

Cash flows from operating activities

 

 

 

 

Profit before tax (being tax attributable to shareholders' and policyholders' returns)

506

 

1,243

2,272

Adjustments to profit before tax for:

 

 

 

 

Non-cash movements in operating assets and liabilities

1,511

 

(71)

(1,687)

Interest and dividend income and interest payments included in profit before tax

(2,448)

 

(2,420)

(4,378)

Operating cash items

2,259

 

2,252

4,041

Other non-cash items

 

345

 

263

584

Net cash flows from operating activities note (i)

 

2,173

 

1,267

832

Cash flows from investing activities

 

 

 

 

Purchases and disposals of property, plant and equipment

(27)

 

(18)

(42)

Acquisition of business and intangibles note (ii)

(243)

 

(197)

(415)

Cash advanced to CPL note (i)

-

 

-

(176)

Disposal of Jackson shares

 

-

 

273

273

Net cash flows from investing activities

 

(270)

 

58

(360)

Cash flows from financing activities

 

 

 

 

Structural borrowings of shareholder-financed operations: note (iii)

 

 

 

 

Redemption of debt

-

 

(371)

(393)

Interest paid

(74)

 

(98)

(188)

Payment of principal portion of lease liabilities

(43)

 

(49)

(93)

Equity capital:

C7

 

 

 

 

Issues of ordinary share capital

 

-

 

4

4

Share repurchases/buybacks

 

(60)

 

-

-

External dividends:

 

 

 

 

 

Dividends paid to equity holders of the Company

B4

(390)

 

(361)

(533)

Dividends paid to non-controlling interests

 

(4)

 

(4)

(7)

Net cash flows from financing activities

 

(571)

 

(879)

(1,210)

Net increase (decrease) in cash and cash equivalents

 

1,332

 

446

(738)

Cash and cash equivalents at beginning of period

 

4,751

 

5,514

5,514

Effect of exchange rate changes on cash and cash equivalents

 

(105)

 

(40)

(25)

Cash and cash equivalents at end of period

 

5,978

 

5,920

4,751

Notes

(i)       Included in net cash flows from operating activities are dividends from joint ventures and associates of $73 million (half year 2023: $62 million; full year 2023: $209 million). Cash advanced of $176 million in full year 2023 to CPL, the Group's joint venture in the Chinese Mainland, reflected cash advanced that has subsequently been converted into a capital injection in half year 2024.

(ii)      Cash flows from acquisition of business and intangibles include amounts paid for distribution rights. There were no acquisitions of businesses in the period.

(iii)    Structural borrowings of shareholder-financed businesses exclude borrowings to support short-term fixed income securities programmes, lease liabilities and other borrowings of shareholder-financed businesses. Cash flows in respect of these borrowings are included within cash flows from operating activities. The changes in the carrying value of the structural borrowings of shareholder-financed businesses for the Group are analysed below:

 

Balance at beginning of period $m

Cash movements $m

 

Non-cash movements $m

Balance at end of period $m

 

Redemption

of debt

 

Foreign exchange

movement

Other

movements

30 Jun 2024

3,933

-

 

(7)

4

3,930

30 Jun 2023

4,261

(371)

 

56

3

3,949

31 Dec 2023

4,261

(393)

 

58

7

3,933

 

 

A Basis of preparation

A1 Basis of preparation and exchange rates

These condensed consolidated financial statements ('interim financial statements') for the six months ended 30 June 2024 have been prepared in accordance with both IAS 34 'Interim Financial Reporting' as issued by the IASB and IAS 34 as adopted for use in the UK. The Group's policy for preparing this interim financial information is to use the accounting policies adopted by the Group in its last consolidated financial statements, as updated by any changes in accounting policies it intends to make in its next consolidated financial statements as a result of new or amended IFRS and other policy improvements. At 30 June 2024, there were no unadopted standards effective for the period ended 30 June 2024 which impacted the interim financial statements of the Group, and there were no differences between UK-adopted international accounting standards and IFRS Standards as issued by the IASB in terms of their application to the Group.

Except for the new and amended IFRS Standards as described in note A2, the accounting policies applied by the Group in determining the IFRS financial results in these interim financial statements are the same as those previously applied in the Group's consolidated financial statements for the year ended 31 December 2023 as disclosed in the 2023 Annual Report.

The IFRS financial results for half year 2024 and half year 2023 are unaudited. The full year 2023 IFRS financial results have been derived from the 2023 statutory accounts. The Group's auditors reported on the 2023 statutory accounts which have been delivered to the Registrar of Companies. The auditors' report on the 2023 statutory accounts was: (i) unqualified; (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Going concern basis of accounting

The Directors have made an assessment of going concern covering a period to 31 August 2025, being at least 12 months from the date these interim financial statements are approved. In making this assessment, the Directors have considered both the Group's current performance, solvency and liquidity and the Group's business plan taking into account the Group's principal risks, and the mitigations available to address them, as well as the results of the Group's stress and scenario testing.

Based on the above, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue their operations for a period to 31 August 2025, being at least 12 months from the date these interim financial statements are approved. No material uncertainties that may cast significant doubt on the ability of the Group to continue as a going concern have been identified. The Directors therefore consider it appropriate to continue to adopt the going concern basis of accounting in preparing these interim financial statements for the period ended 30 June 2024.

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 period end

 

Average rate for the period to date

USD : local currency

30 Jun 2024

 

31 Dec 2023

30 Jun 2023

 

Half year 2024

 

Full year 2023

Half year 2023

Chinese yuan (CNY)

7.27

 

7.09

7.26

 

7.22

 

7.09

6.93

Hong Kong dollar (HKD)

7.81

 

7.81

7.84

 

7.82

 

7.83

7.84

Indian rupee (INR)

83.39

 

83.21

82.04

 

83.23

 

82.60

82.22

Indonesian rupiah (IDR)

16,375.00

 

15,397.00

14,992.50

 

15,901.19

 

15,230.82

15,042.54

Malaysian ringgit (MYR)

4.72

 

4.60

4.67

 

4.73

 

4.56

4.46

Singapore dollar (SGD)

1.36

 

1.32

1.35

 

1.35

 

1.34

1.34

Taiwan dollar (TWD)

32.44

 

30.69

31.14

 

31.90

 

31.17

30.56

Thai baht (THB)

36.72

 

34.37

35.33

 

36.19

 

34.80

34.20

UK pound sterling (GBP)

0.79

 

0.78

0.79

 

0.79

 

0.80

0.81

Vietnamese dong (VND)

25,455.00

 

24,262.00

23,585.00

 

24,963.23

 

23,835.92

23,521.79

Certain notes to the interim financial statements present comparative information at constant exchange rates (CER), in addition to the reporting at actual exchange rates (AER) used throughout the interim financial statements. AER are actual historical exchange rates for the specific accounting period, being the average rates over the period for the income statement and the closing rates at the balance sheet date for the statement of financial position. CER results are calculated by translating prior period results using the current year foreign exchange rate, ie current period average rates for the income statement and current period closing rates for the statement of financial position.

A2 New accounting pronouncements in 2024

The Group has adopted the following amendments in these interim financial statements. The adoption of these amendments has had no significant impact on the Group financial statements.

-   Amendments to IAS 1 'Classification of liabilities as current or non-current' issued in January 2020 and October 2022 and 'Non-current liabilities with covenants' issued in October 2022;

-   Amendments to IFRS 16 'Lease liability in a sale and leaseback' issued in September 2022; and

-   Amendments to IAS 7 and IFRS 7 'Supplier finance arrangements' issued in May 2023.

 

B Earnings performance

B1 Analysis of performance

B1.1 Segment results

 

 

2024 $m

 

2023 $m

 

2024 vs 2023 %

 

2023 $m

 

 

Half year

 

Half year

Half year

 

Half year

Half year

 

Full year

 

Note

 

 

AER

CER

 

AER

CER

 

AER

 

 

note (i)

 

note (i)

note (i)

 

note (i)

note (i)

 

note (i)

CPL

 

197

 

164

157

 

20%

25%

 

368

Hong Kong

 

504

 

554

555

 

(9)%

(9)%

 

1,013

Indonesia

 

132

 

109

103

 

21%

28%

 

221

Malaysia

 

152

 

165

155

 

(8)%

(2)%

 

305

Singapore

 

343

 

270

268

 

27%

28%

 

584

Growth markets and other note (ii)

 

362

 

374

355

 

(3)%

2%

 

746

Eastspring

 

155

 

146

143

 

6%

8%

 

280

Total segment profit

 

1,845

 

1,782

1,736

 

4%

6%

 

3,517

Other income and expenditure unallocated to a segment:

 

 

 

 

 

 

 

 

 

 

Net investment return and other items note (iii)

 

1

 

(28)

(28)

 

104%

104%

 

(21)

Interest payable on core structural borrowings

 

(85)

 

(85)

(85)

 

0%

0%

 

(172)

Corporate expenditure note (iv)

 

(119)

 

(115)

(115)

 

(3)%

(3)%

 

(230)

Total other expenditure

 

(203)

 

(228)

(228)

 

11%

11%

 

(423)

Restructuring and IFRS 17 implementation costs note (v)

 

(98)

 

(92)

(91)

 

(7)%

(8)%

 

(201)

Adjusted operating profit

B1.3

1,544

 

1,462

1,417

 

6%

9%

 

2,893

Short-term fluctuations in investment returns

 

(1,081)

 

(287)

(272)

 

n/a

n/a

 

(774)

Loss attaching to corporate transactions note (vi)

 

(69)

 

-

-

 

n/a

n/a

 

(22)

Profit before tax attributable to shareholders

 

394

 

1,175

1,145

 

(66)%

(66)%

 

2,097

Tax charge attributable to shareholders' returns

 

(212)

 

(228)

(221)

 

7%

4%

 

(385)

Profit for the period

 

182

 

947

924

 

(81)%

(80)%

 

1,712

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

 

 

 

Equity holders of the Company

 

120

 

944

922

 

n/a

n/a

 

1,701

Non-controlling interests

 

62

 

3

2

 

n/a

n/a

 

11

Profit for the period

 

182

 

947

924

 

n/a

n/a

 

1,712

 

Basic earnings per share (in cents)

 

2024

 

2023

 

2024 vs 2023 %

 

2023

 

 

Half year

 

Half year

Half year

 

Half year

Half year

 

Full year

 

Note

 

 

AER

CER

 

AER

CER

 

AER

 

B3

note (i)

 

note (i)

note (i)

 

note (i)

note (i)

 

note (i)

Based on adjusted operating profit, net of tax and non-controlling interests

 

43.8¢

 

45.2¢

44.1¢

 

(3)%

(1)%

 

89.0¢

Based on profit for the period, net of non-controlling interests

 

4.4¢

 

34.5¢

33.9¢

 

(87)%

(87)%

 

62.1¢

Notes

(i)       Segment results are attributed to the shareholders of the Group before deducting the amount attributable to the non-controlling interests. This presentation is applied consistently throughout the document. For definitions of AER and CER refer to note A1.

(ii)      The Growth markets and other segment includes non-insurance entities that support the Group's insurance business and the result for this segment is after deducting the corporate taxes arising from the life joint ventures and associates.

(iii)    Net investment return and other items includes an adjustment to eliminate intercompany profits. Entities within the Prudential Group can provide services to each other, the most significant example being the provision of asset management services by Eastspring to the life entities. If the associated expenses are deemed attributable to the entity's insurance contracts then the costs are included within the estimate of future cash flows when measuring the insurance contract under IFRS 17. In the Group's consolidated accounts, IFRS 17 requires the removal of the intercompany profit from the measurement of the insurance contract. Put another way the future cash flows include the cost to the Group (not the insurance entity) of providing the service. In the period that the service is provided the entity undertaking the service, for example Eastspring, recognises the profit it earns as part of its results. To avoid any double counting an adjustment is included with the centre's 'net investment return and other items' to remove the benefit already recognised when valuing the insurance contract.

(iv)     Corporate expenditure as shown above is for head office functions.

(v)      Restructuring and IFRS 17 implementation costs largely comprise the costs of Group-wide projects including the implementation of IFRS 17 (including one-off costs associated with embedding IFRS 17), reorganisation programmes and initial costs of establishing new business initiatives and operations. The costs include those incurred in insurance and asset management operations of $(18) million (half year 2023: $(36) million; full year 2023: $(81) million).

(vi)     Loss attaching to corporate transactions in half year 2024 mainly relates to the held for sale businesses (further details are provided in note C1.2). The $(22) million loss in full year 2023 largely reflected costs incurred on the termination of corporate services.

 

B1.2 Determining operating segments and performance measure of operating segments

Operating segments

The Group's operating and reported segments for financial reporting purposes are defined and presented in accordance with IFRS 8 'Operating Segments'. There have been no changes to the Group's operating segments as reported in these interim financial statements from those reported in the Group's consolidated financial statements for the year ended 31 December 2023.

Operations and transactions which do not form part of any business unit are reported as 'Unallocated to a segment' and generally comprise head office functions.

Performance measure

The performance measure of operating segments utilised by the Group is IFRS operating profit based on longer-term investment returns (adjusted operating profit) as described below. This measurement basis distinguishes adjusted operating profit from other constituents of total profit or loss for the period, including short-term fluctuations in investment returns and loss on corporate transactions. Note B1.1 shows the reconciliation from adjusted operating profit to total profit for the period.

Determination of adjusted operating profit

(a)  Approach adopted for insurance businesses

The measurement of adjusted operating profit reflects that, for the insurance business, assets and liabilities are held for the longer term. The Group believes trends in underlying performance are better understood if the effects of short-term fluctuations in market conditions, such as changes in interest rates or equity markets, are excluded.

The method of allocating profit between operating and non-operating components involves applying longer-term rates of return to the Group's assets held by insurance entities (including joint ventures and associates). These longer-term rates of return are not applied when assets and liabilities move broadly in tandem and hence the effect on profit from short-term market movements is more muted. In summary the Group applies the following approach when attributing the 'net investment result' between operating and non-operating profit:

-   Returns on investments that meet the definition of an 'underlying item', namely those investments that determine some of the amounts payable to a policyholder such as assets within unit-linked funds or with-profits funds, are recorded in adjusted operating profit on an actual return basis. The exception is for investments backing the shareholders' 10 per cent share of the estate within the Hong Kong with-profits fund. Changes in the value of these investments, including those driven by market movements, pass through the income statement with no liability offset. Consequently adjusted operating profit recognises investment return on a longer-term basis for these assets.

-   For insurance contracts measured under the general measurement model (GMM), the impact of market movements on both the non-underlying insurance contract balances and the investments they relate to are considered together. Adjusted operating profit allows for the long-term credit spread (net of the expected defaults) or long-term equity risk premium on the debt and equity-type instruments respectively. Deducted from this amount is the unwind of the illiquidity premium included in the current discount rate for the liabilities.

-   Some GMM best estimate liabilities (BEL) components are calculated by reference to the investment return of assets, even if the BEL component itself is not considered an underlying item, for example the BEL component related to future fee income or a guarantee. In these cases, for the purposes of determining operating profit, the BEL component is calculated assuming a longer-term investment return and any difference between the actual return arising in the period and the longer-term investment return is taken to non-operating profit. There is no impact on the balance sheet of this allocation.

-   A longer-term rate of return is applied to all other investments held by the Group's insurance business for the purposes of calculating adjusted operating profit. More details on how longer-term rates are determined are set out below.

The difference between the net investment result recorded in the income statement and the longer-term returns determined using the above principles is recorded as 'short-term fluctuations in investment returns' as a component of non-operating profit.

The 'insurance service result' is largely recognised in adjusted operating profit in full with the main exception being the gains or losses that arise from market and other related movements on onerous contracts measured under the variable fee approach (VFA). If these gains and losses are capable of being offset across more than one annual cohort of the same product or fund as applicable, then the adjusted operating profit is determined by amortising the net of the future profits and losses on all contracts where profits or losses can be shared. Any difference between this and the amount included in the income statement for onerous contracts is classified as part of 'short-term fluctuations in investment returns', a component of non-operating profit. See note B1.3 (ii) for the reconciliation to the 'insurance service result' recognised in the condensed consolidated income statement.

(b)  Determination of longer-term returns

The longer-term rates of return are estimates of the long-term trend investment returns having regard to past performance, current trends and future expectations. These rates are broadly stable from period to period but may be different between regions, reflecting, for example, differing expectations of inflation in each business unit. The assumptions are for the returns expected to apply in equilibrium conditions. The assumed rates of return do not reflect any cyclical variability in economic performance and are not set by reference to prevailing asset valuations.

For collective investment schemes that include different types of assets (eg equities and debt securities), weighted assumptions are used reflecting the asset mix underlying the relevant fund mandates.

Debt securities and loans

For debt securities and loans, the longer-term rates of return are estimates of the long-term government bond yield, plus the estimated long-term credit spread over the government bond yield, less an allowance for expected credit losses. The credit spread and credit loss assumptions reflect the mix of assets by credit rating. Longer-term rates of return range from 2.8 per cent to 8.8 per cent for half year 2024 (half year 2023: 2.8 per cent to 7.8 per cent; full year 2023: 2.8 per cent to 8.4 per cent).

Equity-type securities

For equity-type securities, the longer-term rates of return are estimates of the long-term trend investment returns for income and capital. Longer-term rates of return range from 8.6 per cent to 15.7 per cent for all periods shown.

Derivative value movements

In the case where derivatives change the nature of other invested assets (eg by lengthening the duration of assets, hedging overseas bonds to the currency of the local liabilities, or by providing synthetic exposure to equities), the longer-term return on those invested assets reflects the impacts of the derivatives.

(c)  Non-insurance businesses

For these businesses, the determination of adjusted operating profit reflects the underlying economic substance of the arrangements and excludes market-related items only where it is expected these will unwind over time.

B1.3 Analysis of adjusted operating profit by driver

Management assesses adjusted operating profit by breaking it down into the key components that drive performance each period.

The table below analyses the Group's adjusted operating profit into the underlying drivers using the following categories:

-   Adjusted release of CSM, which is net of reinsurance, represents the release from the CSM for the insurance services provided in the period, adjusted for the reduction in CSM release that would occur if gains on profitable contracts were combined with losses on onerous contracts for those contracts where gains and losses can be shared across cohorts as described in note B1.2.

-   Release of risk adjustment, which is net of reinsurance, represents the amount of risk adjustment recognised in the income statement representing non-financial risk that expired in the period net of the amount that was assumed to be covered by any reinsurance contracts in place. The only difference between the amount shown in the table below and the amount included within Insurance service result on the consolidated income statement is the amount relating to the Group's life joint ventures and associates that use the equity method of accounting.

-   Experience variances represent the difference between the actual amounts incurred or received in the period and that assumed within the best estimate liability for insurance and reinsurance contracts. It covers items such as claims, attributable expenses and premiums to the extent that they relate to current or past service.

-   Other insurance service result primarily relates to movements on onerous contracts that impact adjusted operating profit (ie excluding those discussed in B1.2).

-   Net investment result on longer-term basis comprises the component of the 'net investment result' that has been attributed to adjusted operating profit by applying the approach as described in note B1.2.

-   Other insurance income and expenditure represent other sources of income and expenses that are not considered to be attributable to insurance contracts under IFRS 17.

-   Share of related tax charges from joint ventures and associates represents the related tax on the adjusted operating profit of the Group's life joint ventures and associates accounted for using the equity method. Under IFRS, the Group's share of results from its investments in joint ventures and associates accounted for using the equity method is included as a single line in the Group's profit before tax on a net of related tax basis. In the table below, the results of the life joint ventures and associates are analysed by adjusted operating profit drivers and on a pre-tax basis, with related tax shown separately in order for the contribution from the life joint ventures and associates to be included in the profit driver analysis on a consistent basis with the rest of the insurance business operations.

 

2024 $m

 

2023 $m

 

2024 vs 2023 %

 

2023 $m

 

Half year

 

Half year

AER

Half year

CER

 

Half year

AER

Half year

CER

 

Full year

AER

Adjusted release of CSM note (i)

1,091

 

1,178

1,147

 

(7)%

(5)%

 

2,205

Release of risk adjustment

128

 

107

104

 

20%

23%

 

218

Experience variances

(30)

 

(92)

(85)

 

67%

65%

 

(118)

Other insurance service result

(50)

 

(85)

(82)

 

41%

39%

 

(109)

Adjusted insurance service result note (ii)

1,139

 

1,108

1,084

 

3%

5%

 

2,196

Net investment result on longer-term basis note (iii)

641

 

612

590

 

5%

8%

 

1,241

Other insurance income and expenditure

(42)

 

(45)

(44)

 

7%

5%

 

(122)

Share of related tax charges from joint ventures and associates

(48)

 

(39)

(37)

 

(23)%

(30)%

 

(78)

Insurance business

1,690

 

1,636

1,593

 

3%

6%

 

3,237

Eastspring

155

 

146

143

 

6%

8%

 

280

Other income and expenditure

(203)

 

(228)

(228)

 

11%

11%

 

(423)

Restructuring and IFRS 17 implementation costs

(98)

 

(92)

(91)

 

(7)%

(9)%

 

(201)

Adjusted operating profit, as reconciled to profit for the period in note B1.1

1,544

 

1,462

1,417

 

6%

9%

 

2,893

Notes

(i)   The adjusted release of CSM is reconciled to the information in the condensed consolidated income statement as follows:

 

2024 $m

 

2023 $m

 

Half year

 

Half year

Full year

Release of CSM, net of reinsurance as included within Insurance service result on the condensed consolidated income statement

984

 

1,068

1,990

Add amounts relating to the Group's life joint ventures and associates that are accounted for on equity-method

113

 

109

218

Release of CSM, net of reinsurance as shown in note C3.2

 

 

 

 

Insurance

1,253

 

1,223

2,414

Reinsurance

(156)

 

(46)

(206)

 

1,097

 

1,177

2,208

Adjustment to release of CSM for the treatment adopted for adjusted operating profit purposes of combining losses on onerous contracts and gains on profitable contracts that can be shared across more than one annual cohort

(6)

 

1

(3)

Adjusted release of CSM as shown above

1,091

 

1,178

2,205

(ii)  The adjusted insurance service result is reconciled to the information in the condensed consolidated income statement as follows:

 

2024 $m

 

2023 $m

 

Half year

 

Half year

Full year

Insurance service result as shown in the consolidated income statement

1,071

 

1,019

2,087

Add amounts relating to the Group's life joint ventures and associates that are accounted for on equity-method

72

 

70

148

Insurance service result as shown in note C3.2

 

 

 

 

Insurance

1,398

 

1,181

2,424

Reinsurance

(255)

 

(92)

(189)

 

1,143

 

1,089

2,235

Removal of losses or gains from reversal of losses on those onerous contracts that meet the criteria in note B1.2 less the change to the release of CSM shown above

17

 

70

68

Other items including policyholder tax*

(21)

 

(51)

(107)

Adjusted insurance service result as shown above

1,139

 

1,108

2,196

*      Other items include the revenue recognised to cover the tax charge attributable to policyholders that is included in the insurance service result in the income statement. This revenue is fully offset by the actual tax charge attributable to policyholders that is included, as required by IAS 12, in the tax line in the income statement resulting in no net impact to profit after tax and so have been offset in the analysis of adjusted operating profit.

(iii)    In addition, net investment result on longer-term basis is reconciled to the net investment result in the condensed consolidated income statement as follows:

 

2024 $m

 

2023 $m

 

Half year

 

Half year

Full year

Net investment result as shown in the consolidated income statement

167

 

652

1,091

Remove investment return of non-insurance entities

(124)

 

(39)

(142)

Remove short-term fluctuations in investment return included in non-operating profit*

1,081

 

287

774

Other items*

(483)

 

(288)

(482)

Net investment result on longer-term basis as shown above

641

 

612

1,241

*      These reconciling line items include the impact from the Group's life joint ventures and associates.

B1.4 Revenue by segment

 

Half year 2024 $m

 

Insurance operations note (i)

Eastspring

Inter-

segment

elimination

Total

 segment

Unallocated

to a segment

Total

 

Hong Kong

Indonesia

Malaysia

Singapore

Growth

markets

and other

Insurance revenue

1,780

601

605

1,070

905

-

-

4,961

-

4,961

Other revenue note (ii)

12

1

-

-

23

160

-

196

1

197

Total revenue from external customers

1,792

602

605

1,070

928

160

-

5,157

1

5,158

Intra-group revenue

-

-

-

-

-

111

(111)

-

-

-

Interest income

520

48

103

430

354

6

-

1,461

104

1,565

Dividend and other investment income

510

67

90

279

78

2

-

1,026

-

1,026

Investment appreciation (depreciation)

(2,059)

(39)

578

1,233

179

-

-

(108)

12

(96)

Investment return

(1,029)

76

771

1,942

611

119

(111)

2,379

116

2,495

Total revenue

763

678

1,376

3,012

1,539

279

(111)

7,536

117

7,653

 

 

Half year 2023 $m

 

Insurance operations note (i)

Eastspring

Inter-

segment

elimination

Total

 segment

Unallocated

to a segment

Total

 

Hong Kong

Indonesia

Malaysia

Singapore

Growth

markets

and other

Insurance revenue

1,582

551

566

946

946

-

-

4,591

-

4,591

Other revenue note (ii)

11

2

-

1

17

145

-

176

-

176

Total revenue from external customers

1,593

553

566

947

963

145

-

4,767

-

4,767

Intra-group revenue

-

-

-

-

-

103

(103)

-

-

-

Interest income

540

40

133

444

393

3

-

1,553

61

1,614

Dividend and other investment income

410

81

79

273

65

2

-

910

7

917

Investment appreciation (depreciation)

2,345

36

(69)

1,234

1,128

4

-

4,678

(38)

4,640

Investment return

3,295

157

143

1,951

1,586

112

(103)

7,141

30

7,171

Total revenue

4,888

710

709

2,898

2,549

257

(103)

11,908

30

11,938

 

 

Full year 2023 $m

 

Insurance operations note (i)

Eastspring

Inter-

segment

elimination

Total

 segment

Unallocated

to a segment

Total

 

Hong Kong

Indonesia

Malaysia

Singapore

Growth

markets

and other

Insurance revenue

3,229

1,142

1,134

1,983

1,883

-

-

9,371

-

9,371

Other revenue note (ii)

22

4

4

-

39

299

-

368

1

369

Total revenue from external customers

3,251

1,146

1,138

1,983

1,922

299

-

9,739

1

9,740

Intra-group revenue

-

-

-

-

-

184

(184)

-

-

-

Interest income

1,033

92

239

785

627

7

-

2,783

164

2,947

Dividend and other investment income

775

93

151

528

117

3

-

1,667

7

1,674

Investment appreciation (depreciation)

2,155

50

177

1,490

1,309

4

-

5,185

(43)

5,142

Investment return

3,963

235

567

2,803

2,053

198

(184)

9,635

128

9,763

Total revenue

7,214

1,381

1,705

4,786

3,975

497

(184)

19,374

129

19,503

Notes

(i)       The Group's share of the results from the joint ventures and associates including CPL that are equity accounted for is presented in a single line within the Group's profit before tax on a net of related tax basis, and therefore not shown in the analysis of revenue line items above.

(ii)      Other revenue comprises revenue from external customers and consists primarily of revenue from the Group's asset management business of $182 million (half year 2023: $145 million; full year 2023: $299 million).

B2 Tax charge

The total tax (charge) credit in the income statement is as follows:

 

2024 $m

 

2023 $m

 

Half year

 

Half year

Full year

Hong Kong

(60)

 

(63)

(129)

Indonesia

(13)

 

(27)

(43)

Malaysia

(95)

 

(43)

(98)

Singapore

(45)

 

(91)

(174)

Growth markets and other

(66)

 

(66)

(103)

Eastspring

(13)

 

(14)

(26)

Total segment note (i)

(292)

 

(304)

(573)

Unallocated to a segment (central operations)

(32)

 

8

13

Total tax charge

(324)

 

(296)

(560)

 

 

 

 

 

Analysed by:

 

 

 

 

Current tax

(188)

 

(238)

(456)

Deferred tax note (ii)

(136)

 

(58)

(104)

Total tax charge

(324)

 

(296)

(560)

Notes

(i)       Profit before tax includes Prudential's share of profit after tax from the joint ventures and associates that are equity-accounted for. Therefore, the actual tax charge in the income statement does not include tax arising from the results of joint ventures and associates including CPL.

(ii)      At 30 June 2024, the Group has applied the mandatory exemption from recognising and disclosing information on deferred tax assets and liabilities in respect of Pillar 2 income taxes.

The actual shareholder tax rates of the relevant business operations are shown below:

 

Half year 2024 %

 

Hong Kong

Indonesia

Malaysia

Singapore

Growth

markets

and other

Eastspring

Other (central)

operations

Total

attributable to

shareholders

Tax rate on adjusted operating profit

7%

19%

23%

16%

22%

8%

(10)%

18%

Tax rate on profit before tax

9%

17%

23%

13%

16%

9%

(11)%

54%

 

 

Half year 2023 %

 

Hong Kong

Indonesia

Malaysia

Singapore

Growth

markets

and other

Eastspring

Other (central)

operations

Total

attributable to

shareholders

Tax rate on adjusted operating profit

5%

21%

22%

16%

22%

10%

3%

15%

Tax rate on profit before tax

5%

22%

23%

16%

13%

10%

2%

19%

 

 

Full year 2023 %

 

Hong Kong

Indonesia

Malaysia

Singapore

Growth

markets

and other

Eastspring

Other (central)

operations

Total

attributable to

shareholders

Tax rate on adjusted operating profit

7%

22%

22%

16%

20%

9%

2%

15%

Tax rate on profit before tax

7%

22%

20%

16%

11%

9%

2%

18%

A number of jurisdictions in which the Group has operations - Japan, South Korea, Luxembourg, Vietnam and the UK - have implemented either a global minimum tax or a domestic minimum tax at a rate of 15 per cent, in line with the OECD proposals, effective for 2024 onwards. Malaysia has implemented both the global minimum tax and domestic minimum tax effective for 2025 onwards. Other jurisdictions where the Group has a taxable presence, including Hong Kong, Singapore and Thailand intend to implement the proposals for 2025 onwards.

The Group has calculated the impact of the legislation applying for 2024 and there is no resulting amount in respect of Pillar 2 income taxes included in the current tax charge for the period ended 30 June 2024.

B3 Earnings per share

 

Half year 2024

 

Before

 tax

Tax

Non-controlling interests

Net of tax

 and non-

controlling

 interests

Basic

earnings

 per share

Diluted

 earnings

 per share

 

$m

$m

$m

$m

cents

cents

Based on adjusted operating profit

1,544

(273)

(71)

1,200

43.8¢

43.7¢

Short-term fluctuations in investment returns

(1,081)

61

(15)

(1,035)

(37.8)¢

(37.7)¢

Loss attaching to corporate transactions

(69)

-

24

(45)

(1.6)¢

(1.6)¢

Based on profit for the period

394

(212)

(62)

120

4.4¢

4.4¢

 

 

Half year 2023

 

Before

 tax

Tax

Non-controlling interests

Net of tax

 and non-

controlling

 interests

Basic

earnings

 per share

Diluted

 earnings

 per share

 

$m

$m

$m

$m

cents

cents

Based on adjusted operating profit

1,462

(221)

(3)

1,238

45.2¢

45.2¢

Short-term fluctuations in investment returns

(287)

(7)

-

(294)

(10.7)¢

(10.7)¢

Based on profit for the period

1,175

(228)

(3)

944

34.5¢

34.5¢

 

 

Full year 2023

 

Before

 tax

Tax

Non-controlling interests

Net of tax

 and non-

controlling

 interests

Basic

earnings

 per share

Diluted

 earnings

 per share

 

$m

$m

$m

$m

cents

cents

Based on adjusted operating profit

2,893

(444)

(11)

2,438

89.0¢

88.7¢

Short-term fluctuations in investment returns

(774)

59

-

(715)

(26.1)¢

(26.0)¢

Loss attaching to corporate transactions

(22)

-

-

(22)

(0.8)¢

(0.8)¢

Based on profit for the year

2,097

(385)

(11)

1,701

62.1¢

61.9¢

For half year 2024, the weighted average number of shares for calculating basic earnings per share, which excludes those held in employee share trusts, is 2,740 million (half year 2023: 2,740 million; full year 2023: 2,741 million). After including a dilutive effect of the Group's share options and awards of 3 million (half year 2023: none; full year 2023: 6 million), the weighted average number of shares for calculating diluted earnings per share is 2,743 million (half year 2023: 2,740 million; full year 2023: 2,747 million).

B4 Dividends

 

Half year 2024

 

Half year 2023

 

Full year 2023

 

Cents per share

$m

 

Cents per share

$m

 

Cents per share

$m

Dividends relating to reporting period:

 

 

 

 

 

 

 

 

First interim dividend

6.84¢

188*

 

6.26¢

172

 

6.26¢

172

Second interim dividend

-

-

 

-

-

 

14.21¢

392

Total relating to reporting period

6.84¢

188

 

6.26¢

172

 

20.47¢

564

Dividends paid in reporting period:

 

 

 

 

 

 

 

 

Current year first interim dividend

-

-

 

-

-

 

6.26¢

172

Second interim dividend for prior year

14.21¢

390

 

13.04¢

361

 

13.04¢

361

Total paid in reporting period

14.21¢

390

 

13.04¢

361

 

19.30¢

533

*      Estimated based on the outstanding number of ordinary shares as at 30 June 2024.

First and second interim dividends are recorded in the period in which they are paid.

Dividend per share

On 23 October 2024, Prudential will pay a first interim dividend of 6.84 cents per ordinary share for the year ending 31 December 2024. The first interim dividend will be paid to shareholders recorded on the UK register at 5.00pm (British Summer Time) and to shareholders on the HK branch register at 4.30pm (Hong Kong Time) on 6 September 2024 (Record Date), and also to the Holders of US American Depositary Receipts (ADRs) as at 6 September 2024. The first interim dividend will be paid on or around 30 October 2024 to shareholders with shares standing to the credit of their securities accounts with The Central Depository (Pte) Limited (CDP) at 5.00pm (Singapore Time) on the Record Date.

Shareholders holding shares on the UK or HK share registers will continue to receive their dividend payments in either GBP or HKD respectively, unless they elect to receive dividend payments in USD. Shareholders on the UK register are also eligible to participate in a Dividend Reinvestment Plan as an alternative of receiving dividends in cash. Elections must be made through the relevant UK or HK share registrar on or before 30 September 2024. The corresponding amounts per share in GBP and HKD are expected to be announced on or around 9 October 2024. The USD to GBP and HKD conversion rates will be determined by the actual rates achieved by Prudential buying those currencies prior to the subsequent announcement.

Shareholders holding an interest in Prudential shares through the CDP in Singapore will continue to receive their dividend payments in SGD based on the prevailing market exchange rate.

Holders of ADRs will continue to receive their dividend payments in USD.

C Financial position

C1 Group assets and liabilities

C1.1 Group investments by business type

The analysis below is structured to show the investments of the Group's subsidiaries by reference to the differing degrees of policyholder and shareholder economic interest of the different types of business.

Debt securities are analysed below according to the issuing government for sovereign debt and to credit ratings for the rest of the securities. The Group uses the middle of the Standard & Poor's, Moody's and Fitch ratings, where available. Where ratings are not available from these rating agencies, local external rating agencies' ratings and lastly internal ratings have been used. Securities with none of the ratings listed above are classified as unrated and included under the 'below BBB- and unrated' category. The total securities (excluding sovereign debt) that were unrated at 30 June 2024 were $1,220 million (30 June 2023: $1,127 million; 31 December 2023: $1,181 million). Additionally, government debt is shown separately from the rating breakdowns in order to provide a more focused view of the credit portfolio.

In the table below, AAA is the highest possible rating. Investment grade financial assets are classified within the range of AAA to BBB- ratings. Financial assets which fall outside this range are classified as below BBB-.

The following table classifies assets into those that primarily back the Group's participating funds that are measured under the variable fee approach, those backing unit-linked funds, other investments held within the insurance entities, Eastspring's investments and those that are unallocated to a segment (principally centrally held investments).

In terms of the investments held by the insurance businesses, those within funds with policyholder participation and those within unit-linked funds represent underlying items. The gains or losses on these investments will be offset by movements in policyholder liabilities and therefore adjusted operating profit reflects the actual investment return on these assets. The exception is for investments backing the shareholders' 10 per cent share of the estate within the Hong Kong with-profits fund. Changes in the value of these investments, including those driven by market movements, pass through the income statement with no liability offset. Consequently adjusted operating profit recognises investment return on a longer-term basis for these assets.

In terms of other assets held within the insurance entities, these largely comprise assets backing IFRS shareholders' equity or are non-underlying items backing GMM liabilities and therefore the returns on these other investments are recognised in adjusted operating profit at a longer-term rate.

 

30 Jun 2024 $m

 

Asia and Africa

Unallocated

to a segment

Group

total

 

Insurance

Eastspring

Total

 

Funds with policyholder participation

Unit-linked funds

Other

 

note (i)

 

 

 

 

 

 

Debt securities

 

 

 

 

 

 

 

Sovereign debt

 

 

 

 

 

 

 

Indonesia

396

526

518

-

1,440

-

1,440

Singapore

2,513

551

903

-

3,967

-

3,967

Thailand

2

2

1,901

-

1,905

-

1,905

United Kingdom

4

6

20

-

30

-

30

United States

16,484

23

2,162

-

18,669

-

18,669

Vietnam

2,976

18

150

-

3,144

-

3,144

Other (predominantly Asia)

4,337

685

1,599

1

6,622

-

6,622

Subtotal

26,712

1,811

7,253

1

35,777

-

35,777

Other government bonds

 

 

 

 

 

 

 

AAA

1,554

86

112

-

1,752

-

1,752

AA+ to AA-

123

19

23

-

165

-

165

A+ to A-

615

83

222

-

920

-

920

BBB+ to BBB-

246

56

46

-

348

-

348

Below BBB- and unrated

510

11

93

-

614

-

614

Subtotal

3,048

255

496

-

3,799

-

3,799

Corporate bonds

 

 

 

 

 

 

 

AAA

1,242

145

200

-

1,587

-

1,587

AA+ to AA-

2,965

448

802

-

4,215

-

4,215

A+ to A-

11,935

499

1,787

-

14,221

1

14,222

BBB+ to BBB-

9,001

664

1,837

-

11,502

1

11,503

Below BBB- and unrated

2,330

498

361

-

3,189

-

3,189

Subtotal

27,473

2,254

4,987

-

34,714

2

34,716

Asset-backed securities

 

 

 

 

 

 

 

AAA

134

2

37

-

173

-

173

AA+ to AA-

7

1

2

-

10

-

10

A+ to A-

27

-

5

-

32

-

32

BBB+ to BBB-

3

-

1

-

4

-

4

Below BBB- and unrated

2

1

29

-

32

-

32

Subtotal

173

4

74

-

251

-

251

Total debt securities notes (ii)(v)

57,406

4,324

12,810

1

74,541

2

74,543

Loans

 

 

 

 

 

 

 

Mortgage loans

57

-

88

-

145

-

145

Other loans

398

-

-

-

398

-

398

Total loans

455

-

88

-

543

-

543

Equity securities and holdings in collective investment schemes

 

 

 

 

 

 

 

Direct equities

18,234

12,965

170

114

31,483

-

31,483

Collective investment schemes

32,137

8,049

1,440

1

41,627

-

41,627

Total equity securities and holdings in collective investment schemes

50,371

21,014

1,610

115

73,110

-

73,110

Other financial investments note (iii)

1,460

299

1,880

85

3,724

1,836

5,560

Total financial investments note (iv)

109,692

25,637

16,388

201

151,918

1,838

153,756

Investment properties

-

-

3

-

3

-

3

Cash and cash equivalents

1,304

594

1,089

138

3,125

2,853

5,978

Total investments

110,996

26,231

17,480

339

155,046

4,691

159,737

 

 

30 Jun 2023 $m

 

Asia and Africa

Unallocated

to a segment

Group

total

 

Insurance

Eastspring

Total

 

Funds with policyholder participation

Unit-linked funds

Other

 

note (i)

 

 

 

 

 

 

Debt securities

 

 

 

 

 

 

 

Sovereign debt

 

 

 

 

 

 

 

Indonesia

408

637

460

-

1,505

-

1,505

Singapore

3,330

571

943

-

4,844

-

4,844

Thailand

1

3

1,612

-

1,616

-

1,616

United Kingdom

-

4

44

-

48

-

48

United States

23,364

18

1,756

-

25,138

-

25,138

Vietnam

3,084

27

180

-

3,291

-

3,291

Other (predominantly Asia)

4,056

672

1,675

27

6,430

-

6,430

Subtotal

34,243

1,932

6,670

27

42,872

-

42,872

Other government bonds

 

 

 

 

 

 

 

AAA

1,421

89

137

-

1,647

-

1,647

AA+ to AA-

85

11

22

-

118

-

118

A+ to A-

694

114

234

-

1,042

-

1,042

BBB+ to BBB-

231

51

71

-

353

-

353

Below BBB- and unrated

487

15

76

-

578

-

578

Subtotal

2,918

280

540

-

3,738

-

3,738

Corporate bonds

 

 

 

 

 

 

 

AAA

1,175

169

234

-

1,578

-

1,578

AA+ to AA-

2,527

356

932

-

3,815

-

3,815

A+ to A-

10,141

540

2,291

-

12,972

-

12,972

BBB+ to BBB-

8,938

711

2,019

-

11,668

-

11,668

Below BBB- and unrated

2,487

583

356

2

3,428

-

3,428

Subtotal

25,268

2,359

5,832

2

33,461

-

33,461

Asset-backed securities

 

 

 

 

 

 

 

AAA

194

1

66

-

261

-

261

AA+ to AA-

16

2

2

-

20

-

20

A+ to A-

46

1

10

-

57

-

57

BBB+ to BBB-

15

-

3

-

18

-

18

Below BBB- and unrated

2

1

-

-

3

-

3

Subtotal

273

5

81

-

359

-

359

Total debt securities notes (ii)(v)

62,702

4,576

13,123

29

80,430

-

80,430

Loans

 

 

 

 

 

 

 

Mortgage loans

99

-

45

-

144

-

144

Other loans

430

-

-

-

430

-

430

Total loans

529

-

45

-

574

-

574

Equity securities and holdings in collective investment schemes

 

 

 

 

 

 

 

Direct equities

17,352

11,637

156

106

29,251

-

29,251

Collective investment schemes

22,670

7,070

1,514

3

31,257

-

31,257

Total equity securities and holdings in collective investment schemes

40,022

18,707

1,670

109

60,508

-

60,508

Other financial investments note (iii)

2,416

403

1,503

96

4,418

1,096

5,514

Total financial investments note (iv)

105,669

23,686

16,341

234

145,930

1,096

147,026

Investment properties

-

-

38

-

38

-

38

Cash and cash equivalents

900

699

1,410

159

3,168

2,752

5,920

Total investments

106,569

24,385

17,789

393

149,136

3,848

152,984

 

 

31 Dec 2023 $m

 

Asia and Africa

Unallocated

to a segment

Group

total

 

Insurance

Eastspring

Total

 

Funds with policyholder participation

Unit-linked funds

Other

 

note (i)

 

 

 

 

 

 

Debt securities

 

 

 

 

 

 

 

Sovereign debt

 

 

 

 

 

 

 

Indonesia

393

611

525

-

1,529

-

1,529

Singapore

3,006

607

929

-

4,542

-

4,542

Thailand

2

4

1,957

-

1,963

-

1,963

United Kingdom

-

5

87

-

92

-

92

United States

23,552

84

2,351

-

25,987

-

25,987

Vietnam

3,143

30

173

-

3,346

-

3,346

Other (predominantly Asia)

4,375

664

1,732

28

6,799

-

6,799

Subtotal

34,471

2,005

7,754

28

44,258

-

44,258

Other government bonds

 

 

 

 

 

 

 

AAA

1,533

94

119

-

1,746

-

1,746

AA+ to AA-

120

17

29

-

166

-

166

A+ to A-

689

95

239

-

1,023

-

1,023

BBB+ to BBB-

271

57

56

-

384

-

384

Below BBB- and unrated

502

11

63

2

578

-

578

Subtotal

3,115

274

506

2

3,897

-

3,897

Corporate bonds

 

 

 

 

 

 

 

AAA

1,214

147

243

-

1,604

-

1,604

AA+ to AA-

2,716

440

934

-

4,090

-

4,090

A+ to A-

10,918

460

2,179

-

13,557

1

13,558

BBB+ to BBB-

9,466

714

2,055

-

12,235

1

12,236

Below BBB- and unrated

2,280

500

356

-

3,136

-

3,136

Subtotal

26,594

2,261

5,767

-

34,622

2

34,624

Asset-backed securities

 

 

 

 

 

 

 

AAA

174

2

54

-

230

-

230

AA+ to AA-

6

-

2

-

8

-

8

A+ to A-

30

-

7

-

37

-

37

BBB+ to BBB-

7

-

2

-

9

-

9

Below BBB- and unrated

-

1

-

-

1

-

1

Subtotal

217

3

65

-

285

-

285

Total debt securities notes (ii)(v)

64,397

4,543

14,092

30

83,062

2

83,064

Loans

 

 

 

 

 

 

 

Mortgage loans

65

-

83

-

148

-

148

Other loans

430

-

-

-

430

-

430

Total loans

495

-

83

-

578

-

578

Equity securities and holdings in collective investment schemes

 

 

 

 

 

 

 

Direct equities

18,711

12,075

182

128

31,096

-

31,096

Collective investment schemes

24,529

7,546

1,580

2

33,657

-

33,657

Total equity securities and holdings in collective investment schemes

43,240

19,621

1,762

130

64,753

-

64,753

Other financial investments note (iii)

2,893

396

1,707

101

5,097

2,628

7,725

Total financial investments note (iv)

111,025

24,560

17,644

261

153,490

2,630

156,120

Investment properties

-

-

39

-

39

-

39

Cash and cash equivalents

1,054

647

1,287

173

3,161

1,590

4,751

Total investments

112,079

25,207

18,970

434

156,690

4,220

160,910

Notes

(i)       Funds with policyholder participation represent investments held to support insurance products where policyholders participate in the returns of a specified pool of investments (excluding unit-linked policies) that are measured using the variable fee approach.

(ii)      Of the Group's debt securities, the following amounts were held by the consolidated investment funds:

 

 

2024 $m

 

2023 $m

 

30 Jun

 

30 Jun

31 Dec

Debt securities held by consolidated investment funds

11,134

 

10,769

11,116

(iii)    Other financial investments comprise derivative assets and deposits.

(iv)     Of the total financial investments of $153,756 million as at 30 June 2024 (30 June 2023: $147,026 million; 31 December 2023: $156,120 million), $83,881 million (30 June 2023: $72,467 million; 31 December 2023: $80,022 million) are expected to be recovered within one year, including equity securities and holdings in collective investment schemes.

(v)      The credit ratings, information or data contained in this report which are attributed and specifically provided by Standard & Poor's, Moody's and Fitch Solutions and their respective affiliates and suppliers ('Content Providers') is referred to here as the 'Content'. Reproduction of any Content in any form is prohibited except with the prior written permission of the relevant party. The Content Providers do not guarantee the accuracy, adequacy, completeness, timeliness or availability of any Content and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such Content. The Content Providers expressly disclaim liability for any damages, costs, expenses, legal fees, or losses (including lost income or lost profit and opportunity costs) in connection with any use of the Content. A reference to a particular investment or security, a rating or any observation concerning an investment that is part of the Content is not a recommendation to buy, sell or hold any such investment or security, nor does it address the suitability of an investment or security and should not be relied on as investment advice.

C1.2 Other assets and liabilities

Property, plant and equipment (PPE)

At 30 June 2024, there are PPE of $390 million (30 June 2023: $396 million; 31 December 2023: $374 million). During half year 2024, the Group made additions of $113 million of PPE (half year 2023: $37 million; full year 2023: $101 million), of which $86 million relates to right-of-use assets (half year 2023: $19 million; full year 2023: $57 million).

Accrued investment income and other debtors

At 30 June 2024, there are accrued investment income and other debtors of $3,400 million (30 June 2023: $2,052 million; 31 December 2023: $2,164 million), of which $3,311 million (30 June 2023: $1,918 million; 31 December 2023: $2,048 million) are expected to be settled within one year.

Accruals, deferred income and other creditors

At 30 June 2024, there are accruals, deferred income and other liabilities of $3,395 million (30 June 2023: $2,277 million; 31 December 2023: $4,035 million), of which $3,208 million (30 June 2023: $2,087 million; 31 December 2023: $3,845 million) are due within one year.

Assets and liabilities held for sale

At 30 June 2024 the Group is pursuing the disposal of a number of subsidiaries which, as the required conditions were met at the reporting date, are classified as held for sale. These subsidiaries were remeasured to their estimated fair value less expected costs to sell, with a resulting remeasurement loss of $(69) million recognised in the income statement within 'Loss attaching to corporate transactions'. After reflecting the impact of non-controlling interests and other related changes in equity, the overall impact on shareholders' equity is a reduction of $(25) million.

C2 Measurement of financial assets and liabilities

C2.1 Determination of fair value

The fair values of the financial instruments for which fair valuation is required under IFRS Standards are determined by the use of quoted market prices for exchange-quoted investments, or by using quotations from independent third parties, such as brokers and pricing services or by using appropriate valuation techniques. Climate change does not directly impact fair values particularly where these are built on observable inputs (ie level 1 and level 2), which represent the majority of the Group's financial instruments.

The estimated fair value of derivative financial instruments reflects the estimated amount the Group would receive or pay in an arm's-length transaction. This amount is determined using quoted prices if exchange listed, quotations from independent third parties or valued internally using standard market practices.

The fair value of the subordinated and senior debt issued by the Group is determined using quoted prices from independent third parties.

Valuation approach for level 2 fair-valued assets and liabilities

A significant proportion of the Group's level 2 assets are corporate bonds, structured securities and other non-national government debt securities. These assets, in line with market practice, are generally valued using a designated independent pricing service or quote from third-party brokers. These valuations are subject to a number of monitoring controls, such as comparison to multiple pricing sources where available, monthly price variances, stale price reviews and variance analysis on prices achieved on subsequent trades. For further detail on the valuation approach for level 2 fair-valued assets and liabilities, refer to note C2.1 of the Group IFRS consolidated financial statements for the year ended 31 December 2023.

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. Level 3 assets of the Group consist primarily of property, infrastructure and private equity funds held by the participating funds and are externally valued using the net asset value of the invested entities.

The Group's valuation policies, procedures and analyses for instruments categorised as level 3 are overseen by Business Unit committees as part of the Group's wider financial reporting governance processes. The procedures undertaken include approval of valuation methodologies, verification processes, and resolution of significant or complex valuation issues. In addition, the Group has minimum standards for independent price verification to ensure valuation accuracy is regularly independently verified. Adherence to this policy is monitored across the business units.

C2.2 Fair value measurement hierarchy

(a)  Assets and liabilities carried at fair value

All of the Group's financial instruments held at fair value are classified as fair value through profit or loss at 30 June 2024 and measured on a recurring basis. In addition, at 30 June 2024, the Group has assets and liabilities held for sale as described in note C1.2 that have been measured at fair value on a non-recurring basis based on the expected sales proceeds for these businesses.

The table below shows the assets and liabilities carried at fair value on a recurring basis 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.

Financial instruments at fair value

 

30 Jun 2024 $m

 

Level 1

Level 2

Level 3

Total

 

Quoted prices
(unadjusted)
 in active markets

Valuation based
on significant
observable
market inputs

Valuation based
on significant
unobservable
market inputs

 

 

 

note (v)

 

Loans note (i)

-

398

-

398

Equity securities and holdings in collective investment schemes

64,823

5,334

2,953

73,110

Debt securities note (ii)

57,477

17,023

43

74,543

Derivative assets

89

187

-

276

Derivative liabilities

(46)

(380)

-

(426)

Total financial investments, net of derivative liabilities

122,343

22,562

2,996

147,901

Investment contract liabilities without discretionary participation features note (iii)

-

(819)

-

(819)

Net asset value attributable to unit holders of consolidated investment funds note (iv)

(2,921)

-

-

(2,921)

Total financial instruments at fair value

119,422

21,743

2,996

144,161

Percentage of total (%)

83%

15%

2%

100%

 

 

30 Jun 2023 $m

 

Level 1

Level 2

Level 3

Total

 

Quoted prices
(unadjusted)
 in active markets

Valuation based
on significant
observable
market inputs

Valuation based
on significant
unobservable
market inputs

 

 

 

note (v)

 

Loans note (i)

-

427

3

430

Equity securities and holdings in collective investment schemes

52,124

7,159

1,225

60,508

Debt securities note (ii)

60,343

20,049

38

80,430

Derivative assets

329

129

-

458

Derivative liabilities

(182)

(285)

-

(467)

Total financial investments, net of derivative liabilities

112,614

27,479

1,266

141,359

Investment contract liabilities without discretionary participation features note (iii)

-

(716)

-

(716)

Net asset value attributable to unit holders of consolidated investment funds note (iv)

(2,683)

-

-

(2,683)

Total financial instruments at fair value

109,931

26,763

1,266

137,960

Percentage of total (%)

80%

19%

1%

100%

 

 

31 Dec 2023 $m

 

Level 1

Level 2

Level 3

Total

 

Quoted prices
(unadjusted)
 in active markets

Valuation based
on significant
observable
market inputs

Valuation based
on significant
unobservable
market inputs

 

 

 

note (v)

 

Loans note (i)

-

430

-

430

Equity securities and holdings in collective investment schemes

56,327

5,562

2,864

64,753

Debt securities note (ii)

64,004

19,020

40

83,064

Derivative assets

1,460

395

-

1,855

Derivative liabilities

(58)

(180)

-

(238)

Total financial investments, net of derivative liabilities

121,733

25,227

2,904

149,864

Investment contract liabilities without discretionary participation features note (iii)

-

(769)

-

(769)

Net asset value attributable to unit holders of consolidated investment funds note (iv)

(2,711)

-

-

(2,711)

Total financial instruments at fair value

119,022

24,458

2,904

146,384

Percentage of total (%)

81%

17%

2%

100%

Notes

(i)     Of the Group's financial assets and financial liabilities at 30 June 2024, only loans contain more than one asset classification. The loans carried at amortised cost and their fair value are provided in note (c) below.

(ii)      Of the total level 2 debt securities of $17,023 million at 30 June 2024, (30 June 2023: $20,049 million; 31 December 2023: $19,020 million), $5 million (30 June and 31 December 2023: $10 million) are valued internally.

(iii)    For Investment contract liabilities without discretionary participation features, it is assumed that these investment contracts are not quoted in an active market and do not have readily available published prices and that their fair values are determined using valuation techniques. It is assumed that all significant inputs used in the valuation are observable and these investment contract liabilities are classified in level 2.

(iv)     Net asset value attributable to unit holders of consolidated investment funds' represents the interests of investors other than the Group in the investment funds that the Group is deemed to control and therefore treated as a subsidiary and consolidated in the Group financial statements. The Group has designated Net asset value attributable to unit holders of consolidated investment funds as financial liabilities measured at FVTPL to eliminate any accounting mismatch with the underlying investments of those consolidated investment funds, which are measured at FVTPL.

(v)      At 30 June 2024, the Group held $2,996 million (30 June 2023: $1,266 million; 31 December 2023: $2,904 million) of net financial instruments at fair value within level 3. This represents 2 per cent (30 June 2023: less than 1 per cent; 31 December 2023: 2 per cent) of the total fair valued financial assets, net of financial liabilities and comprises the following:

-    Equity securities and holdings in collective investment schemes of $2,952 million (30 June 2023: $1,224 million; 31 December 2023: $2,863 million) consisting primarily of property, infrastructure and private equity funds held by the participating funds, which are externally valued using the net asset value of the invested entities. Equity securities of $1 million (30 June and 31 December 2023: $1 million) are internally valued, representing less than 0.1 per cent of the total fair valued financial assets, net of financial liabilities. Internal valuations are inherently more subjective than external valuations; and

-    Other sundry individual financial instruments of a net asset of $43 million (30 June 2023: $41 million; 31 December 2023: $40 million).

Of the net financial instruments of$2,996 million at 30 June 2024 (30 June 2023: $1,266 million; 31 December 2023: $2,904 million) referred to above:

-    A net asset of $2,957 million (30 June 2023: $1,233 million; 31 December 2023: $2,866 million) is held by the Group's with-profits and unit-linked funds and therefore shareholders' profit and equity are not immediately impacted by movements in the valuation of these financial instruments; and

-    The remaining level 3 investments comprise a net asset of $39 million (30 June 2023: $33 million; 31 December 2023: $38 million) and are primarily corporate bonds valued using external prices adjusted to reflect the specific known conditions relating to these bonds (eg distressed securities). If the value of all these level 3 financial instruments decreased by 10 per cent, the change in valuation would be $4 million (30 June 2023: $(3) million; 31 December 2023: $(4) million), which would reduce shareholders' equity by this amount before tax.

(b)  Transfers into and transfers out of levels

The Group's policy is to recognise transfers into and out of levels as of the end of each reporting period except for material transfers which are recognised as of the date of the event or change in circumstances that caused the transfer. Transfers are deemed to have occurred when there is a material change in the observed valuation inputs or a change in the level of trading activities of the securities.

During half year 2024, the transfers between levels within the portfolios were primarily transfers from level 1 to level 2 of $3,469 million and transfers from level 2 to level 1 of $2,622 million. These transfers primarily reflect the change in the observed valuation inputs of equity securities and debt securities and, in certain cases, the change in the level of trading activities of the securities. There were no transfers from level 3 to level 2 and no transfer into level 3 in the period.

Reconciliation of movements in level 3 assets and liabilities measured at fair value

The following table reconciles the value of level 3 fair-valued assets and liabilities at the beginning of the period to that presented at the end of the period.

Total investment return recorded in the income statement represents interest and dividend income, realised gains and losses, unrealised gains and losses on the assets classified at fair value through profit and loss and foreign exchange movements on an individual entity's overseas investments. Total gains and losses recorded in other comprehensive income comprises the translation of investments into the Group's presentational currency of US dollars.

 

Half year 2024 $m

 

Loans

Equity
securities and
holdings in
collective
investment
schemes

Debt
securities

Group total

Balance at beginning of period

-

2,864

40

2,904

Total gains in income statement note

-

57

3

60

Total loss recorded in other comprehensive income

-

(30)

(2)

(32)

Purchases and other additions

-

126

2

128

Sales

-

(64)

-

(64)

Balance at end of period

-

2,953

43

2,996

 

 

Half year 2023 $m

 

Loans

Equity
securities and
holdings in
collective
investment
schemes

Debt
securities

Group total

Balance at beginning of period

3

824

38

865

Total gains in income statement note

-

14

3

17

Total loss recorded in other comprehensive income

-

(28)

(3)

(31)

Purchases and other additions

-

417

-

417

Sales

-

(2)

-

(2)

Balance at end of period

3

1,225

38

1,266

 

 

Full year 2023 $m

 

Loans

Equity
securities and
holdings in
collective
investment
schemes

Debt
securities

Group total

Balance at beginning of year

3

824

38

865

Total gains in income statement note

-

25

2

27

Total gains recorded in other comprehensive income

-

6

-

6

Purchases and other additions

-

524

-

524

Sales

(3)

(4)

-

(7)

Transfers into level 3

-

1,489

-

1,489

Balance at end of year

-

2,864

40

2,904

Note

Of the total net gain in the income statement of $60 million at half year 2024 (half year 2023: $17 million; full year 2023: $27 million), $34 million (half year 2023: $19 million; full year 2023: $29 million) relates to net unrealised gains and losses of financial instruments still held at the end of the period, which can be analysed as follows:

 

2024 $m

 

2023 $m

 

Half year

 

Half year

Full year

Equity securities and holdings in collective investment schemes

31

 

16

27

Debt securities

3

 

3

2

Net unrealised gains and losses of financial instruments still held at the end of the period

34

 

19

29

(c)  Assets and liabilities carried at amortised cost and their fair value

The table below shows the financial assets and liabilities carried at amortised cost on the statement of financial position and their fair value. Deposits, cash and cash equivalents, accrued investment income, other debtors, accruals, deferred income and other creditors are excluded from the analysis below, as these are carried at amortised cost which approximates fair value.

 

30 Jun 2024 $m

 

30 Jun 2023 $m

 

31 Dec 2023 $m

Carrying

value

Fair

value

 

Carrying

value

Fair

value

 

Carrying

value

Fair

value

Assets

 

 

 

 

 

 

 

 

Loans

145

163

 

144

173

 

148

179

Liabilities

 

 

 

 

 

 

 

 

Core structural borrowings of shareholder-financed businesses

(3,930)

(3,648)

 

(3,949)

(3,560)

 

(3,933)

(3,659)

Operational borrowings (excluding lease liabilities)

(683)

(683)

 

(554)

(554)

 

(707)

(707)

Obligations under funding, securities lending and sale and repurchase agreements

(576)

(576)

 

(617)

(617)

 

(716)

(716)

Net financial liabilities at amortised cost

(5,044)

(4,744)

 

(4,976)

(4,558)

 

(5,208)

(4,903)

The fair value of the assets and liabilities in the table above, with the exception of the subordinated and senior debt issued by the Group, has been estimated from the discounted cash flows expected to be received or paid. The fair value of the subordinated and senior debt issued by the Group is determined using quoted prices from independent third parties.

C3 Insurance and reinsurance contracts

The amounts recorded in the balance sheet as insurance and reinsurance contract asset and liabilities are set out in the table below (on the left-hand side), broken out into their component parts. Additionally presented on the right-hand side are the same amounts but including the Group's share of the relevant amounts of its joint venture and associates, which are equity accounted for on the statement of financial position and hence all assets and liabilities of those businesses are included in a separate line.

Management believes that the movement in the CSM is a key driver for understanding changes in profitability from period to period and as the Group's share of the results of the joint ventures and associates are included in the Group's adjusted operating and total profit, it is relevant to understand the movement in insurance assets and liabilities including those entities too.

C3.1 Group overview

(a)  Analysis of Group insurance and reinsurance contract assets and liabilities

The table below provides an analysis of portfolio of insurance and reinsurance (RI) contract assets and liabilities held on the Group's statement of financial position. The Group's investments in JVs and associates are accounted for on an equity method and the Group's share of insurance and reinsurance contract liabilities and assets as shown above relate to the life business of CPL, India and Takaful business in Malaysia.

 

Excluding JVs and associates

 

Including JVs and associates

 

Assets

Liabilities

Net liabilities (assets)

 

Assets

Liabilities

Net liabilities (assets)

 

Insurance

RI

Insurance

RI

Insurance

RI

 

Insurance

RI

Insurance

RI

Insurance

RI

 

$m

$m

$m

$m

$m

$m

 

$m

$m

$m

$m

$m

$m

As at 30 Jun 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

Best estimate liabilities (BEL)

3,962

1,861

121,980

1,253

118,018

(608)

 

4,010

2,006

143,012

1,292

139,002

(714)

Risk adjustment for non-financial risk (RA)

(604)

(68)

1,661

(23)

2,265

45

 

(602)

(50)

1,956

(26)

2,558

24

Contractual service margin (CSM)

(2,258)

1,407

17,457

149

19,715

(1,258)

 

(2,261)

1,396

19,536

139

21,797

(1,257)

Insurance contract balances note C3.2

1,100

3,200

141,098

1,379

139,998

(1,821)

 

1,147

3,352

164,504

1,405

163,357

(1,947)

Assets for insurance acquisition cash flows

31

-

1

-

(30)

-

 

31

-

1

-

(30)

-

Insurance and reinsurance contract (assets) liabilities

1,131

3,200

141,099

1,379

139,968

(1,821)

 

1,178

3,352

164,505

1,405

163,327

(1,947)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 30 Jun 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Best estimate liabilities (BEL)

3,676

794

114,648

952

110,972

158

 

3,710

927

132,680

992

128,970

65

Risk adjustment for non-financial risk (RA)

(533)

(76)

1,490

(40)

2,023

36

 

(531)

(59)

1,732

(43)

2,263

16

Contractual service margin (CSM)

(2,007)

1,305

17,958

38

19,965

(1,267)

 

(2,004)

1,294

20,081

29

22,085

(1,265)

Insurance contract balances note C3.2

1,136

2,023

134,096

950

132,960

(1,073)

 

1,175

2,162

154,493

978

153,318

(1,184)

Assets for insurance acquisition cash flows

31

-

-

-

(31)

-

 

31

-

-

-

(31)

-

Insurance and reinsurance contract (assets) liabilities

1,167

2,023

134,096

950

132,929

(1,073)

 

1,206

2,162

154,493

978

153,287

(1,184)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 Dec 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Best estimate liabilities (BEL)

3,952

1,175

120,115

1,182

116,163

7

 

3,998

1,315

139,673

1,222

135,675

(93)

Risk adjustment for non-financial risk (RA)

(631)

(84)

1,713

(21)

2,344

63

 

(630)

(67)

1,969

(24)

2,599

43

Contractual service margin (CSM)

(2,173)

1,335

18,011

(10)

20,184

(1,345)

 

(2,176)

1,321

20,176

(19)

22,352

(1,340)

Insurance contract balances note C3.2

1,148

2,426

139,839

1,151

138,691

(1,275)

 

1,192

2,569

161,818

1,179

160,626

(1,390)

Assets for insurance acquisition cash flows

32

-

1

-

(31)

-

 

32

-

1

-

(31)

-

Insurance and reinsurance contract (assets) liabilities

1,180

2,426

139,840

1,151

138,660

(1,275)

 

1,224

2,569

161,819

1,179

160,595

(1,390)

(b)  Adjusted shareholders' equity

 

Excluding

JVs and associates

Group's share related to

JVs and associates

Including

JVs and associates

As at 30 Jun 2024

 

 

 

Shareholders' equity

14,390

1,781

16,171

CSM, net of reinsurance

18,457

2,083

20,540

Remove: CSM asset attaching to reinsurance contracts wholly attributable to policyholders

1,456

-

1,456

Remove: CSM, net of reinsurance, attributable to non-controlling interests (see note D2)

(934)

-

(934)

Shareholders' CSM, net of reinsurance

18,979

2,083

21,062

Less: Related tax adjustments

(2,068)

(483)

(2,551)

Adjusted shareholders' equity

31,301

3,381

34,682

 

 

 

 

As at 30 Jun 2023

 

 

 

Shareholders' equity

15,081

2,078

17,159

CSM, net of reinsurance

18,698

2,122

20,820

Remove: CSM asset attaching to reinsurance contracts wholly attributable to policyholders

1,305

-

1,305

Shareholders' CSM, net of reinsurance

20,003

2,122

22,125

Less: Related tax adjustments

(2,341)

(498)

(2,839)

Adjusted shareholders' equity

32,743

3,702

36,445

 

 

 

 

As at 31 Dec 2023

 

 

 

Shareholders' equity

15,883

1,940

17,823

CSM, net of reinsurance

18,839

2,173

21,012

Remove: CSM asset attaching to reinsurance contracts wholly attributable to policyholders

1,367

-

1,367

Shareholders' CSM, net of reinsurance

20,206

2,173

22,379

Less: Related tax adjustments

(2,347)

(509)

(2,856)

Adjusted shareholders' equity

33,742

3,604

37,346

(c)  Discount rate and risk-free rate

The Group elects to determine discount rates on a bottom-up basis, starting with a liquid risk-free yield curve and adding an illiquidity premium to reflect the characteristics of the insurance contracts. Risk-free rates are based on government bond yields for all currencies except HKD where risk-free rates are based on swap rates due to the higher liquidity of the HKD swap market. The illiquidity premium is calculated as the yield-to-maturity on a reference portfolio of assets with similar liquidity characteristics to the insurance contracts, (in particular, corporate bonds) less the risk-free curve, and an allowance for credit risk. For further detail on the determination of discount rates, refer to note A3.1 of the Group IFRS consolidated financial statements for the year ended 31 December 2023.

The following tables set out the range of yield curves used to discount cash flows of insurance contracts for major currencies. The range reflects the proportion of illiquidity premium applied by business unit and portfolio.

 

30 Jun 2024 %

 

1 year

5 years

10 years

15 years

20 years

Chinese yuan (CNY)

1.53 - 1.72

1.99 - 2.18

2.26 - 2.45

2.38 - 2.57

2.44 - 2.63

Hong Kong dollar (HKD)

5.00 - 5.44

4.15 - 4.59

4.05 - 4.49

4.12 - 4.56

4.16 - 4.60

Indonesian rupiah (IDR)

6.74 - 7.31

7.09 - 7.66

7.24 - 7.81

7.26 - 7.83

7.27 - 7.84

Malaysian ringgit (MYR)

3.32 - 3.57

3.66 - 3.91

3.94 - 4.19

4.07 - 4.32

4.21 - 4.46

Singapore dollar (SGD)

3.55 - 4.22

3.20 - 3.87

3.22 - 3.89

3.21 - 3.88

3.11 - 3.78

United States dollar (USD)

5.14 - 5.87

4.35 - 5.08

4.38 - 5.11

4.50 - 5.23

4.75 - 5.48

 

 

30 Jun 2023 %

 

1 year

5 years

10 years

15 years

20 years

Chinese yuan (CNY)

1.86 - 2.36

2.44 - 2.87

2.67 - 3.10

2.91 - 3.35

3.05 - 3.48

Hong Kong dollar (HKD)

4.82 - 5.98

4.02 - 5.18

3.77 - 4.93

3.79 - 4.95

3.81 - 4.97

Indonesian rupiah (IDR)

5.81 - 6.36

6.15 - 6.70

6.57 - 7.12

6.80 - 7.35

6.95 - 7.50

Malaysian ringgit (MYR)

3.36 - 4.03

3.63 - 4.30

3.95 - 4.62

4.10 - 4.77

4.24 - 4.91

Singapore dollar (SGD)

3.66 - 4.62

3.11 - 4.07

3.00 - 3.96

2.79 - 3.75

2.43 - 3.39

United States dollar (USD)

5.42 - 6.43

4.13 - 5.14

3.81 - 4.82

3.83 - 4.84

4.17 - 5.18

 

 

31 Dec 2023 %

 

1 year

5 years

10 years

15 years

20 years

Chinese yuan (CNY)

2.07 - 2.33

2.41 - 2.67

2.59 - 2.85

2.70 - 2.96

2.76 - 3.02

Hong Kong dollar (HKD)

4.76 - 5.23

3.75 - 4.22

3.76 - 4.23

3.89 - 4.36

3.95 - 4.42

Indonesian rupiah (IDR)

6.47 - 6.96

6.63 - 7.12

6.73 - 7.22

6.94 - 7.43

7.03 - 7.52

Malaysian ringgit (MYR)

3.31 - 3.56

3.67 - 3.92

3.78 - 4.03

4.09 - 4.34

4.33 - 4.58

Singapore dollar (SGD)

3.62 - 4.37

2.67 - 3.42

2.71 - 3.46

2.77 - 3.52

2.74 - 3.49

United States dollar (USD)

4.81 - 5.64

3.86 - 4.69

3.90 - 4.73

4.01 - 4.84

4.36 - 5.19

 

C3.2 Analysis of movements in insurance and reinsurance contract balances by measurement component (including JVs and associates)

An analysis of movements in insurance and reinsurance contract balances by measurement component, excluding assets for insurance acquisition cash flows, and including the Group's share of insurance and reinsurance contract (assets) liabilities related to the life JVs and associate is set out below:

 

Half year 2024 $m

 

Insurance

 

Reinsurance

 

BEL

RA

CSM

Total

 

BEL

RA

CSM

Total

Opening assets

(3,998)

630

2,176

(1,192)

 

(1,315)

67

(1,321)

(2,569)

Opening liabilities

139,673

1,969

20,176

161,818

 

1,222

(24)

(19)

1,179

Net (assets) liabilities at 1 Jan

135,675

2,599

22,352

160,626

 

(93)

43

(1,340)

(1,390)

Changes that relate to future service

 

 

 

 

 

 

 

 

 

Changes in estimates that adjust the CSM note (iv)

157

21

(178)

-

 

93

(3)

(90)

-

Changes in estimates that result in losses or reversal of losses on onerous contracts

45

1

-

46

 

64

-

-

64

New contracts in the period

(1,306)

158

1,175

27

 

(35)

(3)

38

-

 

(1,104)

180

997

73

 

122

(6)

(52)

64

Changes that relate to current service

 

 

 

 

 

 

 

 

 

Release of CSM to profit or loss

-

-

(1,253)

(1,253)

 

-

-

156

156

Release of risk adjustment to profit or loss

-

(138)

-

(138)

 

-

11

-

11

Experience adjustments

(32)

-

-

(32)

 

55

-

-

55

 

(32)

(138)

(1,253)

(1,423)

 

55

11

156

222

Changes that relate to past service

 

 

 

 

 

 

 

 

 

Adjustments to assets and liabilities for incurred claims

(47)

(1)

-

(48)

 

(31)

-

-

(31)

Insurance service result

(1,183)

41

(256)

(1,398)

 

146

5

104

255

 

 

 

 

 

 

 

 

 

 

Net finance (income) expense

 

 

 

 

 

 

 

 

 

Accretion of interest on GMM contracts note (i)

110

24

160

294

 

(20)

2

(26)

(44)

Other net finance (income) expense

3,580

(23)

34

3,591

 

246

(27)

5

224

 

3,690

1

194

3,885

 

226

(25)

(21)

180

Total amount recognised in income statement

2,507

42

(62)

2,487

 

372

(20)

83

435

Effect of movements in exchange rates

(2,355)

(64)

(493)

(2,912)

 

(1)

1

-

-

Total amount recognised in comprehensive income

152

(22)

(555)

(425)

 

371

(19)

83

435

 

 

 

 

 

 

 

 

 

 

Cash flows

 

 

 

 

 

 

 

 

 

Premiums received net of ceding commissions paid

13,446

-

-

13,446

 

(1,178)

-

-

(1,178)

Insurance acquisition cash flows

(2,725)

-

-

(2,725)

 

-

-

-

-

Claims and other insurance service expenses net of recoveries from reinsurance received note (ii)

(7,286)

-

-

(7,286)

 

189

-

-

189

Total cash flows

3,435

-

-

3,435

 

(989)

-

-

(989)

 

 

 

 

 

 

 

 

 

 

Other changes note (iii)

(260)

(19)

-

(279)

 

(3)

-

-

(3)

 

 

 

 

 

 

 

 

 

 

Closing assets

(4,010)

602

2,261

(1,147)

 

(2,006)

50

(1,396)

(3,352)

Closing liabilities

143,012

1,956

19,536

164,504

 

1,292

(26)

139

1,405

Net (assets) liabilities at 30 Jun

139,002

2,558

21,797

163,357

 

(714)

24

(1,257)

(1,947)

 

 

Half year 2023 $m

 

Insurance

 

Reinsurance

 

BEL

RA

CSM

Total

 

BEL

RA

CSM

Total

Opening assets

(3,562)

502

1,921

(1,139)

 

(652)

21

(1,369)

(2,000)

Opening liabilities

124,297

1,662

19,383

145,342

 

1,193

(47)

54

1,200

Net (assets) liabilities at 1 Jan

120,735

2,164

21,304

144,203

 

541

(26)

(1,315)

(800)

Changes that relate to future service

 

 

 

 

 

 

 

 

 

Changes in estimates that adjust the CSM

(990)

80

910

-

 

(36)

23

13

-

Changes in estimates that result in losses or reversal of losses on onerous contracts

128

(12)

-

116

 

7

-

-

7

New contracts in the year

(1,296)

154

1,184

42

 

(9)

(3)

12

-

 

(2,158)

222

2,094

158

 

(38)

20

25

7

Changes that relate to current service

 

 

 

 

 

 

 

 

 

Release of CSM to profit or loss

-

-

(1,223)

(1,223)

 

-

-

46

46

Release of risk adjustment to profit or loss

-

(119)

-

(119)

 

-

12

-

12

Experience adjustments

(258)

-

-

(258)

 

(2)

-

-

(2)

 

(258)

(119)

(1,223)

(1,600)

 

(2)

12

46

56

Changes that relate to past service

 

 

 

 

 

 

 

 

 

Adjustments to assets and liabilities for incurred claims

261

-

-

261

 

29

-

-

29

Insurance service result

(2,155)

103

871

(1,181)

 

(11)

32

71

92

 

 

 

 

 

 

 

 

 

 

Net finance (income) expense

 

 

 

 

 

 

 

 

 

Accretion of interest on GMM contracts note (i)

67

20

153

240

 

12

(1)

(23)

(12)

Other net finance (income) expense

7,350

2

1

7,353

 

(113)

9

(5)

(109)

 

7,417

22

154

7,593

 

(101)

8

(28)

(121)

Total amount recognised in income statement

5,262

125

1,025

6,412

 

(112)

40

43

(29)

Effect of movements in exchange rates

(1,420)

(26)

(244)

(1,690)

 

-

2

7

9

Total amount recognised in comprehensive income

3,842

99

781

4,722

 

(112)

42

50

(20)

 

 

 

 

 

 

 

 

 

 

Cash flows

 

 

 

 

 

 

 

 

 

Premiums received net of ceding commissions paid

13,353

-

-

13,353

 

(686)

-

-

(686)

Insurance acquisition cash flows

(2,532)

-

-

(2,532)

 

-

-

-

-

Claims and other insurance service expenses net of recoveries from reinsurance received note (ii)

(6,388)

-

-

(6,388)

 

327

-

-

327

Total cash flows

4,433

-

-

4,433

 

(359)

-

-

(359)

 

 

 

 

 

 

 

 

 

 

Other changes note (iii)

(40)

-

-

(40)

 

(5)

-

-

(5)

 

 

 

 

 

 

 

 

 

 

Closing assets

(3,710)

531

2,004

(1,175)

 

(927)

59

(1,294)

(2,162)

Closing liabilities

132,680

1,732

20,081

154,493

 

992

(43)

29

978

Net (assets) liabilities at 30 Jun

128,970

2,263

22,085

153,318

 

65

16

(1,265)

(1,184)

 

 

Full year 2023 $m

 

Insurance

 

Reinsurance

 

BEL

RA

CSM

Total

 

BEL

RA

CSM

Total

Opening assets

(3,562)

502

1,921

(1,139)

 

(652)

21

(1,369)

(2,000)

Opening liabilities

124,297

1,662

19,383

145,342

 

1,193

(47)

54

1,200

Net (assets) liabilities at 1 Jan

120,735

2,164

21,304

144,203

 

541

(26)

(1,315)

(800)

Changes that relate to future service

 

 

 

 

 

 

 

 

 

Changes in estimates that adjust the CSM

(1,142)

341

801

-

 

62

43

(105)

-

Changes in estimates that result in losses or reversal of losses on onerous contracts

224

(8)

-

216

 

(93)

-

-

(93)

New contracts in the year

(2,687)

317

2,429

59

 

86

(6)

(81)

(1)

 

(3,605)

650

3,230

275

 

55

37

(186)

(94)

Changes that relate to current service

 

 

 

 

 

 

 

 

 

Release of CSM to profit or loss

-

-

(2,414)

(2,414)

 

-

-

206

206

Release of risk adjustment to profit or loss

-

(242)

-

(242)

 

-

27

-

27

Experience adjustments

(170)

-

-

(170)

 

50

-

-

50

 

(170)

(242)

(2,414)

(2,826)

 

50

27

206

283

Changes that relate to past service

 

 

 

 

 

 

 

 

 

Adjustments to assets and liabilities for incurred claims

130

(3)

-

127

 

-

-

-

-

Insurance service result

(3,645)

405

816

(2,424)

 

105

64

20

189

 

 

 

 

 

 

 

 

 

 

Net finance (income) expense

 

 

 

 

 

 

 

 

 

Accretion of interest on GMM contracts note (i)

158

52

307

517

 

(3)

(3)

(47)

(53)

Other net finance (income) expense

10,379

(20)

(12)

10,347

 

(155)

9

-

(146)

 

10,537

32

295

10,864

 

(158)

6

(47)

(199)

Total amount recognised in income statement

6,892

437

1,111

8,440

 

(53)

70

(27)