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"ifrs-full:CashFlowsFromLosingControlOfSubsidiariesOrOtherBusinessesClassifiedAsInvestingActivities", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f-589": { "value": "
1.1 Basis of preparation
The consolidated financial statements for the year ended 31\u00a0December 2023 comprise the financial statements of M&G plc ('the
Company') and its subsidiaries (together referred to as 'the Group'). The consolidated financial statements have been prepared in
accordance with UK-adopted international accounting standards (IAS) and the legal requirements of the Companies Act 2006. The
consolidated financial statements have been prepared under the historical cost basis except for investment property measured at
fair value, certain financial assets and financial liabilities (including derivative instruments) that are measured at fair value through
profit and loss (FVTPL), insurance contract liabilities that are measured in accordance with the requirements of IFRS 17: Insurance
contracts, and defined benefit assets and liabilities, measured at the fair value of plan assets less the present value of the defined
benefit obligations. Assets and disposal groups held for sale are stated at the lower of the previous carrying amount and fair value
less costs to sell.
The consolidated financial statements are stated in million pounds sterling, the Group\u2019s presentation currency.
The consolidated financial statements from the full year 2022 have been restated to reflect the retrospective application of IFRS 17,
\u2018Insurance Contracts\u2019 and IFRS 9, \u2018Financial Instruments\u2019 from 1\u00a0January 2023, as outlined below in Note 1.2.1.
", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-590": { "value": "
Going concern
The Directors have reasonable expectation that the Group as a whole has adequate resources to continue in operational existence
for the foreseeable future and for a period of at least 12 months from the date of approval of the consolidated financial statements.
To satisfy themselves of the appropriateness of the use of the going concern assumptions in relation to the consolidated financial
statements, the Directors have considered the liquidity projections of the Group, including the impact of applying specific liquidity
stresses. The Directors also considered the ability of the Group to access external funding sources and the management actions
that could be used to manage liquidity.
In addition, the Directors also gave particular attention to the solvency projections of the Group under a base scenario and its
sensitivity to various individual economic stresses and tested the resilience of the balance sheet to adverse scenarios using
reverse stress testing.
The impact of the following individual stresses on solvency were considered as part of the assessment:
\u2013 20% fall in equity prices,
\u2013 20% fall in property prices,
\u2013 (50bps) parallel shift in nominal yields,
\u2013 20% of the credit portfolio downgrading by one full letter,
\u2013 +100bps spread widening (A-rated assets).
The scenarios considered as part of the assessment included a range of different scenarios (base, optimistic and pessimistic)
taking into account the plausible pathways that the global economy would take, its impact on consumer demand and actions that
central banks could take. We also assessed the resilience of our financial position in a high inflationary and low growth
environment (stagflation scenario) and the economic implications resulting from it. In addition, we assessed the strength of our
solvency position to withstand any potential legislative change that may result in the value of the residential ground rent portfolio
falling to close to nil as a result of the Government implementing the 'peppercorn cap' described in the Department for Levelling up,
Housing and Communities' recent consultation on residential ground rents (UK Government consultation). This is explained further
in note 31.8.1. Where relevant, consideration was given to any impending legislative change, which may affect the financial position
of the Group adversely as part of the assessment.
The results of the assessment demonstrated the ability of the Group to meet all obligations, including payments to shareholders
and debt holders, and future business requirements for the foreseeable future. In addition, the assessment demonstrated that the
Group was able to remain above its regulatory solvency requirements in a stressed scenario.
For this reason, the Directors continue to adopt the going concern basis in preparing the consolidated financial statements.
", "dimensions": { "concept": "ifrs-full:DisclosureOfGoingConcernExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-592": { "value": "
1.2 New accounting pronouncements
1.2.1 New accounting pronouncements adopted by the Group
In these financial statements, the Group has applied IFRS 17 'Insurance Contracts' and IFRS 9 'Financial Instruments', for the first
time. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet
effective.
IFRS 17 Insurance Contracts
IFRS 17 replaces IFRS 4 Insurance Contracts for annual periods beginning on or after 1\u00a0January 2023.
The Group has applied the standard retrospectively by applying the transitional provisions in Appendix C of IFRS 17. Furthermore,
as allowed within the transition provisions of IFRS 17, the Group has elected to not present the following information required by
IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' on the adoption of a new standard for current and prior
periods presented:
(i) The amount of adjustment for each financial statement line item affected; and
(ii) The impact on basic and diluted earnings per share calculated in accordance with IAS 33 Earnings per Share.
The Group has restated comparative information for 2022 applying the transitional provisions in Appendix C to IFRS 17. The nature
of the changes in accounting policies can be summarised, as follows:
(i) Recognition, measurement and presentation of insurance contracts
IFRS 17 establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts, reinsurance
contracts and investment contracts with discretionary participation features (DPF). It introduces a model that measures groups of
contracts based on the Group\u2019s estimates of the present value of future cash flows that are expected to arise as the Group fulfils
the contracts, an explicit risk adjustment for non-financial risk and a contractual service margin (CSM).
Under IFRS 17, insurance revenue in each reporting period represents the provision of services arising from the group of insurance
contracts at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those services.
This includes amounts relating to the changes in the liability for remaining coverage and the allocation of the portion of the
premiums that relate to recovery of insurance acquisition cash flows. Investment components are not included within insurance
revenue.
Insurance finance income and expenses are presented separately from insurance revenue and insurance service expenses.
Previously, acquisition costs in relation to insurance contracts were recognised and presented under IFRS 4 as separate assets
from the related insurance contract liabilities until those costs were included in profit or loss. Under IFRS 17, insurance acquisition
cash flows in relation to all contracts in scope that arise before the recognition of the related insurance contracts are recognised as
separate assets and are tested for recoverability. These assets are presented in the carrying amount of the related portfolio of
contracts and are derecognised once the related contracts have been recognised.
There is no change in accounting policy for investment contracts without DPF which are not in scope of IFRS 17. For these
contracts, deferred acquisition costs continue to be presented as separate assets and amortised into profit or loss in line with
revenue.
Income and expenses from reinsurance contracts other than insurance finance income and expenses are now presented as a
single net amount in profit or loss. Previously, amounts recovered from reinsurers and reinsurance expenses were presented
separately.
For an explanation of how the Group accounts for insurance and reinsurance contracts under IFRS 17, see Note 1.5.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 17 Insurance Contracts (continued)
(ii) Transition
Changes in accounting policies resulting from the adoption of IFRS 17 have been applied using a fully retrospective approach
to\u00a0the\u00a0extent practicable. Under the fully retrospective approach, at 1\u00a0January 2022 the Group:
\u2013 identified, recognised and measured each group of insurance contracts, investment contracts with DPF and reinsurance
contracts as if IFRS 17 had always been applied;
\u2013 derecognised previously reported balances that would not have existed if IFRS 17 had always been applied, such as the
unallocated surplus of the With-Profits Fund; and
\u2013 recognised any resulting net difference in equity, after allowing for any deferred tax adjustment.
In addition, there are also changes in presentation in the consolidated statement of financial position line items from the adoption
of IFRS 17:
\u2013 The inclusion of insurance receivables and payables balances as cash flows in the measurement of insurance and reinsurance
held contracts;
\u2013 The presentation of reinsurance held contracts as an asset or liability based on the net position of all contracts within a portfolio,
rather than the previous IFRS 4 treatment which was recognised on an individual contract basis; and
\u2013 Investment contract liabilities with DPF within the scope of IFRS 17 are presented within insurance contract liabilities.
Where it is impracticable to apply a fully retrospective approach to a group of contracts, then the Group has, as permitted under
IFRS 17, used either the modified retrospective approach or the fair value approach.
The Group has applied the following approaches to valuing the CSM on transition to IFRS 17:
Transition approach
Applied to products
Fully Retrospective Approach (FRA)
90:10 With-Profits contracts written 2020-2021i
PruProtect contracts written June 2010 \u2013 June 2016 ii
Non-Profit protection in Poland written 2020-2021
Rothesay reinsurance treatyiii
Modified Retrospective Approach (MRA)
90:10 With-Profits contracts written 2004-2019i
PruProtect contracts written before June 2010 ii
Fair Value Approach (FVA)
90:10 With-Profits contracts written before 2004i
All other insurance and reinsurance contracts written up to 2021
i Shareholder transfers for most contracts in the With-Profits Sub-Fund (WPSF) are up to one-ninth of the cost of bonus declared to policyholders, in
accordance with the Articles of Association. These contracts are referred to as 90:10 business.
ii PruProtect is a non-profit contract providing life and sickness cover that the Group issued through a joint venture arrangement with Vitality Life.
iii The Rothesay Part VII transfer in December 2021, which involved the sale of an annuity portfolio from M&G plc to Rothesay Life PLC, and consequential
update to the reinsurance treaty for the retained annuity business is deemed to constitute a derecognition event. Therefore, for IFRS 17 purposes, the
inception date of the reinsurance contract is 15 December 2021 and so is transitioned under FRA.
The impact of adopting IFRS 17 on total equity at 1\u00a0January 2022 is presented in the consolidated statement of changes in equity.
Fully retrospective approach
The Group has applied the fully retrospective approach on transition to products as shown above. On transition to IFRS 17, the
Group has applied the fully retrospective approach unless impracticable.
The reasons why the Group considers the fully retrospective approach to be impracticable for some contracts include:
\u2013 The effects of retrospective application are not determinable because the information required was not collected, or was not
collected with sufficient granularity, or is unavailable because of system migrations or other reasons.
\u2013 The fully retrospective approach requires assumptions about what the Group management\u2019s intentions would have been in
previous periods that cannot be made without the use of hindsight. These include judgements about the compensation the
Group requires for bearing non-financial risk in order to determine the risk adjustment. As the Group was established as a
separate entity in 2019, the Group\u2019s current business management and assumptions are not appropriate prior to 2020 and
choosing to use these or other assumptions would require the application of hindsight. This rationale does not apply to
PruProtect contracts, which have been managed through a joint venture and for which the approach to managing the business
prior to 2019 (and back until 2010) is known without the need to apply hindsight.
\u2013 Where the fully retrospective approach is impracticable for the valuation of a portfolio of insurance contracts written then it is
also impracticable for the valuation of any associated reinsurance portfolio as measurement requires similar considerations.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 17 Insurance Contracts (continued)
Modified retrospective approach
The objective of the modified retrospective approach is to achieve the closest outcome to retrospective application possible using
reasonable and supportable information available without undue cost or effort. The Group has applied each of the following
modifications only to the extent that it does not have reasonable and supportable information to apply IFRS 17 retrospectively.
\u00a0 \u00a0 Assessments at inception or on initial recognition
The Group has determined the identification of groups of contracts and classification of contracts using information available at
contract inception where reasonable and supportable information is available. Where the Group does not have reasonable and
supportable information this has been assessed based on information at 1 January 2022.
Groups of contracts valued under the modified retrospective approach contain contracts issued more than one year apart.
\u00a0 \u00a0 90:10 with-profits contracts written 2004-2019
For groups of with-profits contracts issued between 2004 and 2019 transitioning under the modified retrospective approach, the
Group has determined the CSM at 1 January 2022 by calculating a proxy (as permitted in IFRS 17) for the total CSM for all services
to be provided from inception as the fair value of the underlying items at 1 January 2022 minus the fulfilment cash flows at
1 January 2022, adjusted for:
\u2013 Amounts charged to policyholders (including charges deducted from the underlying items) before 1 January 2022.
\u2013 Amounts paid before 1 January 2022 that did not vary based on the underlying items.
\u2013 The change in the risk adjustment for non-financial risk caused by the release from risk before 1 January 2022, which was
estimated by reference to the release of risk for similar contracts that the Group issued at 1 January 2022.
If the calculation resulted in a CSM, the Group measures the CSM at 1 January 2022 by deducting the CSM related to services
provided before 1 January 2022. The CSM related to services provided before 1 January 2022 was determined by comparing the
remaining coverage units at 1 January 2022 with coverage units prior to 1 January 2022.
If the calculation resulted in a loss component then the Group adjusted the loss component to nil and increased the liability for
remaining coverage excluding the loss component by the same amount.
\u00a0 \u00a0 PruProtect contracts written before June 2010
The PruProtect contracts written before June 2010 are transitioning under the modified retrospective approach by applying the
modification that contracts issued more than one year apart are grouped together.
Fair value approach
The Group has applied the fair value approach on transition for contracts for which the fully retrospective approach was
considered impracticable, and for which reasonable and supportable information to apply the modified retrospective approach
was not available without undue cost or effort.
The Group has determined the CSM of the liability for remaining coverage at the transition date, as the difference between the fair
value of the group of insurance contracts and the fulfilment cash flows measured at that date. In determining fair value, the Group
has applied the requirements of IFRS 13 Fair Value Measurement except for, as required, the principles relating to demand
features.
Using Level 3 inputs in accordance with the IFRS 13 hierarchy, the Group has measured the fair value of the contracts as the sum of:
\u2013 The best estimate of the liability, determined using a discounted cash flow technique and assumptions used for Solvency II
reporting; and
\u2013 the compensation a market participant would require for taking on the obligation, over and above the best estimate liability,
determined using a cost of capital approach, and for with-profits contracts an amount to reflect the risk around the quantum of
future shareholder transfers.
For reinsurance contracts held the calculation above has been carried out twice, using gross of reinsurance cash flows and net of
reinsurance cash flows. The fair value of reinsurance contracts held has been determined as the difference between the two
amounts.
The allowance for the cost of capital is based on:
\u2013 Capital at 135% of the Group Solvency II internal model Solvency Capital Requirements (SCR) on a diversified basis, plus Group
Solvency II Risk Margin less allowance for the Group's Transitional Measure on Technical Provisions (TMTP) for pre-2016
incepting contracts.
\u2013 Cost of capital at 7%.
\u2013 Investment return based on assets backing capital, net of investment management expenses and corporation tax.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 17 Insurance Contracts (continued)
Fair value approach (continued)
In addition to the allowance for the cost of capital, key assumptions underpinning the determination of the fair value are set out
below:
\u2013 Discount rate
The discount rate used for with-profits contracts is the prescribed Solvency II risk-free curve.
The discount rate used for non-profit annuity contracts is the prescribed Solvency II risk-free curve plus the Group\u2019s matching
adjustment. The matching adjustment for the shareholder non-profit annuities is 106 basis points (bps) per annum and for the non-
profit annuities in the With-Profits Fund is 94 bps per annum.
\u2013 Longevity assumptions
The longevity assumptions for annuity contracts are consistent with the best estimate basis used for the Group\u2019s Solvency II
reporting as at 31 December 2021, as disclosed in the Group Solvency and Financial Condition Report as at 31 December 2021.
\u2013 Shareholder transfers
For with-profits contracts the level of compensation required to reflect the risk in relation to future shareholder transfers is 20% of
the present value of future shareholder transfers.
\u2013 Expense assumptions
Renewal expenses are based on the Group's best estimate view and are considered to be in line with what other market
participants would assume.
Investment management fees are negotiated on an arms-length basis, including those for the assets managed by the Group\u2019s
asset managers. Therefore the Group assumes that a market participant would adopt comparable investment management
expense assumptions.
The fair value was calculated at an aggregate level based on availability of Solvency II inputs. The fair value was then allocated to
IFRS 17 groups based on estimates of the underlying inputs at a more granular level based on consideration of the characteristics
of the portfolio and output from the SCR reporting processes.
The fair value has been calibrated based on analysis of the Group\u2019s own data and market data including public information on
recent transactions (to the extent relevant and available).
The Group has determined the identification of groups of contracts and classification of contracts using information available at
1\u00a0January 2022. Groups of policies valued under the fair value approach contain contracts issued more than one year apart.
For\u00a0contracts valued under the General Measurement Model, locked-in discount rates and financial assumptions applied after
transition have been determined as at 1 January 2022.
The table below shows the locked-in discount rates for annuity business at the transition date:
1 year
5 years
10 years
15 years
20 years
25 years
30 years
Annuities - shareholder-backed
1.850%
2.143%
2.040%
2.005%
1.971%
1.942%
1.915%
Annuities - in the With-Profits Fund
1.747%
2.039%
1.937%
1.902%
1.868%
1.839%
1.812%
The tables below show selected sensitivities of the fair value to the assumed parameters:
Sensitivity of the fair value of with-profits business to the compensation required in relation to shareholder transfers
Parameter
Fair value
Impact on
fair value
\u00a3m
\u00a3m
Base
20%
42,130
N/A
Sensitivity
25%
42,233
103
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 17 Insurance Contracts (continued)
Sensitivity of the fair value to the cost of capital rate
With-profits contracts
Annuity contracts
Parameter
Fair value
Impact on
fair\u00a0value
Fair value
Impact on
fair\u00a0value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Base
7%
42,130
N/A
28,670
N/A
Sensitivity
6%
42,123
(7)
28,379
(291)
Sensitivity
8%
42,135
5
28,922
252
Fulfilment cash flows
The fulfilment cash flows at 1 January 2022 under all transition approaches have been measured in accordance with the accounting
policies set out in Note 1.5. For this purpose the key assumptions are set out below.
The risk-free yield curve for with-profits and annuity contracts is shown in the table below:
Risk-free yield curve (excluding illiquidity premium)
1 year
5 years
10 years
15 years
20 years
As at 1 January 2022
0.76%
1.05%
0.95%
0.91%
0.88%
For with-profits contracts, future investment return assumptions and discount rates (using a bottom-up approach) are set at the
above risk-free yield curve plus an illiquidity premium of 34 bps.
For annuity contracts, discount rates (using a top-down approach) are set at the above risk-free yield curve plus an illiquidity
premium of 109 bps for shareholder-backed annuities and 99 bps for annuities in the With-Profits Fund.
The longevity assumptions for annuity contracts are consistent with the best estimate basis used for the Group\u2019s Solvency II
reporting, as disclosed in the Group Solvency and Financial Condition Report as at 31 December 2021.
Comparison with IFRS 4
The timing of profit recognition changed significantly under IFRS 17. Under IFRS 4 profits are recognised as follows:
\u2013 For with-profits contracts that share in the profit arising in the main With-Profits Fund, profits are recognised when bonuses
are\u00a0added to policies. As a substantial proportion of the total bonus is determined when claims are paid to policyholders,
a\u00a0considerable part of the profit is recognised when policies terminate.
\u2013 For non-profit contracts (notably annuities) a substantial proportion of the lifetime expected profit is recognised at policy
inception, reflecting the difference between the premiums received less costs incurred and the prudent liability established for
the expected future cash flows.
In contrast, IFRS 17 does not allow upfront profit recognition for profitable contracts but rather requires that profit is recognised
as\u00a0services are provided to the policyholders.
Other differences in the measurement of the liabilities include:
\u2013 IFRS 17 requires that the discount rates include an illiquidity premium. The IFRS 4 discount rates for with-profits contracts in
particular do not include an illiquidity premium. For annuity contracts, the IFRS 4 discount rates are similar to IFRS 17.
\u2013 IFRS 4 liabilities for non-profit contracts are determined using implicit prudent margins in the demographic and expense
assumptions. In contrast, IFRS 17 requires a separate risk adjustment for non-financial risks which may differ from the value of
the IFRS 4 margins.
\u2013 Under IFRS 4, the unallocated surplus of the With-Profits Fund represented the excess of the fund\u2019s assets over policyholder
liabilities that is yet to be appropriated between policyholders and shareholders with no allocation to equity. There is no
unallocated surplus under IFRS 17 although IFRS 17 requires a liability to be held for the policyholders\u2019 share of the surplus assets
in the With-Profits Fund. Under IFRS 17 there is equity for the first time relating to the With-Profits Fund.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 17 Insurance Contracts (continued)
Comparison with IFRS 4 (continued)
Driver
Description
\u00a3m
Total equity as previously reported
5,345
Liability remeasurement
Includes impact of:
\u2013 Removing the prudent margins required under IFRS 4 for annuity liabilities
(primarily for demographic and expenses assumptions); and
\u2013 Different basis for determining discount rate for both annuity and with-profit liabilities.
1,334
Value of shareholder
transfers
Under IFRS 17 the present value of all future shareholder transfers are allowed for
in\u00a0the\u00a0Variable Fee (broadly the entity's expected future profit) and so the unearned
share\u00a0of the shareholder transfers is included in the CSM.
3,954
CSM
Introduction of CSM which represents unearned profit on insurance contracts
and\u00a0investment contracts with DPF which will be released over the life of the contract
in\u00a0line with the provision of service.
(4,400)
Risk adjustment
Introduction of risk adjustment which represents compensation for non-financial risk
and\u00a0replaces the IFRS 4 prudent margins.
(487)
Shareholder interest in
excess assets in the
With-Profits Fund
As a consequence of applying the mutualisation requirements of IFRS 17, a portion
of\u00a0the\u00a0with-profits estate is allocated to shareholders. Under IFRS 4, this was included
within the unallocated surplus of the With-Profits Fund.
1,687
Tax and other
Impact of change in deferred tax and other minor effects.
(169)
Remeasurement of equity attributable to equity holders on adoption.
1,919
Total equity as restated
7,264
IFRS 9 Financial Instruments
IFRS 9 replaced IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after
1\u00a0January\u00a02018. However, the Group elected, under the amendments to IFRS 4 to apply the temporary exemption from IFRS 9,
deferring the initial application date of IFRS 9 to align with the initial application of IFRS 17.
The Company has applied IFRS 9 retrospectively and restated comparative information for the year ended 31 December 2022 for
financial instruments in the scope of IFRS 9. Differences arising from the adoption of IFRS 9 have been recognised in retained
earnings as at 1\u00a0January 2022 and presented in the consolidated statement of changes in equity and have been disclosed in below.
The nature of the changes in accounting policies can be summarised as follows:
(i) Classification of financial assets and financial liabilities
IFRS 9 includes three classification categories for financial assets: measured at amortised cost, Fair Value through Other
Comprehensive Income (FVOCI) and Fair Value Through Profit or Loss (FVTPL). The classification of financial assets is generally
based on the business model in which a financial asset is managed and its contractual cash flow characteristics. It eliminates the
previous categories of held-to-maturity investments, loans and receivables, and available-for-sale financial assets applied by IAS 39.
IFRS 9 has not had a significant effect on the Group\u2019s financial instruments classification as the majority were already measured at
FVTPL. The Group does not hold any assets measured at FVOCI.
(ii) Impairment of financial assets
IFRS 9 replaced the \u2018incurred loss\u2019 model in IAS 39 with a forward-looking \u2018expected credit loss\u2019 (ECL) model for recording
impairment. The new impairment model applies to financial assets measured at amortised cost and contract assets under IFRS 15.
The ECL model results in earlier recognition of impairment as compared to the previous model which required objective evidence
of impairment to exist before any impairment was recorded.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 9 Financial Instruments (continued)
(iii) Transition
Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively, except as described
below:
\u2013 The comparative period has been restated adopting the overlay approach.
\u2013 The following assessments have been made on the basis of the facts and circumstances that existed at 1\u00a0January 2023:
\u2013 The determination of the business model within which a financial asset is held.
\u2013 The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at
FVTPL.
\u2013 If a financial asset had low credit risk at 1 January 2023, then the Group determined that the credit risk on the asset had not
increased significantly since initial recognition.
The adoption of IFRS 9 has not had a material impact on the Group\u2019s basic or diluted EPS for the years ended 31\u00a0December 2023
and 2022.
Details of the changes and implications resulting from the adoption of IFRS 9 are presented below.
(iv) Effect of initial application
Classification of financial assets and financial liabilities
The following table and the accompanying notes below explain the original measurement categories and carrying amounts under
IAS 39 and the new measurement categories and carrying amounts under IFRS 9 for each class of the Group\u2019s financial assets and
financial liabilities as at 1\u00a0January 2023.
As at 31\u00a0December 2022
As at 1\u00a0January 2023
As at 31\u00a0December 2022
As at 1\u00a0January 2023
Original classification\u00a0
under\u00a0IAS 39
New classification
under\u00a0IFRS 9
Original carrying value
under IAS 39i
New carrying
amount under IFRS 9
\u00a3m
\u00a3m
Financial assets
Equity securities and pooled investment funds
FVTPL designated
FVTPL mandatory
70,127
70,127
Loans
Loans and receivables
FVTPL mandatory
2,114
2,018
Loans
FVTPL designated
FVTPL mandatory
1,216
1,216
Debt securities
FVTPL designated
FVTPL mandatory
62,821
62,821
Derivative assets
FVTPL held for trading
FVTPL mandatory
2,850
2,850
Deposits
Amortised cost
Amortised cost
21,401
21,399
Accrued investment income and other debtors
Loans and receivables
Amortised cost
2,408
2,404
Cash and cash equivalents
Loans and receivables
Amortised cost
4,884
4,884
Total financial assets
167,821
167,719
As at 31\u00a0December 2022
As at 1\u00a0January 2023
As at 31\u00a0December 2022
As at 1\u00a0January 2023
Original classification\u00a0
under\u00a0IAS 39
New classification under
IFRS 9
Original carrying value
under IAS 39i
New carrying
amount under IFRS 9
\u00a3m
\u00a3m
Financial liabilities
Investment contract liabilities without DPF
FVTPL designated
FVTPL designated
11,937
11,937
Third party interest in consolidated funds
FVTPL designated
FVTPL designated
10,389
10,389
Subordinated liabilities and other borrowings
Amortised cost
Amortised cost
7,537
7,537
Derivative liabilities
FVTPL held for trading
FVTPL mandatory
4,185
4,185
Other financial liabilities
Amortised cost
Amortised cost
2,172
2,172
Accruals, deferred income and other liabilities
FVTPL designated
FVTPL designated
246
246
Accruals, deferred income and other liabilities
Amortised cost
Amortised cost
6,522
6,522
Total financial liabilities
42,988
42,988
i Original carrying value differs from that published in the Annual Report and Accounts for the year ended 31 December 2022 following reclassifications.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 9 Financial Instruments (continued)
Classification of financial assets and financial liabilities (continued)
The Group accounting policies on the classification of financial instruments under IFRS 9 are set out in Note 1.5. The application of
the revised Group accounting policies resulted in the reclassifications set out in the table above and explained below.
\u2013 As at 31\u00a0December 2022, Loans of \u00a32,114m which have previously been classified as loans and receivables are managed on a fair
value basis and are, therefore, measured at FVTPL on the basis of the business model for managing loans under IFRS 9.
The application of IFRS 9 did not have a material impact on the classification and measurement of financial liabilities.
The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 on
transition to IFRS 9 on 1\u00a0January 2023.
31\u00a0December 2022
IAS 39
Reclassification
Remeasurement
1\u00a0January 2023
IFRS 9
\u00a3m
\u00a3m
\u00a3m
\u00a3m
FVTPL
Equity securities and pooled investment funds
70,127
\u2014
\u2014
70,127
Loans
1,216
2,114
(96)
3,234
Debt securities
62,821
\u2014
\u2014
62,821
Derivative assets - net of derivative liabilities
(1,335)
\u2014
\u2014
(1,335)
Total FVTPL
132,829
2,114
(96)
134,847
31\u00a0December 2022
IAS 39
Reclassification
Remeasurement
1\u00a0January 2023
IFRS 9
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Amortised cost
Loans
2,114
(2,114)
\u2014
\u2014
Deposits
21,401
\u2014
(2)
21,399
Accrued investment income and other debtors
2,408
\u2014
(4)
2,404
Cash and cash equivalents
4,884
\u2014
\u2014
4,884
Total amortised cost
30,807
(2,114)
(6)
28,687
As at 1 January 2023 the transition to IFRS 9 did not result in reclassification or remeasurement of the carrying amounts of financial
liabilities.
Impairment of financial assets
The following table reconciles the closing impairment allowance under IAS 39 as at 31\u00a0December 2022 with the opening ECLs
under IFRS 9 as at 1\u00a0January 2023.
Impairment allowance
under IAS 39 as at
31\u00a0December 2022
Remeasurement
ECLs under IFRS 9 as at
1\u00a0January 2023
\u00a3m
\u00a3m
\u00a3m
Loans
30
(30)
\u2014
Deposits
\u2014
2
2
Accrued investment income and other debtors
37
4
41
Cash and cash equivalents
\u2014
\u2014
\u2014
Total impairment allowances /ECLs
67
(24)
43
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 9 Financial Instruments (continued)
IFRS 7 includes disclosure requirements at the date of initial application of IFRS 9 (1\u00a0January 2023). As the Group has restated
comparative balances effective 1\u00a0January 2022, the following additional tables have been included to provide the user
with\u00a0additional information about the transition to IFRS 9 and the adjustments to opening balances of retained earnings as at
1\u00a0January 2022, in conjunction with the effects of the transition to IFRS 17 on that date.
The table below and accompanying notes compare the original measurement categories and carrying amounts under IAS 39 and
the new measurement categories under IFRS 9 for each class of the Group\u2019s financial assets and financial liabilities on transition to
IFRS 9 on 1\u00a0January 2022:
As at
31\u00a0December 2021
As at
1\u00a0January 2022
As at
31\u00a0December 2021
As at
1\u00a0January 2022
Original classification
under\u00a0IAS 39
New classification
under IFRS 9
Original carrying value
under IAS 39i
New carrying amount
under IFRS 9
\u00a3m
\u00a3m
Financial assets
Equity securities and pooled investment funds
FVTPL designated
FVTPL mandatory
74,069
74,069
Loans
Loans and receivables
FVTPL mandatory
2,534
2,605
Loans
FVTPL designated
FVTPL mandatory
3,275
3,275
Debt securities
FVTPL designated
FVTPL mandatory
81,059
81,059
Derivative assets
FVTPL held for trading
FVTPL mandatory
3,373
3,373
Deposits
Loans and receivables
Amortised cost
17,633
17,632
Accrued investment income and other debtors
Loans and receivables
Amortised cost
2,837
2,833
Cash and cash equivalents
Loans and receivables
Amortised cost
6,908
6,908
Total financial assets
191,688
191,754
As at
31\u00a0December 2021
As at
1\u00a0January 2022
As at
31\u00a0December 2021
As at
1\u00a0January 2022
Original classification
under\u00a0IAS 39
New classification
under IFRS 9
Original carrying value
under IAS 39i
New carrying amount
under IFRS 9
\u00a3m
\u00a3m
Financial liabilities
Investment contract liabilities without DPF
FVTPL designated
FVTPL designated
14,884
14,884
Third party interest in consolidated funds
FVTPL designated
FVTPL designated
12,636
12,636
Subordinated liabilities and other borrowings
FVTPL designated
FVTPL designated
1,159
1,159
Subordinated liabilities and other borrowings
Amortised cost
Amortised cost
7,771
7,771
Derivative liabilities
FVTPL held for trading
FVTPL mandatory
2,689
2,689
Other financial liabilities
Amortised cost
Amortised cost
2,882
2,882
Accruals, deferred income and other liabilities
FVTPL designated
FVTPL designated
403
403
Accruals, deferred income and other liabilities
Amortised cost
Amortised cost
5,661
5,661
Total financial liabilities
48,085
48,085
i Original carrying value differs from that published in the Annual Report and Accounts for the year ended 31 December 2021 following reclassifications.
The tables above and below explain the reclassifications of assets and liabilities on application of the revised Group accounting
policies for classification of financial instruments under IFRS 9 set out in Note 1.5.
As at 31 December 2021, Loans of \u00a32,534m which have previously been classified as loans and receivables under IAS 39, are
managed on a fair value basis and are, therefore, measured at FVTPL on the basis of business model for managing loans under
IFRS 9.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 9 Financial Instruments (continued)
The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 on
transition to IFRS 9 on 1\u00a0January 2022.
31\u00a0December 2021
IAS 39
Reclassification
Remeasurement
1\u00a0January 2022
IFRS 9
\u00a3m
\u00a3m
\u00a3m
\u00a3m
FVTPL
Equity securities and pooled investment funds
74,069
\u2014
\u2014
74,069
Loans
3,275
2,534
71
5,880
Debt securities
81,059
\u2014
\u2014
81,059
Derivative assets - net of derivative liabilities
684
\u2014
\u2014
684
Total FVTPL
159,087
2,534
71
161,692
31\u00a0December 2021
IAS 39
Reclassification
Remeasurement
1\u00a0January 2022
IFRS 9
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Amortised cost
Loans
2,534
(2,534)
\u2014
\u2014
Deposits
17,633
\u2014
(1)
17,632
Accrued investment income and other debtors
2,837
\u2014
(4)
2,833
Cash and cash equivalents
6,908
\u2014
\u2014
6,908
Total amortised cost
29,912
(2,534)
(5)
27,373
As at 1 January 2022 the transition to IFRS 9 did not result in reclassification or remeasurement of the carrying amounts of financial
liabilities.
Impairment of financial assets
The following table reconciles the closing impairment allowance under IAS 39 as at 31\u00a0December 2021 with the opening ECLs
under IFRS 9 as at 1\u00a0January 2022.
Impairment allowance
under IAS 39 as at
31\u00a0December 2021
Remeasurement
ECLs under IFRS 9 as at
1\u00a0January 2022
\u00a3m
\u00a3m
\u00a3m
Loans
18
(18)
\u2014
Deposits
\u2014
1
1
Accrued investment income and other debtors
77
4
81
Cash and cash equivalents
\u2014
\u2014
Total impairment allowances/ECLs
95
(13)
82
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
Transition to IFRS 9 and IFRS 17
The key impact on main financial statement lines in the Group's consolidated statement of financial position on transition to IFRS 9
and IFRS 17 is presented below:
31\u00a0December 2021 as
previously reported
Reclassification due
to adoption of IFRS 9
and\u00a0IFRS 17
Remeasurement due
to adoption of IFRS 9
and IFRS 17
1\u00a0January 2022
restated
Financial statement line item
\u00a3m
\u00a3m
\u00a3m
\u00a3m
IFRS 9
Equity securities and pooled investment funds
74,069
\u2014
\u2014
74,069
Loans
5,809
\u2014
71
5,880
Debt securities
81,059
\u2014
\u2014
81,059
Derivative assets - net of derivative liabilities
684
\u2014
\u2014
684
Cash and cash equivalents
6,908
\u2014
\u2014
6,908
IFRS 17
Reinsurance contract assets
1,669
\u2014
46
1,715
Reinsurance contract liabilities
\u2014
\u2014
(546)
(546)
Insurance contract assets
\u2014
\u2014
28
28
Insurance contract liabilities
(63,223)
(99,466)
1,868
(160,821)
Investment contract liabilities with DPF
(82,743)
82,743
\u2014
\u2014
Investment contract liabilities without DPF
(14,884)
\u2014
\u2014
(14,884)
IFRS 9 and IFRS 17
Accrued investment income and other debtors
2,647
\u2014
186
2,833
Unallocated surplus of the With-Profits Fund
(16,723)
16,723
\u2014
\u2014
Accruals, deferred income and other liabilities
(6,666)
\u2014
153
(6,513)
Other
16,739
\u2014
113
16,852
Total equity
5,345
\u2014
1,919
7,264
Other accounting announcements adopted by the Group
The Group has also adopted the following standards, interpretations and amendments which became effective from
1\u00a0January\u00a02023:
\u2013 Disclosure of Accounting Policies (Amendments to IAS 1), issued in March 2022;
\u2013 Definition of Accounting Estimates (Amendments to IAS 8), issued in March 2022;
\u2013 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12), issued in August 2022;
and
\u2013 International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12), issued in May 2023.
The above interpretations and amendments to standards are not considered to have a material effect on these consolidated
financial statements.
1.2.2 New accounting pronouncements not yet effective
In addition to the above, the following new accounting pronouncements have also been issued but are not yet effective or have not
yet been adopted for use in the UK:
\u2013 Classification of Liabilities as Current or Non-current (Amendments to IFRS 1), issued in January 2020 and effective from
1\u00a0January 2024;
\u2013 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture \u2013 (Amendments to IFRS 10 and IAS 28),
issued in December 2015 and effective date pending completion of the research project on equity method accounting;
\u2013 Lease Liability in a Sale and Leaseback (Amendments to IFRS 16), issued in September 2022 and effective from 1 January 2024;
\u2013 Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7), issued in May 2023 and effective from 1\u00a0January\u00a02024; and
\u2013 Lack of exchangeability (Amendments to IAS 21), issued in August 2023 and effective from 1 January 2025.
The Group has assessed the impact of these pronouncements on the consolidated financial statements, none of which are
expected to have a material impact on the Group.
1.3 Judgements in applying accounting policies and sources of estimation uncertainty
A full list of the Group\u2019s material accounting policies is provided in Note 1.5. The accounting policies adopted by the Group have not
changed materially from those applied in the Group's Annual Report and Accounts for the year ended 31 December 2022, the
exceptions being those arising from the application of IFRS 17 and IFRS 9. In applying these accounting policies, the Group has
made a number of key judgements which have a significant effect on the amounts recognised in the consolidated financial
statements. The impact of climate change has been considered when preparing these consolidated financial statements,
particularly in the context of our TCFD disclosures included on pages 69 to 90. Many of the effects arising from climate change are
long term in nature, with an inherent degree of uncertainty associated. These have been assessed as having no material impact on
the carrying value of assets and liabilities within the next financial year.
The following table sets out the basis of these judgements, and references the associated accounting policy and related note
which both give further detail on the specific application.
Financial statement area
Key judgement
Accounting
policy
Note
Consolidation of
structured entities
IFRS 10 requires entities that the Group controls to be consolidated in the
consolidated financial statements. Structured entities are entities that have been
designed so that voting or similar rights are not the dominant factor in deciding
who controls the entity. Due to the nature of structured entities, judgement is
required to determine whether the Group controls and therefore consolidates
structured entities. Judgement is also required where certain seed capital
investments in structured entities are classified as held for sale investments, and
therefore not consolidated on a line-by-line basis.
1.5.1
30
Classification of
insurance and
investment contracts
IFRS 17 requires that contracts that transfer significant insurance risk are
accounted for as insurance contracts. Judgement is required to determine
whether contracts written by the Group transfer significant insurance risk, unless a
specific scope exception applies (eg equity release mortgages).
Judgement is also required in the case of certain investment contracts which
provide an additional benefit in addition to guaranteed benefits to determine
whether they meet the criteria to be considered as discretionary participation
features, and therefore accounted for under IFRS 17.
1.5.2
24
Contractual Service
Margin measurement
model
IFRS 17 requires an assessment of whether contracts meet the conditions for
having direct participation features and when this is the case such contracts must
use the Variable Fee Approach to measure the CSM. For with-profit and unit-linked
contracts, judgement is required to assess whether the Group expects to pay to
the policyholder an amount equal to a substantial share of the fair value returns on
the underlying items; and whether the entity expects a substantial proportion of
any change in the amounts to be paid to the policyholder to vary with the change in
fair value of the underlying items. The assessment is carried out at the contract
level and judgement is also applied to determine the extent to which mutualisation
between contracts is allowed for.
1.5.2
24
Underlying items
Underlying items are items that determine some of the amounts payable to a
policyholder as part of their with-profit or unit-linked contract and therefore are a
component of the insurance contract or investment contracts with DPF liabilities.
Judgement is required to define underlying items for with-profits contracts that
reflect the mutualisation between contracts and how to split underlying items
between current and future policyholders.
1.5.2
24
1 Basis of preparation and\u00a0material accounting policies (continued)
1.3 Judgements in applying accounting policies and sources of estimation uncertainty (continued)
Financial statement area
Key judgement
Accounting
policy
Note
Division of surplus
relating to the
With-Profits Fund
Judgement is required to determine the amount of surplus that should be divided
between current and future with-profits policyholders as well as with the Group
and the amount of surplus attributable solely to the Group.
1.5.2
24
Provision of insurance
contract services
The amount of CSM recognised in profit or loss in each reporting period is
determined by reference to coverage units, which represent the insurance
contract services provided in that period. Judgement is required to define the
services provided, and the relative weighting if these include both insurance and
investment services.
1.5.2
24
The following table sets out the basis of the judgements made specifically for the measurement of the consolidated statement of
financial position at the IFRS 17 transition date of 1\u00a0January 2022. Further detail on specific application can be found in Note 1.2.1.
Financial statement area
Key judgement
Method of transition
approach
Judgement was required to assess for which contracts it would be impracticable to apply the Fully
Retrospective Approach (FRA).
1.4 Sources of estimation uncertainty
The preparation of these consolidated financial statements requires the Group to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. These
estimates and assumptions have not changed materially from those applied for the 2022 year end financial statements, except for
the measurement of insurance contracts on the application of IFRS 17.
The following table sets out the assumptions and estimates which have a significant risk of resulting in a material adjustment to
their carrying value within the next financial year. Details of the nature of the estimate is provided in the related accounting policy
and details of the assumptions applied at the statement of financial position date are provided in the related note.
Financial statement asset
or\u00a0liability
Key estimate and assumptions
Accounting
policy
Note
Insurance contract
liabilities
When measuring the insurance contract liabilities, a number of assumptions are
applied to estimate future amounts due to the policyholder. The areas where the
assumptions could have a material impact are:
\u2013 for with-profits contracts, the assumed future investment returns on the
backing assets, the assumptions used in determining the allowance for
persistency and maintenance expenses, the policyholders' share of historic
and future surpluses, and the illiquidity premium in setting the discount rate;
and
\u2013 for annuity contracts, the assumed rates of policyholder mortality,
maintenance expenses, and the selection of the reference portfolio and
allowance for credit risk in setting the discount rate.
In addition, when measuring the insurance contract liabilities, a risk adjustment is
included. The assessment of the risk adjustment requires assumptions about the
compensation that the Group requires for bearing uncertainty about the amount
and timing of the cash flows that arises from non-financial risk, the most significant
of which is the assumed rates of the policyholder mortality for annuity contracts.
1.5.2
24, 32
1 Basis of preparation and\u00a0material accounting policies (continued)
1.4 Sources of estimation uncertainty (continued)
Financial statement asset
or\u00a0liability
Key estimate and assumptions
Accounting
policy
Note
Assets classified as
level 3 under the fair
value hierarchy
Determination of fair value of financial assets classified as level 3 in the fair value
hierarchy involves the use of inputs which are not observable in the market and
hence require a high degree of estimation which could result in a significant
change in the valuation. This includes the determination of the spread above
risk free rate applied to value residential ground rents that are impacted by the
recent UK Government consultation which potentially restricts future income
on these assets.
1.5.5, 1.5.12
18, 31
Determination of
recoverable amount of
goodwill
Goodwill is assessed for impairment at least on an annual basis by comparing the
recoverable amount of each cash-generating unit or group of cash-generating
units to which goodwill has been allocated with its carrying value. Recoverable
amount is defined as the higher of fair value less costs to sell and the value in use
where the value in use is based on the present value of future cash flows. The
determination of the value in use requires the use of various assumptions around
future cash flows, future growth rates and appropriate discount rates based on the
risks associated with the cash-generating-unit or group of cash-generating units
which can have a material impact on the calculation.
1.5.15
13
Defined benefit
pension liability
The defined benefit pension scheme liability is calculated using actuarial valuations
which incorporate a number of assumptions including discount rates, inflation
rates, and expected future mortality. Due to the long-term nature of the schemes,
the value of the pension scheme obligation is sensitive to these assumptions.
1.5.13
17
Recognition of deferred
tax asset
IAS 12 requires deferred tax assets to be recognised to the extent that it is
probable that sufficient taxable profit will be available against which the deductible
temporary differences, and the carry-forward of unused tax credits and unused tax
losses can be utilised. Judgement is required to determine the extent to which
future taxable profits emerge and the corresponding period over which unused tax
credits and unused tax losses will be utilised.
1.5.14
10.2
The following table sets out the significant assumptions and estimates made specifically for the measurement of the consolidated
statement of financial position at the IFRS 17 transition date of 1 January 2022. Further detail on the specific application can be
found in Note 1.2.1.
Financial statement asset or
liability
Key estimate and assumptions
Insurance contract
liabilities\u00a0- Estimation
of fair value
When determining fair values, a number of assumptions are applied to estimate a market participant\u2019s
view of the best estimate of the liability and the compensation required for taking on the obligation.
The\u00a0areas where the assumptions could have a material impact are:
\u2013 the target capital and cost of capital rate;
\u2013 for with-profits contracts, the assumed future investment returns on the backing assets, the
assumptions used in determining the allowance for persistency and maintenance expenses, the
level of compensation required to reflect the risk in relation to future shareholder transfers, and
the discount rates used; and
\u2013 for annuity contracts, the assumed rates of policyholder mortality, maintenance expenses, and
the discount rates used.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-591": { "value": "
1.2 New accounting pronouncements
1.2.1 New accounting pronouncements adopted by the Group
In these financial statements, the Group has applied IFRS 17 'Insurance Contracts' and IFRS 9 'Financial Instruments', for the first
time. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet
effective.
IFRS 17 Insurance Contracts
IFRS 17 replaces IFRS 4 Insurance Contracts for annual periods beginning on or after 1\u00a0January 2023.
The Group has applied the standard retrospectively by applying the transitional provisions in Appendix C of IFRS 17. Furthermore,
as allowed within the transition provisions of IFRS 17, the Group has elected to not present the following information required by
IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' on the adoption of a new standard for current and prior
periods presented:
(i) The amount of adjustment for each financial statement line item affected; and
(ii) The impact on basic and diluted earnings per share calculated in accordance with IAS 33 Earnings per Share.
The Group has restated comparative information for 2022 applying the transitional provisions in Appendix C to IFRS 17. The nature
of the changes in accounting policies can be summarised, as follows:
(i) Recognition, measurement and presentation of insurance contracts
IFRS 17 establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts, reinsurance
contracts and investment contracts with discretionary participation features (DPF). It introduces a model that measures groups of
contracts based on the Group\u2019s estimates of the present value of future cash flows that are expected to arise as the Group fulfils
the contracts, an explicit risk adjustment for non-financial risk and a contractual service margin (CSM).
Under IFRS 17, insurance revenue in each reporting period represents the provision of services arising from the group of insurance
contracts at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those services.
This includes amounts relating to the changes in the liability for remaining coverage and the allocation of the portion of the
premiums that relate to recovery of insurance acquisition cash flows. Investment components are not included within insurance
revenue.
Insurance finance income and expenses are presented separately from insurance revenue and insurance service expenses.
Previously, acquisition costs in relation to insurance contracts were recognised and presented under IFRS 4 as separate assets
from the related insurance contract liabilities until those costs were included in profit or loss. Under IFRS 17, insurance acquisition
cash flows in relation to all contracts in scope that arise before the recognition of the related insurance contracts are recognised as
separate assets and are tested for recoverability. These assets are presented in the carrying amount of the related portfolio of
contracts and are derecognised once the related contracts have been recognised.
There is no change in accounting policy for investment contracts without DPF which are not in scope of IFRS 17. For these
contracts, deferred acquisition costs continue to be presented as separate assets and amortised into profit or loss in line with
revenue.
Income and expenses from reinsurance contracts other than insurance finance income and expenses are now presented as a
single net amount in profit or loss. Previously, amounts recovered from reinsurers and reinsurance expenses were presented
separately.
For an explanation of how the Group accounts for insurance and reinsurance contracts under IFRS 17, see Note 1.5.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 17 Insurance Contracts (continued)
(ii) Transition
Changes in accounting policies resulting from the adoption of IFRS 17 have been applied using a fully retrospective approach
to\u00a0the\u00a0extent practicable. Under the fully retrospective approach, at 1\u00a0January 2022 the Group:
\u2013 identified, recognised and measured each group of insurance contracts, investment contracts with DPF and reinsurance
contracts as if IFRS 17 had always been applied;
\u2013 derecognised previously reported balances that would not have existed if IFRS 17 had always been applied, such as the
unallocated surplus of the With-Profits Fund; and
\u2013 recognised any resulting net difference in equity, after allowing for any deferred tax adjustment.
In addition, there are also changes in presentation in the consolidated statement of financial position line items from the adoption
of IFRS 17:
\u2013 The inclusion of insurance receivables and payables balances as cash flows in the measurement of insurance and reinsurance
held contracts;
\u2013 The presentation of reinsurance held contracts as an asset or liability based on the net position of all contracts within a portfolio,
rather than the previous IFRS 4 treatment which was recognised on an individual contract basis; and
\u2013 Investment contract liabilities with DPF within the scope of IFRS 17 are presented within insurance contract liabilities.
Where it is impracticable to apply a fully retrospective approach to a group of contracts, then the Group has, as permitted under
IFRS 17, used either the modified retrospective approach or the fair value approach.
The Group has applied the following approaches to valuing the CSM on transition to IFRS 17:
Transition approach
Applied to products
Fully Retrospective Approach (FRA)
90:10 With-Profits contracts written 2020-2021i
PruProtect contracts written June 2010 \u2013 June 2016 ii
Non-Profit protection in Poland written 2020-2021
Rothesay reinsurance treatyiii
Modified Retrospective Approach (MRA)
90:10 With-Profits contracts written 2004-2019i
PruProtect contracts written before June 2010 ii
Fair Value Approach (FVA)
90:10 With-Profits contracts written before 2004i
All other insurance and reinsurance contracts written up to 2021
i Shareholder transfers for most contracts in the With-Profits Sub-Fund (WPSF) are up to one-ninth of the cost of bonus declared to policyholders, in
accordance with the Articles of Association. These contracts are referred to as 90:10 business.
ii PruProtect is a non-profit contract providing life and sickness cover that the Group issued through a joint venture arrangement with Vitality Life.
iii The Rothesay Part VII transfer in December 2021, which involved the sale of an annuity portfolio from M&G plc to Rothesay Life PLC, and consequential
update to the reinsurance treaty for the retained annuity business is deemed to constitute a derecognition event. Therefore, for IFRS 17 purposes, the
inception date of the reinsurance contract is 15 December 2021 and so is transitioned under FRA.
The impact of adopting IFRS 17 on total equity at 1\u00a0January 2022 is presented in the consolidated statement of changes in equity.
Fully retrospective approach
The Group has applied the fully retrospective approach on transition to products as shown above. On transition to IFRS 17, the
Group has applied the fully retrospective approach unless impracticable.
The reasons why the Group considers the fully retrospective approach to be impracticable for some contracts include:
\u2013 The effects of retrospective application are not determinable because the information required was not collected, or was not
collected with sufficient granularity, or is unavailable because of system migrations or other reasons.
\u2013 The fully retrospective approach requires assumptions about what the Group management\u2019s intentions would have been in
previous periods that cannot be made without the use of hindsight. These include judgements about the compensation the
Group requires for bearing non-financial risk in order to determine the risk adjustment. As the Group was established as a
separate entity in 2019, the Group\u2019s current business management and assumptions are not appropriate prior to 2020 and
choosing to use these or other assumptions would require the application of hindsight. This rationale does not apply to
PruProtect contracts, which have been managed through a joint venture and for which the approach to managing the business
prior to 2019 (and back until 2010) is known without the need to apply hindsight.
\u2013 Where the fully retrospective approach is impracticable for the valuation of a portfolio of insurance contracts written then it is
also impracticable for the valuation of any associated reinsurance portfolio as measurement requires similar considerations.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 17 Insurance Contracts (continued)
Modified retrospective approach
The objective of the modified retrospective approach is to achieve the closest outcome to retrospective application possible using
reasonable and supportable information available without undue cost or effort. The Group has applied each of the following
modifications only to the extent that it does not have reasonable and supportable information to apply IFRS 17 retrospectively.
\u00a0 \u00a0 Assessments at inception or on initial recognition
The Group has determined the identification of groups of contracts and classification of contracts using information available at
contract inception where reasonable and supportable information is available. Where the Group does not have reasonable and
supportable information this has been assessed based on information at 1 January 2022.
Groups of contracts valued under the modified retrospective approach contain contracts issued more than one year apart.
\u00a0 \u00a0 90:10 with-profits contracts written 2004-2019
For groups of with-profits contracts issued between 2004 and 2019 transitioning under the modified retrospective approach, the
Group has determined the CSM at 1 January 2022 by calculating a proxy (as permitted in IFRS 17) for the total CSM for all services
to be provided from inception as the fair value of the underlying items at 1 January 2022 minus the fulfilment cash flows at
1 January 2022, adjusted for:
\u2013 Amounts charged to policyholders (including charges deducted from the underlying items) before 1 January 2022.
\u2013 Amounts paid before 1 January 2022 that did not vary based on the underlying items.
\u2013 The change in the risk adjustment for non-financial risk caused by the release from risk before 1 January 2022, which was
estimated by reference to the release of risk for similar contracts that the Group issued at 1 January 2022.
If the calculation resulted in a CSM, the Group measures the CSM at 1 January 2022 by deducting the CSM related to services
provided before 1 January 2022. The CSM related to services provided before 1 January 2022 was determined by comparing the
remaining coverage units at 1 January 2022 with coverage units prior to 1 January 2022.
If the calculation resulted in a loss component then the Group adjusted the loss component to nil and increased the liability for
remaining coverage excluding the loss component by the same amount.
\u00a0 \u00a0 PruProtect contracts written before June 2010
The PruProtect contracts written before June 2010 are transitioning under the modified retrospective approach by applying the
modification that contracts issued more than one year apart are grouped together.
Fair value approach
The Group has applied the fair value approach on transition for contracts for which the fully retrospective approach was
considered impracticable, and for which reasonable and supportable information to apply the modified retrospective approach
was not available without undue cost or effort.
The Group has determined the CSM of the liability for remaining coverage at the transition date, as the difference between the fair
value of the group of insurance contracts and the fulfilment cash flows measured at that date. In determining fair value, the Group
has applied the requirements of IFRS 13 Fair Value Measurement except for, as required, the principles relating to demand
features.
Using Level 3 inputs in accordance with the IFRS 13 hierarchy, the Group has measured the fair value of the contracts as the sum of:
\u2013 The best estimate of the liability, determined using a discounted cash flow technique and assumptions used for Solvency II
reporting; and
\u2013 the compensation a market participant would require for taking on the obligation, over and above the best estimate liability,
determined using a cost of capital approach, and for with-profits contracts an amount to reflect the risk around the quantum of
future shareholder transfers.
For reinsurance contracts held the calculation above has been carried out twice, using gross of reinsurance cash flows and net of
reinsurance cash flows. The fair value of reinsurance contracts held has been determined as the difference between the two
amounts.
The allowance for the cost of capital is based on:
\u2013 Capital at 135% of the Group Solvency II internal model Solvency Capital Requirements (SCR) on a diversified basis, plus Group
Solvency II Risk Margin less allowance for the Group's Transitional Measure on Technical Provisions (TMTP) for pre-2016
incepting contracts.
\u2013 Cost of capital at 7%.
\u2013 Investment return based on assets backing capital, net of investment management expenses and corporation tax.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 17 Insurance Contracts (continued)
Fair value approach (continued)
In addition to the allowance for the cost of capital, key assumptions underpinning the determination of the fair value are set out
below:
\u2013 Discount rate
The discount rate used for with-profits contracts is the prescribed Solvency II risk-free curve.
The discount rate used for non-profit annuity contracts is the prescribed Solvency II risk-free curve plus the Group\u2019s matching
adjustment. The matching adjustment for the shareholder non-profit annuities is 106 basis points (bps) per annum and for the non-
profit annuities in the With-Profits Fund is 94 bps per annum.
\u2013 Longevity assumptions
The longevity assumptions for annuity contracts are consistent with the best estimate basis used for the Group\u2019s Solvency II
reporting as at 31 December 2021, as disclosed in the Group Solvency and Financial Condition Report as at 31 December 2021.
\u2013 Shareholder transfers
For with-profits contracts the level of compensation required to reflect the risk in relation to future shareholder transfers is 20% of
the present value of future shareholder transfers.
\u2013 Expense assumptions
Renewal expenses are based on the Group's best estimate view and are considered to be in line with what other market
participants would assume.
Investment management fees are negotiated on an arms-length basis, including those for the assets managed by the Group\u2019s
asset managers. Therefore the Group assumes that a market participant would adopt comparable investment management
expense assumptions.
The fair value was calculated at an aggregate level based on availability of Solvency II inputs. The fair value was then allocated to
IFRS 17 groups based on estimates of the underlying inputs at a more granular level based on consideration of the characteristics
of the portfolio and output from the SCR reporting processes.
The fair value has been calibrated based on analysis of the Group\u2019s own data and market data including public information on
recent transactions (to the extent relevant and available).
The Group has determined the identification of groups of contracts and classification of contracts using information available at
1\u00a0January 2022. Groups of policies valued under the fair value approach contain contracts issued more than one year apart.
For\u00a0contracts valued under the General Measurement Model, locked-in discount rates and financial assumptions applied after
transition have been determined as at 1 January 2022.
The table below shows the locked-in discount rates for annuity business at the transition date:
1 year
5 years
10 years
15 years
20 years
25 years
30 years
Annuities - shareholder-backed
1.850%
2.143%
2.040%
2.005%
1.971%
1.942%
1.915%
Annuities - in the With-Profits Fund
1.747%
2.039%
1.937%
1.902%
1.868%
1.839%
1.812%
The tables below show selected sensitivities of the fair value to the assumed parameters:
Sensitivity of the fair value of with-profits business to the compensation required in relation to shareholder transfers
Parameter
Fair value
Impact on
fair value
\u00a3m
\u00a3m
Base
20%
42,130
N/A
Sensitivity
25%
42,233
103
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 17 Insurance Contracts (continued)
Sensitivity of the fair value to the cost of capital rate
With-profits contracts
Annuity contracts
Parameter
Fair value
Impact on
fair\u00a0value
Fair value
Impact on
fair\u00a0value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Base
7%
42,130
N/A
28,670
N/A
Sensitivity
6%
42,123
(7)
28,379
(291)
Sensitivity
8%
42,135
5
28,922
252
Fulfilment cash flows
The fulfilment cash flows at 1 January 2022 under all transition approaches have been measured in accordance with the accounting
policies set out in Note 1.5. For this purpose the key assumptions are set out below.
The risk-free yield curve for with-profits and annuity contracts is shown in the table below:
Risk-free yield curve (excluding illiquidity premium)
1 year
5 years
10 years
15 years
20 years
As at 1 January 2022
0.76%
1.05%
0.95%
0.91%
0.88%
For with-profits contracts, future investment return assumptions and discount rates (using a bottom-up approach) are set at the
above risk-free yield curve plus an illiquidity premium of 34 bps.
For annuity contracts, discount rates (using a top-down approach) are set at the above risk-free yield curve plus an illiquidity
premium of 109 bps for shareholder-backed annuities and 99 bps for annuities in the With-Profits Fund.
The longevity assumptions for annuity contracts are consistent with the best estimate basis used for the Group\u2019s Solvency II
reporting, as disclosed in the Group Solvency and Financial Condition Report as at 31 December 2021.
Comparison with IFRS 4
The timing of profit recognition changed significantly under IFRS 17. Under IFRS 4 profits are recognised as follows:
\u2013 For with-profits contracts that share in the profit arising in the main With-Profits Fund, profits are recognised when bonuses
are\u00a0added to policies. As a substantial proportion of the total bonus is determined when claims are paid to policyholders,
a\u00a0considerable part of the profit is recognised when policies terminate.
\u2013 For non-profit contracts (notably annuities) a substantial proportion of the lifetime expected profit is recognised at policy
inception, reflecting the difference between the premiums received less costs incurred and the prudent liability established for
the expected future cash flows.
In contrast, IFRS 17 does not allow upfront profit recognition for profitable contracts but rather requires that profit is recognised
as\u00a0services are provided to the policyholders.
Other differences in the measurement of the liabilities include:
\u2013 IFRS 17 requires that the discount rates include an illiquidity premium. The IFRS 4 discount rates for with-profits contracts in
particular do not include an illiquidity premium. For annuity contracts, the IFRS 4 discount rates are similar to IFRS 17.
\u2013 IFRS 4 liabilities for non-profit contracts are determined using implicit prudent margins in the demographic and expense
assumptions. In contrast, IFRS 17 requires a separate risk adjustment for non-financial risks which may differ from the value of
the IFRS 4 margins.
\u2013 Under IFRS 4, the unallocated surplus of the With-Profits Fund represented the excess of the fund\u2019s assets over policyholder
liabilities that is yet to be appropriated between policyholders and shareholders with no allocation to equity. There is no
unallocated surplus under IFRS 17 although IFRS 17 requires a liability to be held for the policyholders\u2019 share of the surplus assets
in the With-Profits Fund. Under IFRS 17 there is equity for the first time relating to the With-Profits Fund.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 17 Insurance Contracts (continued)
Comparison with IFRS 4 (continued)
Driver
Description
\u00a3m
Total equity as previously reported
5,345
Liability remeasurement
Includes impact of:
\u2013 Removing the prudent margins required under IFRS 4 for annuity liabilities
(primarily for demographic and expenses assumptions); and
\u2013 Different basis for determining discount rate for both annuity and with-profit liabilities.
1,334
Value of shareholder
transfers
Under IFRS 17 the present value of all future shareholder transfers are allowed for
in\u00a0the\u00a0Variable Fee (broadly the entity's expected future profit) and so the unearned
share\u00a0of the shareholder transfers is included in the CSM.
3,954
CSM
Introduction of CSM which represents unearned profit on insurance contracts
and\u00a0investment contracts with DPF which will be released over the life of the contract
in\u00a0line with the provision of service.
(4,400)
Risk adjustment
Introduction of risk adjustment which represents compensation for non-financial risk
and\u00a0replaces the IFRS 4 prudent margins.
(487)
Shareholder interest in
excess assets in the
With-Profits Fund
As a consequence of applying the mutualisation requirements of IFRS 17, a portion
of\u00a0the\u00a0with-profits estate is allocated to shareholders. Under IFRS 4, this was included
within the unallocated surplus of the With-Profits Fund.
1,687
Tax and other
Impact of change in deferred tax and other minor effects.
(169)
Remeasurement of equity attributable to equity holders on adoption.
1,919
Total equity as restated
7,264
IFRS 9 Financial Instruments
IFRS 9 replaced IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after
1\u00a0January\u00a02018. However, the Group elected, under the amendments to IFRS 4 to apply the temporary exemption from IFRS 9,
deferring the initial application date of IFRS 9 to align with the initial application of IFRS 17.
The Company has applied IFRS 9 retrospectively and restated comparative information for the year ended 31 December 2022 for
financial instruments in the scope of IFRS 9. Differences arising from the adoption of IFRS 9 have been recognised in retained
earnings as at 1\u00a0January 2022 and presented in the consolidated statement of changes in equity and have been disclosed in below.
The nature of the changes in accounting policies can be summarised as follows:
(i) Classification of financial assets and financial liabilities
IFRS 9 includes three classification categories for financial assets: measured at amortised cost, Fair Value through Other
Comprehensive Income (FVOCI) and Fair Value Through Profit or Loss (FVTPL). The classification of financial assets is generally
based on the business model in which a financial asset is managed and its contractual cash flow characteristics. It eliminates the
previous categories of held-to-maturity investments, loans and receivables, and available-for-sale financial assets applied by IAS 39.
IFRS 9 has not had a significant effect on the Group\u2019s financial instruments classification as the majority were already measured at
FVTPL. The Group does not hold any assets measured at FVOCI.
(ii) Impairment of financial assets
IFRS 9 replaced the \u2018incurred loss\u2019 model in IAS 39 with a forward-looking \u2018expected credit loss\u2019 (ECL) model for recording
impairment. The new impairment model applies to financial assets measured at amortised cost and contract assets under IFRS 15.
The ECL model results in earlier recognition of impairment as compared to the previous model which required objective evidence
of impairment to exist before any impairment was recorded.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 9 Financial Instruments (continued)
(iii) Transition
Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively, except as described
below:
\u2013 The comparative period has been restated adopting the overlay approach.
\u2013 The following assessments have been made on the basis of the facts and circumstances that existed at 1\u00a0January 2023:
\u2013 The determination of the business model within which a financial asset is held.
\u2013 The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at
FVTPL.
\u2013 If a financial asset had low credit risk at 1 January 2023, then the Group determined that the credit risk on the asset had not
increased significantly since initial recognition.
The adoption of IFRS 9 has not had a material impact on the Group\u2019s basic or diluted EPS for the years ended 31\u00a0December 2023
and 2022.
Details of the changes and implications resulting from the adoption of IFRS 9 are presented below.
(iv) Effect of initial application
Classification of financial assets and financial liabilities
The following table and the accompanying notes below explain the original measurement categories and carrying amounts under
IAS 39 and the new measurement categories and carrying amounts under IFRS 9 for each class of the Group\u2019s financial assets and
financial liabilities as at 1\u00a0January 2023.
As at 31\u00a0December 2022
As at 1\u00a0January 2023
As at 31\u00a0December 2022
As at 1\u00a0January 2023
Original classification\u00a0
under\u00a0IAS 39
New classification
under\u00a0IFRS 9
Original carrying value
under IAS 39i
New carrying
amount under IFRS 9
\u00a3m
\u00a3m
Financial assets
Equity securities and pooled investment funds
FVTPL designated
FVTPL mandatory
70,127
70,127
Loans
Loans and receivables
FVTPL mandatory
2,114
2,018
Loans
FVTPL designated
FVTPL mandatory
1,216
1,216
Debt securities
FVTPL designated
FVTPL mandatory
62,821
62,821
Derivative assets
FVTPL held for trading
FVTPL mandatory
2,850
2,850
Deposits
Amortised cost
Amortised cost
21,401
21,399
Accrued investment income and other debtors
Loans and receivables
Amortised cost
2,408
2,404
Cash and cash equivalents
Loans and receivables
Amortised cost
4,884
4,884
Total financial assets
167,821
167,719
As at 31\u00a0December 2022
As at 1\u00a0January 2023
As at 31\u00a0December 2022
As at 1\u00a0January 2023
Original classification\u00a0
under\u00a0IAS 39
New classification under
IFRS 9
Original carrying value
under IAS 39i
New carrying
amount under IFRS 9
\u00a3m
\u00a3m
Financial liabilities
Investment contract liabilities without DPF
FVTPL designated
FVTPL designated
11,937
11,937
Third party interest in consolidated funds
FVTPL designated
FVTPL designated
10,389
10,389
Subordinated liabilities and other borrowings
Amortised cost
Amortised cost
7,537
7,537
Derivative liabilities
FVTPL held for trading
FVTPL mandatory
4,185
4,185
Other financial liabilities
Amortised cost
Amortised cost
2,172
2,172
Accruals, deferred income and other liabilities
FVTPL designated
FVTPL designated
246
246
Accruals, deferred income and other liabilities
Amortised cost
Amortised cost
6,522
6,522
Total financial liabilities
42,988
42,988
i Original carrying value differs from that published in the Annual Report and Accounts for the year ended 31 December 2022 following reclassifications.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 9 Financial Instruments (continued)
Classification of financial assets and financial liabilities (continued)
The Group accounting policies on the classification of financial instruments under IFRS 9 are set out in Note 1.5. The application of
the revised Group accounting policies resulted in the reclassifications set out in the table above and explained below.
\u2013 As at 31\u00a0December 2022, Loans of \u00a32,114m which have previously been classified as loans and receivables are managed on a fair
value basis and are, therefore, measured at FVTPL on the basis of the business model for managing loans under IFRS 9.
The application of IFRS 9 did not have a material impact on the classification and measurement of financial liabilities.
The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 on
transition to IFRS 9 on 1\u00a0January 2023.
31\u00a0December 2022
IAS 39
Reclassification
Remeasurement
1\u00a0January 2023
IFRS 9
\u00a3m
\u00a3m
\u00a3m
\u00a3m
FVTPL
Equity securities and pooled investment funds
70,127
\u2014
\u2014
70,127
Loans
1,216
2,114
(96)
3,234
Debt securities
62,821
\u2014
\u2014
62,821
Derivative assets - net of derivative liabilities
(1,335)
\u2014
\u2014
(1,335)
Total FVTPL
132,829
2,114
(96)
134,847
31\u00a0December 2022
IAS 39
Reclassification
Remeasurement
1\u00a0January 2023
IFRS 9
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Amortised cost
Loans
2,114
(2,114)
\u2014
\u2014
Deposits
21,401
\u2014
(2)
21,399
Accrued investment income and other debtors
2,408
\u2014
(4)
2,404
Cash and cash equivalents
4,884
\u2014
\u2014
4,884
Total amortised cost
30,807
(2,114)
(6)
28,687
As at 1 January 2023 the transition to IFRS 9 did not result in reclassification or remeasurement of the carrying amounts of financial
liabilities.
Impairment of financial assets
The following table reconciles the closing impairment allowance under IAS 39 as at 31\u00a0December 2022 with the opening ECLs
under IFRS 9 as at 1\u00a0January 2023.
Impairment allowance
under IAS 39 as at
31\u00a0December 2022
Remeasurement
ECLs under IFRS 9 as at
1\u00a0January 2023
\u00a3m
\u00a3m
\u00a3m
Loans
30
(30)
\u2014
Deposits
\u2014
2
2
Accrued investment income and other debtors
37
4
41
Cash and cash equivalents
\u2014
\u2014
\u2014
Total impairment allowances /ECLs
67
(24)
43
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 9 Financial Instruments (continued)
IFRS 7 includes disclosure requirements at the date of initial application of IFRS 9 (1\u00a0January 2023). As the Group has restated
comparative balances effective 1\u00a0January 2022, the following additional tables have been included to provide the user
with\u00a0additional information about the transition to IFRS 9 and the adjustments to opening balances of retained earnings as at
1\u00a0January 2022, in conjunction with the effects of the transition to IFRS 17 on that date.
The table below and accompanying notes compare the original measurement categories and carrying amounts under IAS 39 and
the new measurement categories under IFRS 9 for each class of the Group\u2019s financial assets and financial liabilities on transition to
IFRS 9 on 1\u00a0January 2022:
As at
31\u00a0December 2021
As at
1\u00a0January 2022
As at
31\u00a0December 2021
As at
1\u00a0January 2022
Original classification
under\u00a0IAS 39
New classification
under IFRS 9
Original carrying value
under IAS 39i
New carrying amount
under IFRS 9
\u00a3m
\u00a3m
Financial assets
Equity securities and pooled investment funds
FVTPL designated
FVTPL mandatory
74,069
74,069
Loans
Loans and receivables
FVTPL mandatory
2,534
2,605
Loans
FVTPL designated
FVTPL mandatory
3,275
3,275
Debt securities
FVTPL designated
FVTPL mandatory
81,059
81,059
Derivative assets
FVTPL held for trading
FVTPL mandatory
3,373
3,373
Deposits
Loans and receivables
Amortised cost
17,633
17,632
Accrued investment income and other debtors
Loans and receivables
Amortised cost
2,837
2,833
Cash and cash equivalents
Loans and receivables
Amortised cost
6,908
6,908
Total financial assets
191,688
191,754
As at
31\u00a0December 2021
As at
1\u00a0January 2022
As at
31\u00a0December 2021
As at
1\u00a0January 2022
Original classification
under\u00a0IAS 39
New classification
under IFRS 9
Original carrying value
under IAS 39i
New carrying amount
under IFRS 9
\u00a3m
\u00a3m
Financial liabilities
Investment contract liabilities without DPF
FVTPL designated
FVTPL designated
14,884
14,884
Third party interest in consolidated funds
FVTPL designated
FVTPL designated
12,636
12,636
Subordinated liabilities and other borrowings
FVTPL designated
FVTPL designated
1,159
1,159
Subordinated liabilities and other borrowings
Amortised cost
Amortised cost
7,771
7,771
Derivative liabilities
FVTPL held for trading
FVTPL mandatory
2,689
2,689
Other financial liabilities
Amortised cost
Amortised cost
2,882
2,882
Accruals, deferred income and other liabilities
FVTPL designated
FVTPL designated
403
403
Accruals, deferred income and other liabilities
Amortised cost
Amortised cost
5,661
5,661
Total financial liabilities
48,085
48,085
i Original carrying value differs from that published in the Annual Report and Accounts for the year ended 31 December 2021 following reclassifications.
The tables above and below explain the reclassifications of assets and liabilities on application of the revised Group accounting
policies for classification of financial instruments under IFRS 9 set out in Note 1.5.
As at 31 December 2021, Loans of \u00a32,534m which have previously been classified as loans and receivables under IAS 39, are
managed on a fair value basis and are, therefore, measured at FVTPL on the basis of business model for managing loans under
IFRS 9.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
IFRS 9 Financial Instruments (continued)
The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 on
transition to IFRS 9 on 1\u00a0January 2022.
31\u00a0December 2021
IAS 39
Reclassification
Remeasurement
1\u00a0January 2022
IFRS 9
\u00a3m
\u00a3m
\u00a3m
\u00a3m
FVTPL
Equity securities and pooled investment funds
74,069
\u2014
\u2014
74,069
Loans
3,275
2,534
71
5,880
Debt securities
81,059
\u2014
\u2014
81,059
Derivative assets - net of derivative liabilities
684
\u2014
\u2014
684
Total FVTPL
159,087
2,534
71
161,692
31\u00a0December 2021
IAS 39
Reclassification
Remeasurement
1\u00a0January 2022
IFRS 9
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Amortised cost
Loans
2,534
(2,534)
\u2014
\u2014
Deposits
17,633
\u2014
(1)
17,632
Accrued investment income and other debtors
2,837
\u2014
(4)
2,833
Cash and cash equivalents
6,908
\u2014
\u2014
6,908
Total amortised cost
29,912
(2,534)
(5)
27,373
As at 1 January 2022 the transition to IFRS 9 did not result in reclassification or remeasurement of the carrying amounts of financial
liabilities.
Impairment of financial assets
The following table reconciles the closing impairment allowance under IAS 39 as at 31\u00a0December 2021 with the opening ECLs
under IFRS 9 as at 1\u00a0January 2022.
Impairment allowance
under IAS 39 as at
31\u00a0December 2021
Remeasurement
ECLs under IFRS 9 as at
1\u00a0January 2022
\u00a3m
\u00a3m
\u00a3m
Loans
18
(18)
\u2014
Deposits
\u2014
1
1
Accrued investment income and other debtors
77
4
81
Cash and cash equivalents
\u2014
\u2014
Total impairment allowances/ECLs
95
(13)
82
1 Basis of preparation and\u00a0material accounting policies (continued)
1.2 New accounting pronouncements (continued)
1.2.1 New accounting pronouncements adopted by the Group (continued)
Transition to IFRS 9 and IFRS 17
The key impact on main financial statement lines in the Group's consolidated statement of financial position on transition to IFRS 9
and IFRS 17 is presented below:
31\u00a0December 2021 as
previously reported
Reclassification due
to adoption of IFRS 9
and\u00a0IFRS 17
Remeasurement due
to adoption of IFRS 9
and IFRS 17
1\u00a0January 2022
restated
Financial statement line item
\u00a3m
\u00a3m
\u00a3m
\u00a3m
IFRS 9
Equity securities and pooled investment funds
74,069
\u2014
\u2014
74,069
Loans
5,809
\u2014
71
5,880
Debt securities
81,059
\u2014
\u2014
81,059
Derivative assets - net of derivative liabilities
684
\u2014
\u2014
684
Cash and cash equivalents
6,908
\u2014
\u2014
6,908
IFRS 17
Reinsurance contract assets
1,669
\u2014
46
1,715
Reinsurance contract liabilities
\u2014
\u2014
(546)
(546)
Insurance contract assets
\u2014
\u2014
28
28
Insurance contract liabilities
(63,223)
(99,466)
1,868
(160,821)
Investment contract liabilities with DPF
(82,743)
82,743
\u2014
\u2014
Investment contract liabilities without DPF
(14,884)
\u2014
\u2014
(14,884)
IFRS 9 and IFRS 17
Accrued investment income and other debtors
2,647
\u2014
186
2,833
Unallocated surplus of the With-Profits Fund
(16,723)
16,723
\u2014
\u2014
Accruals, deferred income and other liabilities
(6,666)
\u2014
153
(6,513)
Other
16,739
\u2014
113
16,852
Total equity
5,345
\u2014
1,919
7,264
Other accounting announcements adopted by the Group
The Group has also adopted the following standards, interpretations and amendments which became effective from
1\u00a0January\u00a02023:
\u2013 Disclosure of Accounting Policies (Amendments to IAS 1), issued in March 2022;
\u2013 Definition of Accounting Estimates (Amendments to IAS 8), issued in March 2022;
\u2013 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12), issued in August 2022;
and
\u2013 International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12), issued in May 2023.
The above interpretations and amendments to standards are not considered to have a material effect on these consolidated
financial statements.
1.2.2 New accounting pronouncements not yet effective
In addition to the above, the following new accounting pronouncements have also been issued but are not yet effective or have not
yet been adopted for use in the UK:
\u2013 Classification of Liabilities as Current or Non-current (Amendments to IFRS 1), issued in January 2020 and effective from
1\u00a0January 2024;
\u2013 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture \u2013 (Amendments to IFRS 10 and IAS 28),
issued in December 2015 and effective date pending completion of the research project on equity method accounting;
\u2013 Lease Liability in a Sale and Leaseback (Amendments to IFRS 16), issued in September 2022 and effective from 1 January 2024;
\u2013 Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7), issued in May 2023 and effective from 1\u00a0January\u00a02024; and
\u2013 Lack of exchangeability (Amendments to IAS 21), issued in August 2023 and effective from 1 January 2025.
The Group has assessed the impact of these pronouncements on the consolidated financial statements, none of which are
expected to have a material impact on the Group.
1.3 Judgements in applying accounting policies and sources of estimation uncertainty
A full list of the Group\u2019s material accounting policies is provided in Note 1.5. The accounting policies adopted by the Group have not
changed materially from those applied in the Group's Annual Report and Accounts for the year ended 31 December 2022, the
exceptions being those arising from the application of IFRS 17 and IFRS 9. In applying these accounting policies, the Group has
made a number of key judgements which have a significant effect on the amounts recognised in the consolidated financial
statements. The impact of climate change has been considered when preparing these consolidated financial statements,
particularly in the context of our TCFD disclosures included on pages 69 to 90. Many of the effects arising from climate change are
long term in nature, with an inherent degree of uncertainty associated. These have been assessed as having no material impact on
the carrying value of assets and liabilities within the next financial year.
The following table sets out the basis of these judgements, and references the associated accounting policy and related note
which both give further detail on the specific application.
Financial statement area
Key judgement
Accounting
policy
Note
Consolidation of
structured entities
IFRS 10 requires entities that the Group controls to be consolidated in the
consolidated financial statements. Structured entities are entities that have been
designed so that voting or similar rights are not the dominant factor in deciding
who controls the entity. Due to the nature of structured entities, judgement is
required to determine whether the Group controls and therefore consolidates
structured entities. Judgement is also required where certain seed capital
investments in structured entities are classified as held for sale investments, and
therefore not consolidated on a line-by-line basis.
1.5.1
30
Classification of
insurance and
investment contracts
IFRS 17 requires that contracts that transfer significant insurance risk are
accounted for as insurance contracts. Judgement is required to determine
whether contracts written by the Group transfer significant insurance risk, unless a
specific scope exception applies (eg equity release mortgages).
Judgement is also required in the case of certain investment contracts which
provide an additional benefit in addition to guaranteed benefits to determine
whether they meet the criteria to be considered as discretionary participation
features, and therefore accounted for under IFRS 17.
1.5.2
24
Contractual Service
Margin measurement
model
IFRS 17 requires an assessment of whether contracts meet the conditions for
having direct participation features and when this is the case such contracts must
use the Variable Fee Approach to measure the CSM. For with-profit and unit-linked
contracts, judgement is required to assess whether the Group expects to pay to
the policyholder an amount equal to a substantial share of the fair value returns on
the underlying items; and whether the entity expects a substantial proportion of
any change in the amounts to be paid to the policyholder to vary with the change in
fair value of the underlying items. The assessment is carried out at the contract
level and judgement is also applied to determine the extent to which mutualisation
between contracts is allowed for.
1.5.2
24
Underlying items
Underlying items are items that determine some of the amounts payable to a
policyholder as part of their with-profit or unit-linked contract and therefore are a
component of the insurance contract or investment contracts with DPF liabilities.
Judgement is required to define underlying items for with-profits contracts that
reflect the mutualisation between contracts and how to split underlying items
between current and future policyholders.
1.5.2
24
1 Basis of preparation and\u00a0material accounting policies (continued)
1.3 Judgements in applying accounting policies and sources of estimation uncertainty (continued)
Financial statement area
Key judgement
Accounting
policy
Note
Division of surplus
relating to the
With-Profits Fund
Judgement is required to determine the amount of surplus that should be divided
between current and future with-profits policyholders as well as with the Group
and the amount of surplus attributable solely to the Group.
1.5.2
24
Provision of insurance
contract services
The amount of CSM recognised in profit or loss in each reporting period is
determined by reference to coverage units, which represent the insurance
contract services provided in that period. Judgement is required to define the
services provided, and the relative weighting if these include both insurance and
investment services.
1.5.2
24
The following table sets out the basis of the judgements made specifically for the measurement of the consolidated statement of
financial position at the IFRS 17 transition date of 1\u00a0January 2022. Further detail on specific application can be found in Note 1.2.1.
Financial statement area
Key judgement
Method of transition
approach
Judgement was required to assess for which contracts it would be impracticable to apply the Fully
Retrospective Approach (FRA).
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1.5 Accounting policies
1.5.1 Basis of consolidation
The Group has control over an investee if all three of the following conditions are met: (i) it has power over an investee; (ii) it is
exposed to, or has rights to, variable returns from its involvement with the investee; and (iii) it has the ability to use its power over
the investee to affect its own returns.
(i) Subsidiaries
Subsidiaries are those investees that the Group controls. Where the Group is deemed to control an entity, the entity is treated as a
subsidiary and its results, assets and liabilities are consolidated. Where the Group holds a minority share in an entity but does not
have control, joint control or significant influence over the entity, the investments are carried at FVTPL within financial investments
in the consolidated statement of financial position.
The Group performs a reassessment of consolidation whenever there is a change in the substance of the relationship between the
Group and an investee.
(ii) Joint ventures and associates
Joint ventures are joint arrangements arising from a contractual agreement whereby the Group and other investors have joint
control of the net assets of the arrangement. In these arrangements, the Group\u2019s share of the underlying net assets may be lower
or higher than 50% but the terms of the relevant agreement make it clear that control is jointly exercised between the Group and
the third party, for example, where significant decisions required unanimous approval of all parties, or where all parties have equal
voting rights.
Associates are entities over which the Group has significant influence, but which it does not control. Generally, it is presumed that
the Group has significant influence if it holds between 20% and 50% of the voting rights of the entity.
Investments in associates and joint ventures held by the Group\u2019s insurance or investment funds, including venture capital
businesses, mutual funds and unit trusts, are accounted for at FVTPL. All other investments in joint ventures and associates are
accounted for using the equity method of accounting. Under the equity method, the Group\u2019s share of profit or loss of its joint
ventures and associates is recognised in the consolidated income statement and its share of movements in other comprehensive
income are recognised in other comprehensive income.
(iii) Structured entities
Structured entities are those that have been designed so that voting or similar rights are not the dominant factor in deciding who
controls the entity. Voting rights relate to administrative tasks. Relevant activities are directed by means of contractual
arrangements. The Group invests in structured entities such as:
\u2013 Collective investment vehicles including Open-Ended Investment Companies (OEICs), Authorised Contractual Schemes (ACSs)
and Luxembourg-domiciled Soci\u00e9t\u00e9s d\u2019Investissement \u00e0 Capital Variable (SICAVs)
\u2013 Limited partnerships
\u2013 Collateralised debt obligations
\u2013 Mortgage-backed securities
\u2013 Similar asset-backed securities.
Collective investment vehicles
The Group invests in OEICs, ACSs, SICAVs and unit trusts, which invest mainly in equities, bonds, cash and cash equivalents, and
properties.
The assessment of control over OEICs, ACSs, SICAVs and unit trusts requires judgement. In assessing control, the Group
determines whether it is acting as principal or agent. This includes an assessment of the scope of its decision-making authority,
including rights held by third parties, which may provide these parties substantive removal rights that may affect the Group\u2019s ability
to direct the relevant activities and indicate that the Group does not have power.
In addition, the assessment considers the aggregate economic interest of the Group, which includes both direct holding and
expected management fees if the fund manager is a Group company, however, management fees in most cases forms an
immaterial part of the aggregate economic interest of the Group.
Holdings in such investments can fluctuate on a daily basis according to the participation of the Group and other investors in them.
As a result, in determining control, the Group looks at the trend of ownership over a longer period (rather than at a point in time) to
mitigate the impact of daily fluctuations which do not reflect the wider facts and circumstances of the Group\u2019s involvement.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.1 Basis of consolidation (continued)
(iii) Structured entities (continued)
Collective investment vehicles (continued)
Consolidation assessment is performed in line with the following principles having taken into account substantial removal rights:
\u2013 where the Group manages the assets of the entity, and the aggregate of the Group\u2019s ownership holding in the entity exceeds
50%, the Group is judged to have control over the entity;
\u2013 where the Group manages the assets of the entity, and the aggregate of the Group\u2019s ownership holding in the entity is between
20% and 50%, the facts and circumstances of the Group\u2019s involvement in the entity are considered, including the rights to any
fees earned by the asset manager from the entity, in forming a judgement as to whether the Group has control over the entity;
\u2013 where the Group manages the assets of the entity, and the aggregate of the Group\u2019s ownership holding in the entity is less than
20%, the Group is judged to not have control over the entity; or
\u2013 where the assets of the entity are managed externally, an assessment is made of whether the Group has existing rights that give
it the ability to direct the current activities of the entity and therefore control the entity. In assessing the Group\u2019s ability to direct
an entity, the Group considers its ability relative to other investors. The Group has a limited number of OEICs and unit trusts
where it considers it has such ability.
Where the Group is deemed to control these entities, they are treated as subsidiaries and are consolidated, with the interests of
investors other than entities within the Group being classified as liabilities, presented as third party interest in consolidated funds.
Where the Group does not control these entities (as it is deemed to be acting as an agent), and they do not meet the definition of
associates, they are carried at FVTPL within equity securities and pooled investment funds in the consolidated statement of
financial position.
Where the Group initially sets up OEICs, ACSs, SICAVs and unit trusts as part of its operations through its investment management
business, and invests the initial seed capital which results in a significant holding resulting in control of the fund, the Group
assesses whether there is a formal plan in place to divest its holding to below the threshold triggering control within 12 months.
In\u00a0this situation, the vehicle is not consolidated, but classified as held for sale and carried at FVTPL.
Limited partnerships
The Group invests in a number of limited partnerships, either directly or through unit trusts, through a mix of capital and loans.
These limited partnerships are managed by general partners, in which the Group holds equity.
Such interests in general partners and limited partnerships provide the Group with voting and similar rights to participate in the
governance framework of the relevant activities which limited partnerships are engaged in. Accounting for the limited partnerships
(including underlying investees) as subsidiaries, joint ventures, associates or other financial investments depends on the terms of
each partnership agreement and the level of shareholdings in the general partners.
Other structured entities
The Group holds investments in mortgage-backed securities, collateralised debt obligations and similar asset-backed securities.
The Group consolidates the vehicles that hold the investments where the Group is deemed to control the vehicles. When assessing
control over the vehicles, the factors considered include the purpose and design of the vehicle, the Group\u2019s exposure to the
variability of returns and the scope of the Group\u2019s ability to direct the relevant activities of the vehicle, including any kick-out or
removal rights that are held by third parties. The outcome of the control assessment is dependent on the terms and conditions of
the respective individual arrangements, taking into account aggregate economic interest where relevant.
(iv) Qualifying partnerships
Entities consolidated by the Group include Qualifying Partnerships as defined under the UK Partnerships (Accounts) Regulations
2008 (the 'Partnership Act'). Some of these limited partnerships have taken advantage of the exemption under regulation 7 of the
Partnerships Act from the financial statements requirements. This is under regulations 4 to 6, on the basis that these limited
partnerships are dealt with on a consolidated basis in these financial statements.
(v) Third party interests
Interests of parties other than the Group in entities which the Group controls are assessed to determine whether they should be
classified as financial liabilities or as non-controlling interests in equity on the consolidated statement of financial position. Puttable
third party interests such as units held by external investors in unit trusts are classified as financial liabilities. Third party interests in
private equity vehicles set up with finite lives are also classified as financial liabilities.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
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1.5 Accounting policies
1.5.1 Basis of consolidation
The Group has control over an investee if all three of the following conditions are met: (i) it has power over an investee; (ii) it is
exposed to, or has rights to, variable returns from its involvement with the investee; and (iii) it has the ability to use its power over
the investee to affect its own returns.
(i) Subsidiaries
Subsidiaries are those investees that the Group controls. Where the Group is deemed to control an entity, the entity is treated as a
subsidiary and its results, assets and liabilities are consolidated. Where the Group holds a minority share in an entity but does not
have control, joint control or significant influence over the entity, the investments are carried at FVTPL within financial investments
in the consolidated statement of financial position.
The Group performs a reassessment of consolidation whenever there is a change in the substance of the relationship between the
Group and an investee.
(ii) Joint ventures and associates
Joint ventures are joint arrangements arising from a contractual agreement whereby the Group and other investors have joint
control of the net assets of the arrangement. In these arrangements, the Group\u2019s share of the underlying net assets may be lower
or higher than 50% but the terms of the relevant agreement make it clear that control is jointly exercised between the Group and
the third party, for example, where significant decisions required unanimous approval of all parties, or where all parties have equal
voting rights.
Associates are entities over which the Group has significant influence, but which it does not control. Generally, it is presumed that
the Group has significant influence if it holds between 20% and 50% of the voting rights of the entity.
Investments in associates and joint ventures held by the Group\u2019s insurance or investment funds, including venture capital
businesses, mutual funds and unit trusts, are accounted for at FVTPL. All other investments in joint ventures and associates are
accounted for using the equity method of accounting. Under the equity method, the Group\u2019s share of profit or loss of its joint
ventures and associates is recognised in the consolidated income statement and its share of movements in other comprehensive
income are recognised in other comprehensive income.
(iii) Structured entities
Structured entities are those that have been designed so that voting or similar rights are not the dominant factor in deciding who
controls the entity. Voting rights relate to administrative tasks. Relevant activities are directed by means of contractual
arrangements. The Group invests in structured entities such as:
\u2013 Collective investment vehicles including Open-Ended Investment Companies (OEICs), Authorised Contractual Schemes (ACSs)
and Luxembourg-domiciled Soci\u00e9t\u00e9s d\u2019Investissement \u00e0 Capital Variable (SICAVs)
\u2013 Limited partnerships
\u2013 Collateralised debt obligations
\u2013 Mortgage-backed securities
\u2013 Similar asset-backed securities.
Collective investment vehicles
The Group invests in OEICs, ACSs, SICAVs and unit trusts, which invest mainly in equities, bonds, cash and cash equivalents, and
properties.
The assessment of control over OEICs, ACSs, SICAVs and unit trusts requires judgement. In assessing control, the Group
determines whether it is acting as principal or agent. This includes an assessment of the scope of its decision-making authority,
including rights held by third parties, which may provide these parties substantive removal rights that may affect the Group\u2019s ability
to direct the relevant activities and indicate that the Group does not have power.
In addition, the assessment considers the aggregate economic interest of the Group, which includes both direct holding and
expected management fees if the fund manager is a Group company, however, management fees in most cases forms an
immaterial part of the aggregate economic interest of the Group.
Holdings in such investments can fluctuate on a daily basis according to the participation of the Group and other investors in them.
As a result, in determining control, the Group looks at the trend of ownership over a longer period (rather than at a point in time) to
mitigate the impact of daily fluctuations which do not reflect the wider facts and circumstances of the Group\u2019s involvement.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.1 Basis of consolidation (continued)
(iii) Structured entities (continued)
Collective investment vehicles (continued)
Consolidation assessment is performed in line with the following principles having taken into account substantial removal rights:
\u2013 where the Group manages the assets of the entity, and the aggregate of the Group\u2019s ownership holding in the entity exceeds
50%, the Group is judged to have control over the entity;
\u2013 where the Group manages the assets of the entity, and the aggregate of the Group\u2019s ownership holding in the entity is between
20% and 50%, the facts and circumstances of the Group\u2019s involvement in the entity are considered, including the rights to any
fees earned by the asset manager from the entity, in forming a judgement as to whether the Group has control over the entity;
\u2013 where the Group manages the assets of the entity, and the aggregate of the Group\u2019s ownership holding in the entity is less than
20%, the Group is judged to not have control over the entity; or
\u2013 where the assets of the entity are managed externally, an assessment is made of whether the Group has existing rights that give
it the ability to direct the current activities of the entity and therefore control the entity. In assessing the Group\u2019s ability to direct
an entity, the Group considers its ability relative to other investors. The Group has a limited number of OEICs and unit trusts
where it considers it has such ability.
Where the Group is deemed to control these entities, they are treated as subsidiaries and are consolidated, with the interests of
investors other than entities within the Group being classified as liabilities, presented as third party interest in consolidated funds.
Where the Group does not control these entities (as it is deemed to be acting as an agent), and they do not meet the definition of
associates, they are carried at FVTPL within equity securities and pooled investment funds in the consolidated statement of
financial position.
Where the Group initially sets up OEICs, ACSs, SICAVs and unit trusts as part of its operations through its investment management
business, and invests the initial seed capital which results in a significant holding resulting in control of the fund, the Group
assesses whether there is a formal plan in place to divest its holding to below the threshold triggering control within 12 months.
In\u00a0this situation, the vehicle is not consolidated, but classified as held for sale and carried at FVTPL.
Limited partnerships
The Group invests in a number of limited partnerships, either directly or through unit trusts, through a mix of capital and loans.
These limited partnerships are managed by general partners, in which the Group holds equity.
Such interests in general partners and limited partnerships provide the Group with voting and similar rights to participate in the
governance framework of the relevant activities which limited partnerships are engaged in. Accounting for the limited partnerships
(including underlying investees) as subsidiaries, joint ventures, associates or other financial investments depends on the terms of
each partnership agreement and the level of shareholdings in the general partners.
Other structured entities
The Group holds investments in mortgage-backed securities, collateralised debt obligations and similar asset-backed securities.
The Group consolidates the vehicles that hold the investments where the Group is deemed to control the vehicles. When assessing
control over the vehicles, the factors considered include the purpose and design of the vehicle, the Group\u2019s exposure to the
variability of returns and the scope of the Group\u2019s ability to direct the relevant activities of the vehicle, including any kick-out or
removal rights that are held by third parties. The outcome of the control assessment is dependent on the terms and conditions of
the respective individual arrangements, taking into account aggregate economic interest where relevant.
(iv) Qualifying partnerships
Entities consolidated by the Group include Qualifying Partnerships as defined under the UK Partnerships (Accounts) Regulations
2008 (the 'Partnership Act'). Some of these limited partnerships have taken advantage of the exemption under regulation 7 of the
Partnerships Act from the financial statements requirements. This is under regulations 4 to 6, on the basis that these limited
partnerships are dealt with on a consolidated basis in these financial statements.
(v) Third party interests
Interests of parties other than the Group in entities which the Group controls are assessed to determine whether they should be
classified as financial liabilities or as non-controlling interests in equity on the consolidated statement of financial position. Puttable
third party interests such as units held by external investors in unit trusts are classified as financial liabilities. Third party interests in
private equity vehicles set up with finite lives are also classified as financial liabilities.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts
(i) Contracts within the scope of IFRS 17
An entity must apply IFRS 17 to determine the requirements for recognition, measurement, presentation and disclosure of:
\u2013 Insurance contracts (including reinsurance contracts issued);
\u2013 Reinsurance contracts held; and
\u2013 Investment contracts with DPF issued, provided the entity also issues insurance contracts.
IFRS 17 defines insurance contracts as contracts under which one party (the issuer) accepts significant insurance risk from another
party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event)
adversely affects the policyholder.
Reinsurance contracts are insurance contracts issued by one entity (the reinsurer) to compensate another entity for claims arising
from one or more insurance contracts issued by that other entity (underlying contracts).
The Group judges that a contract transfers significant insurance risk if there is at least one scenario where the amounts that could
be payable under the contract represent 10% or more than the amounts payable if the insured event does not occur.
In addition to accepting insurance risk from the insurance contracts issued, the Group is exposed to financial risk from the
insurance and investment contracts it issues and reinsurance contracts it holds.
The Group\u2019s reinsurance contracts are predominantly contracts held under which risks are transferred to an external third party.
The Group has one reinsurance contract under which it accepts risks from with-profits contracts issued by another insurer.
Insurance contracts can be issued and reinsurance contracts can be initiated by the Group, or they can be acquired in a business
combination or in a transfer of contracts that do not form a business. All references in these accounting policies to \u2018insurance
contracts\u2019 and \u2018reinsurance contracts\u2019 include contracts issued, initiated or acquired by the Group, unless otherwise stated.
Investment contracts with DPF have the legal form of insurance contracts, but do not transfer significant insurance risk and so are
classified as financial instruments. Nevertheless such contracts fall within the scope of IFRS 17.
An investment contract with DPF is a financial instrument that provides a particular investor with the contractual right to receive, as
a supplement to an amount not subject to the discretion of the issuer, additional amounts:
\u2013 that are expected to be a significant portion of the total contractual benefits;
\u2013 the timing or amount of which are contractually at the discretion of the issuer; and
\u2013 that are contractually based on:
\u2013 the returns on a specified pool of contracts or a specified type of contract;
\u2013 realised and/or unrealised investment returns on a specified pool of assets held by the issuer; or
\u2013 the profit or loss of the entity or fund that issues the contract.
The Group judges that the additional discretionary benefits are significant when they are expected to be at least 5% of the total
contractual benefits.
The Group\u2019s investment contracts with DPF comprise the with-profits business that do not transfer significant insurance risk. This
includes investments in the PruFund range of funds available to individual investors.
Investment contracts without DPF are not accounted for under IFRS 17 but instead fall within the scope of IFRS 9. For the Group
these primarily comprise unit-linked contracts that do not transfer significant insurance risk. Also within the scope of IFRS 9 are
contracts issued to corporate bodies to facilitate investment in PruFund, which as a result of cancellation rights included in those
contracts, are judged by the Group to not provide significant discretionary benefits.
If several insurance contracts are transacted with the same or a related counterparty and the Group assesses that the contracts
are designed to achieve an overall commercial effect, the contracts are combined in order to report the substance of the
transactions.
Some investment contracts issued by the Group provide policyholders with the option to invest their premiums in both unit-linked
funds and with-profits funds (including access to PruFund). The Group accounts for such contracts as two separate in substance
contracts enabling the investment in with-profits and PruFund to be accounted for under IFRS 17 and the investment in unit-linked
funds to be accounted for under IFRS 9.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(i) Contracts within the scope of IFRS 17 (continued)
The Group has previously issued and still holds a book of equity release mortgages. These contracts contain a no negative equity
guarantee which ensures that, should the policyholder pass away or move into residential care during the term of the instrument
and the accrued loan value is in excess of the sale proceeds of the mortgaged property, then the policyholder\u2019s beneficiaries would
not have to repay any excess. This feature has been assessed to consider whether it gives rise to insurance risk. The Group judges
the equity release mortgages meet the definition of an insurance contract, but the compensation for insured events is limited to the
amount otherwise required to settle the policyholder's obligation created by the contract. In this circumstance IFRS 17 permits the
issuer of contracts to choose whether to account for these contracts under IFRS 17 or IFRS 9. The Group has opted to account for
these contracts under IFRS 9.
(ii) Separating components
At inception, the Group must identify and separate the following components from contracts within the scope of IFRS 17 and
account for the components as if they were stand-alone financial instruments:
\u2013 derivatives embedded in the contract whose economic characteristics and risks are not closely related to those of the host
contract, and where the component issued as a standalone contract is not itself a contract that falls within the scope of IFRS 17;
and
\u2013 distinct investment components other than investment components with DPF: ie investment components that are not highly
inter-related with the insurance components and for which contracts with equivalent terms are sold, or could be sold, separately
in the same market or the same jurisdiction.
After separating any financial instrument components, the Group must separate any promises to transfer to policyholders distinct
goods or services other than insurance coverage and investment services and account for them as separate contracts with
customers (ie these are accounted for under IFRS 15). A good or service is distinct if the policyholder can benefit from it either on
its own or with other resources that are readily available to the policyholder. A good or service is not distinct and is accounted for
together with the insurance component if the cash flows and risks associated with the good or service are highly inter-related with
the cash flows and risks associated with the insurance component, and the Group provides a significant level of service by
integrating the good or service with the insurance component.
The Group has assessed the contracts it has issued and no contracts were identified as containing embedded derivatives, distinct
investment components or distinct goods and non-insurance services that must be separated and accounted for under other IFRS
standards.
Certain contracts have been determined to contain non-distinct investment components, rights to a refund of premiums, and other
non-insurance components (ie amounts payable to a policyholder that are not contingent on the occurrence of an insured event)
which are not required to be separated from the host insurance contract but do require specific treatment under IFRS 17. These
payments are excluded from the value of insurance revenue and insurance service expenses presented in profit and loss.
Non-distinct investment components, rights to a refund of premiums, and other non-insurance components typically arise in
contracts where there is some form of surrender benefit payable at any time of the policyholder\u2019s choosing. The Group has opted
as an accounting policy choice to consistently define the surrender value to be net of surrender charges or penalties when
determining the amounts to exclude from insurance revenue and insurance service expenses.
(iii) Level of aggregation
Insurance contracts
Insurance contracts issued are aggregated into groups for measurement purposes. Groups of insurance contracts are first
determined by identifying portfolios of insurance contracts, each comprising contracts subject to similar risks and managed
together.
The Group interprets that, when aggregating contracts by similar risk, all risks must be considered but \u2018similar risks\u2019 is not
interpreted to mean \u2018identical risks\u2019. The Group judges that an appropriate method is to aggregate contracts according to which of
the three risk categories of protection, longevity and investment is the dominant risk which the Group is exposed to from writing
the contract. These three categories have been chosen as they best represent the risks that the Group is exposed to without
unnecessary granularity and subdivision.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(iii) Level of aggregation (continued)
Insurance contracts (continued)
In aggregating contracts that are managed together, the Group considers the following factors:
\u2013 the existence of a common pool of assets backing the contracts;
\u2013 the approach to risk management, for example hedging strategies or the existence of reinsurance arrangements;
\u2013 for business in a with-profits fund, the approach to risk-bearing, profit-sharing and the application of discretion;
\u2013 the source of the business, eg UK or overseas; and
\u2013 the categorisation of contracts for the segmental reporting reported in the accounts or for internal management information.
Each portfolio is divided into a minimum of:
\u2013 a group of contracts that are onerous on initial recognition, if any;
\u2013 a group of contracts that at initial recognition have no significant possibility of becoming onerous subsequently, if any; and
\u2013 a group of the remaining contracts in the portfolio, if any.
The Group does not currently have any groups of contracts that fall into the category that on initial recognition have no significant
possibility of becoming onerous subsequently.
Each of these groups must then be further subdivided, if necessary to ensure that each group does not contain contracts that have
been issued more than one year apart.
For annuities, unisex pricing may be required under gender neutral pricing regulations, and may, for example, result in policies sold
to females being onerous and policies sold to males being non-onerous. As the other elements of the pricing basis are identical, the
difference in onerousness is solely due to the legal constraint. IFRS 17 permits such contracts to be included in the same group.
Reinsurance contracts held
Reinsurance contracts held are similarly aggregated into groups for measurement purposes by first identifying portfolios.
However, rather than dividing the portfolios into three groups based on profitability, the contracts are grouped according to
whether or not there is net gain at initial recognition for a group, that is into a minimum of:
\u2013 a group of contracts for which there is a net gain on initial recognition, if any;
\u2013 a group of contracts for which, on initial recognition, there is no significant possibility of there being a net gain subsequently, if
any; and
\u2013 a group of the remaining contracts in the portfolio, if any.
As for groups of contracts issued, no group may contain contracts that have been issued more than one year apart and so the
groups must be further subdivided to meet this requirement as necessary.
The Group does not currently have any groups of contracts that fall into the category of, on initial recognition, having no significant
possibility of there being a net gain subsequently.
Some reinsurance contracts provide cover for underlying contracts that are included in different groups. However, the Group
concludes that the reinsurance contract\u2019s legal form of a single contract reflects the substance of the Group\u2019s contractual rights
and obligations, considering that the different covers lapse together and are not sold separately. As a result, the reinsurance
contract is not separated into multiple insurance components that relate to different underlying groups.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(iv) Recognition
A group of contracts issued by the Group is recognised from the earliest of:
\u2013 the beginning of the coverage period of the group (ie the period during which the Group provides services in respect of any
premiums within the boundaries of the contracts);
\u2013 when the first payment from a policyholder in the group becomes due or, if there is no contractual due date, when it is received
from a policyholder; and
\u2013 for a group of onerous contracts, when the group becomes onerous.
The Group is required to determine whether any contracts form a group of onerous contracts before the earlier of the first two
dates above if facts and circumstances indicate there is such a group.
An insurance contract acquired in a transfer of contracts or a business combination is recognised on the date of acquisition.
When the contract is recognised, it is added to an existing group of contracts or, if the contract does not qualify for inclusion in an
existing group, it forms a new group to which future contracts are added. Groups of contracts are established on initial recognition
and their composition is not revised once all contracts have been added to the group.
The recognition date of an investment contract with DPF is the date that the entity becomes party to the contract.
A group of reinsurance contracts held is recognised from the earlier of the following:
\u2013 the beginning of the coverage period of the group of reinsurance contracts held; and
\u2013 the date the Group recognises an onerous group of underlying insurance contracts, if the Group entered into the related
reinsurance contract held in the group of reinsurance contracts held at or before that date.
For groups of reinsurance contracts held that provide proportionate coverage, which for the Group consists of quota share
reinsurance contracts, recognition is delayed until the date that any underlying insurance contract is initially recognised, if that date
is later than the beginning of the coverage period of the group of reinsurance contracts held.
Reinsurance contracts that are acquired are recognised from the date of acquisition.
(v) Onerous groups of contracts
The Group considers the following factors to identify if a group of contracts is onerous:
\u2013 the Group\u2019s pricing frameworks;
\u2013 profit testing results; and
\u2013 calculations for individual contracts.
(vi) Contract boundary
The measurement of a group of contracts includes all of the future cash flows within the boundary of each contract in the group,
determined as follows:
Insurance contracts
Cash flows are within the contract boundary if they arise from substantive rights and obligations that exist during the reporting
period in which the Group can compel the policyholder to pay premiums or has a substantive obligation to provide services
(including insurance coverage and any investment services).
A substantive obligation to provide services ends when:
\u2013 the Group has the practical ability to reassess the risks of the particular policyholder and can set a price or level of benefits that
fully reflects those reassessed risks; or
\u2013 the Group has the practical ability to reassess the risks of the portfolio that contains the contract and can set a price or level of
benefits that fully reflects the risks of that portfolio, and the pricing of the premiums up to the reassessment date does not take
into account risks that relate to periods after the reassessment date.
The reassessment of risks considers only risks transferred from policyholders to the Group, which may include both insurance and
financial risks, but exclude lapse and expense risks.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vi) Contract boundary (continued)
Investment contracts with DPF
Cash flows are within the contract boundary of an investment contract with DPF if they result from a substantive obligation of the
entity to deliver cash at a present or future date. The entity has no substantive obligation to deliver cash if it has the practical ability
to set a price for the promise to deliver the cash that fully reflects the amount of cash promised and related risks.
Reinsurance contracts
Cash flows are within the contract boundary if they arise from substantive rights and obligations that exist during the reporting
period in which the Group is compelled to pay amounts to the reinsurer or has a substantive right to receive services from the
reinsurer. A substantive right to receive services from the reinsurer ends when the reinsurer:
\u2013 has the practical ability to reassess the risks transferred to it and can set a price or level of benefits that fully reflects those
reassessed risks; or
\u2013 has a substantive right to terminate the coverage.
In assessing contract boundaries for insurance, investment with DPF and reinsurance contracts the Group makes the following
judgements:
Granularity of contract boundary assessment
The contract boundary is assessed at an individual contract level.
Practical ability to set a price or level of benefits that fully reflect the risks
Only policyholder risks (the insurance and financial risks that the insurance contract transfers from the policyholder to the Group)
are considered when assessing the Group\u2019s ability to set a price or level of benefits that fully reflects the risks. Individual
components of a single insurance contract are assessed separately, and the full insurance contract is subject to the same single
boundary which is the longest of the individual components.
The Group considers the practical ability to set a price or level of benefits that fully reflects the risks only exists where the Group is
not prevented from setting the same price it would for a new contract with the same characteristics. In addition to the constraints
that apply in relation to new business, constraints on the Group\u2019s ability to set a price or level of benefits that fully reflects the risks
also include wider market competitiveness and commercial considerations and contractual, legal or regulatory restrictions.
The constraints must have commercial substance to bind the Group, where commercial substance is defined as having a
\u2018discernible effect on the economics of the transaction\u2019.
Right to terminate the contract
Policyholder behaviour is not relevant in assessing whether a contract binds the Group. The Group includes, within the fulfilment
cash flows, the probability-weighted expectation of contract terminations, including allowance for policyholder behaviour.
Adding insurance coverage
Where there is an option to add insurance coverage to the same contract at a future date, then the cash flows arising from the
option will only fall outside the contract boundary if the Group has the practical ability to fully reassess the risks for the entire
contract (including the option) at the point the option is exercised.
Frequency of assessment
The assessment of the contract boundary is performed and reassessed to include the effect of changes in circumstances on the
entity's substantive rights and obligations.
Treatment of non-contractual premium top-ups for accumulating with-profits and PruFund range of funds
The Group judges that, on initial recognition of an accumulating with-profits contract or PruFund range of funds contract, it has no
substantive right to any profits associated with future non-contractual premiums and no substantive obligations. Therefore future
non-contractual premiums are considered to be outside the contract boundary of the original contract. Non-contractual top-up
premiums for these contracts are recognised from the date of payment and are reported as new business in the year of payment.
(vii) Measurement
Insurance contracts \u2013 initial measurement
On initial recognition, the Group measures a group of insurance contracts as the total of:
\u2013 the fulfilment cash flows, which comprise estimates of future cash flows, adjusted to reflect the time value of money and the
associated financial risks, and a risk adjustment for non-financial risk; and
\u2013 the CSM.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement (continued)
Estimates of future cash flows
The estimated future cash flows are an explicit, unbiased and probability-weighted estimate (ie expected value) of the present
value of the future cash outflows minus the present value of the future cash inflows that will arise as the entity fulfils insurance
contracts. For most contracts the cash inflows and outflows primarily consist of premiums, claims and costs relating to the
fulfilment of the contracts.
The With-Profits Fund contains surplus assets that have accumulated from a number of sources over a long period. Surpluses may
continue to arise, for example if the amounts charged to policies exceed the costs they are intended to cover. These surpluses
accrue to the With-Profits Fund and can be utilised to meet deficits arising on other with-profits contracts or to enhance the
benefits payable to current or future policyholders. The expression 'mutualisation' is used to refer to the feature whereby the cash
flows of some contracts may affect or be affected by the cash flows of other contracts.
This feature of the With-Profits Fund is recognised under IFRS 17 through:
\u2013 Adjustments to the estimated future cash flows of each with-profits group of insurance contracts to reflect the policyholders\u2019
share of the future surpluses/deficits that are expected to emerge from that group of insurance contracts.
\u2013 A liability that is separate to the liabilities for the groups of insurance contracts that reflects the additional amounts expected to
be paid to current or future policyholders (in accordance with paragraph B71 of IFRS 17).
Estimating the policyholders\u2019 share of the surplus assets is an area requiring significant judgement.
IFRS 17 requires that only costs that are directly attributable to fulfilling the insurance contracts are included in the cash flows.
Management considers that the majority of the expenses incurred in relation to contracts within the scope of IFRS 17 meet this
requirement. Examples of costs that would typically be excluded are those relating to corporate restructuring, brand marketing,
and regulatory failings.
IFRS 17 requires that cash flows within the contract boundary include costs that the entity will incur in providing an investment
activity to enhance benefits for the policyholder. The Group\u2019s interpretation is that the Investment Management Expenses (IMEs)
incurred on assets backing the fulfilment cash flows are included in the fulfilment cash flows for the majority of business, with the
exception of non-profit protection contracts. This is on the basis of the effect of the Group\u2019s investment activities and expected
investment returns on the benefits payable, even if the benefits are contractually fixed at inception (as for annuity contracts). If the
Group were to invest the premiums received for annuity contracts in less risky asset classes, a lower level of benefits would then
be offered for the same premiums. Therefore, the benefits to the policyholder if an insured event occurs are enhanced by the
investment activities performed, and so the associated expenses are included within the fulfilment cash flows.
Where there are cash flows between different components of the reporting entity (such as policyholder funds and shareholder
funds) IFRS 17 requires that these are not included when estimating the cash flows that will arise as the entity fulfils an existing
insurance contract, provided these cash flows do not change the amount that will be paid to the policyholders.
The Group\u2019s interpretation is that expenses will reflect the costs incurred by the Group, which may differ from the internal charges
to companies within the Group.
The cash flows of a group of insurance contracts do not reflect the Group\u2019s non-performance risk.
Discount rates
Cash flows are discounted using risk-free yield curves adjusted to reflect the liquidity characteristics of the contracts.
The Group determines the adjustment for illiquidity using either a top-down or a bottom-up approach.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement (continued)
Discount rates (continued)
Under the top-down approach a yield curve that reflects the current market rates of return implicit in a fair value measurement of a
reference portfolio of assets is adjusted to eliminate any factors that are not relevant to the insurance contracts, such as cash flow
mismatching and credit risk. There is no requirement to adjust the yield curve for differences in the liquidity characteristics of the
insurance contracts and the reference portfolio. Judgement is required to choose an appropriate reference portfolio and to
determine the element of the yield on the portfolio that is attributable to factors not relevant to the insurance contracts.
Under the bottom-up approach a liquid risk-free yield curve is increased to reflect the differences between the liquidity
characteristics of the financial instruments that underlie the risk-free rates observed in the market and the liquidity characteristics
of the insurance contracts. Judgement is required to determine the illiquidity premium.
The Group applies the top-down approach for non-profit annuity contracts and the bottom-up approach for all other contracts,
including with-profits.
The reference portfolios chosen for non-profit annuities are the Assigned Portfolios used for the Solvency II Matching Adjustment.
These are considered to be suitable as reference portfolios for IFRS 17 reporting because their objective is to closely match the
liability cash flows and there is strong governance around their management.
The largest adjustment made to reference portfolio yield is in relation to credit risk. IFRS 17 is not prescriptive as to how the
adjustment for credit risk is determined other than that it should reflect market risk premiums for credit risk. The Group continues
to calculate the credit risk adjustment using the same approach previously used for IFRS 4 reporting. This methodology is
considered appropriate for IFRS 17 reporting as it incorporates allowances for expected and unexpected credit events, including
internal and external views on the outlook for credit risk, and considers the relationship between credit risk and yield spreads.
For with-profits contracts the illiquidity premium is derived from a portfolio of fixed interest assets, comprising highly liquid
government bonds and less liquid corporate bonds, that have similar characteristics and duration to the liabilities. The illiquidity
premium for this portfolio is determined as the spread over risk-free rates less an allowance for credit risk. A weighting is then
applied to this premium to reflect the relative liquidity characteristics of the with-profits contracts.
Risk adjustment for non-financial risk
The risk adjustment for non-financial risk for a group of insurance contracts, determined separately from the other estimates, is the
compensation that the Group requires for bearing uncertainty about the amount and timing of the cash flows that arises from non-
financial risk, such as insurance risk, expense risk and lapse risk.
For all lines of business, the Group uses a confidence level technique under which the target confidence level is determined by
consideration of the Group\u2019s pricing framework for insurance contracts issued and the prices at which the Group has previously
transacted reinsurance contracts held. The target confidence level is translated into product-specific non-financial assumptions by
reference to the Group\u2019s view of the likely risk distributions of non-financial risk events, which have a time horizon of one year. The
risk adjustment for non-financial risk is determined as the increase in the discounted value of the future cash flows from using
these assumptions instead of unbiased non-financial assumptions.
There is significant overlap in the risks considered between IFRS 17 and Solvency II reporting. The IFRS 17 risk adjustment does not
include financial risks or non-financial risks that do not arise from insurance contracts.
The risk adjustment reflects the impact of diversification of non-financial risks within each entity in the Group but not diversification
of risks between entities. The risk adjustment is calculated separately gross of reinsurance and for reinsurance contracts held.
For reinsurance contracts held, the risk adjustment represents the amount of risk being transferred by the Group to the reinsurer.
The same approach is used to determine the risk adjustment, ie as the difference in the discounted value of future cash flows
between using best estimate assumptions and assumptions calibrated to the required confidence level.
CSM
The CSM of a group of insurance contracts represents the unearned profit that the Group will recognise as it provides services
under those contracts. On initial recognition of a group of insurance contracts, if the total of (a) the fulfilment cash flows, (b) any
cash flows arising at that date and (c) any amount arising from the derecognition of any assets or liabilities previously recognised
for cash flows related to the group is a net inflow, then the group is not onerous. In this case, the CSM is measured as the value of
the net inflow, which results in no income or expenses arising on initial recognition.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement (continued)
CSM (continued)
For groups of contracts acquired in a transfer of contracts or a business combination, the consideration received for the contracts
is included in the fulfilment cash flows as a proxy for the premiums received at the date of acquisition. In a business combination,
the consideration received is the fair value of the contracts at that date.
If the total is a net outflow, then the group is onerous. In this case, the net outflow is recognised as a loss in profit or loss, or as an
adjustment to goodwill or a gain on a bargain purchase if the contracts are acquired in a business combination. A loss component
is created to depict the amount of the net outflow, which determines the amounts that are subsequently presented in profit or loss
as reversals of losses on onerous contracts and are excluded from insurance revenue.
Insurance contracts \u2013 subsequent measurement
The carrying amount of a group of insurance contracts at each reporting date is the sum of the liability for remaining coverage and
the liability for incurred claims. The liability for remaining coverage comprises (a) the fulfilment cash flows that relate to services
that will be provided under the contracts in future periods and (b) any remaining CSM at that date. The liability for incurred claims
includes the fulfilment cash flows for incurred claims and expenses that have not yet been paid, including claims that have been
incurred but not yet reported.
The fulfilment cash flows of groups of insurance contracts are measured at the reporting date using current estimates of future
cash flows, current discount rates and current estimates of the risk adjustment for non-financial risk.
The method for calculating the CSM for a group of contracts subsequent to initial recognition of the group depends on whether the
group consists of contracts that are with or without direct participation features.
A contract within the scope of IFRS 17 is considered to have direct participation features (ie required to be measured applying the
Variable Fee Approach) if at inception:
\u2013 the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying items;
\u2013 the entity expects to pay to the policyholder an amount equal to a substantial share of the fair value returns on the underlying
items; and
\u2013 the entity expects a substantial proportion of any change in the amounts to be paid to the policyholder to vary with the change in
fair value of the underlying items.
Conversely all contracts that do not meet the definition of being with direct participation features at inception are contracts
without direct participation features.
Contracts must be individually assessed to determine whether they are with direct participation features and once classified they
are not reassessed unless the contract is modified.
Where contracts are subject to mutualisation, criteria (b) and (c) are assessed allowing for the impact of mutualisation.
The Group\u2019s contracts with direct participation features comprise all of the with-profits business and unit-linked contracts
accounted for under IFRS 17.
All of the Group\u2019s other business that is within the scope of IFRS 17 are contracts without direct participation features. In particular
IFRS 17 prescribes that reinsurance contracts, held or issued, can only be contracts without direct participation features.
Underlying items
The underlying items are items that determine some of the amounts payable to a policyholder. Underlying items can comprise any
items, for example, a reference portfolio of assets, the net assets of the entity, or a specified subset of the net assets of the entity.
For in-force with-profits contracts the Group defines the underlying items to be the assets backing asset shares (which are the
accumulated value of all items of income and outgo) and, where applicable, the assets backing the amounts expected to be added
to asset shares in the future, for example to reflect miscellaneous surplus that has arisen (such as from some non-profit business
written in the With-Profits Fund).
A liability, that is separate to the liabilities for the in-force with-profits contracts (in accordance with paragraph B71 of IFRS 17), is
held in the With-Profits Fund that reflects the additional amounts expected to be paid to current or future policyholders. The Group
defines the underlying items for these benefits to be:
\u2013 the entirety of the assets in the With-Profits Fund;
\u2013 less: the underlying items of the in-force with-profits contracts;
\u2013 less: the assets held to meet other liabilities of the With-Profits Fund, for example for non-profit contracts.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement (continued)
Underlying items (continued)
For unit-linked contracts the Group defines the underlying items to be the assets backing the units allocated to all contracts in the
unit of account (the \u2018unit fund\u2019). For contracts where actuarial funding is used the underlying items are defined as the funded value
of units, that is the face value of units multiplied by the actuarial funding factor.
Insurance contracts without direct participation features
For insurance contracts without direct participation features, the carrying amount of the CSM subsequent to initial recognition is
calculated using the General Measurement Model (GMM). Applying GMM, the carrying amount of the CSM at each reporting date
is the carrying amount at the start of the reporting period, adjusted for:
\u2013 the effect of any new contracts that are added to the group in the reporting period;
\u2013 interest accreted on the carrying amount of the CSM during the reporting period, measured at the discount rates determined on
initial recognition;
\u2013 changes in fulfilment cash flows that relate to future service, except to the extent that:
\u2013 any increases in the fulfilment cash flows exceed the carrying amount of the CSM, in which case the excess is recognised as a
loss in profit or loss and creates a loss component; or
\u2013 any decreases in the fulfilment cash flows are allocated to the loss component;
\u2013 the effect of any currency exchange differences on the CSM; and
\u2013 the amount recognised as insurance revenue because of the services provided in the reporting period.
Changes in fulfilment cash flows that relate to future service comprise:
\u2013 experience adjustments arising from premiums received in the reporting period that relate to future services and related cash
flows, measured at the discount rates determined on initial recognition;
\u2013 changes in estimates of the present value of future cash flows in the liability for remaining coverage, measured at the discount
rates determined on initial recognition, except for changes that arise from the effects of the time value of money, financial risk
and changes therein;
\u2013 differences between (a) any investment component expected to become payable in the reporting period, determined as the
payment expected at the start of the reporting period plus any insurance finance income or expenses related to that expected
payment before it becomes payable; and (b) the actual amount that becomes payable in the reporting period; and
\u2013 changes in the risk adjustment for non-financial risk that relate to future services.
A key aspect of GMM is that adjustments to the CSM resulting from changes to the present value of future cash flows must be
measured using the discount rate that applied at inception of the group of contracts. However, the standard does not explicitly
state whether this is intended to extend to all financial assumptions. The Group\u2019s interpretation is that all financial assumptions
must be set at inception but are only \u2018locked-in\u2019 for future years, therefore the estimates of cash flows up to the measurement date
reflect the effect of actual historical financial risk experience. For example, for index-linked annuities the estimated future cash
flows reflect the actual inflationary increases that have been added to benefits since inception rather than the locked-in assumed
inflationary increases.
After recognising a loss on an onerous group of insurance contracts, specified fulfilment cash flows must be allocated on a
systematic basis between the loss component of the liability for remaining coverage and the liability for remaining coverage
excluding the loss component. For this purpose, the proportion allocated to the loss component is determined as the ratio of the
amount of the loss component to the discounted value of the future cash outflows plus the risk adjustment for non-financial risk.
Insurance contracts with direct participation features
Direct participating contracts are contracts under which the Group\u2019s obligation to the policyholder is the net of:
\u2013 the obligation to pay the policyholder an amount equal to the fair value of the underlying items; and
\u2013 a variable fee in exchange for future services provided by the contracts, being the amount of the Group's share of the fair value of
the underlying items less fulfilment cash flows that do not vary based on the returns on underlying items. The Group provides
investment services under these contracts by promising an investment return based on underlying items, in addition to
insurance coverage.
In respect of the variable fee for the Group\u2019s in-force with-profits contracts, the Group's share of the fair value of the underlying
items consists of:
\u2013 shareholder transfers, gross of tax; and
\u2013 the Group's share of the excess of charges and deductions taken from the asset share (such as annual management charges or
surrender penalties) over shareholder transfers, gross of tax, and costs that vary directly with the underlying items.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement (continued)
Insurance contracts with direct participation features (continued)
The fulfilment cash flows that do not vary based on the returns of the underlying items are:
\u2013 the Group's share of amounts that are expressed as a monetary amount, such as administration expenses, policy fees and the
risk adjustment for non-financial risk. For certain types of cost, such as investment management expenses and additional death
benefits in excess of the asset share, some costs vary directly with the underlying items and others do not. The whole amount of
these types of cost is included in the fulfilment cash flows that do not vary based on the returns of the underlying items.
\u2013 less the fee margin charged by the Group\u2019s asset managers for managing the investments backing the with-profits contracts.
There is no variable fee or CSM in relation to the additional amounts expected to be paid to current or future policyholders (that are
recognised in accordance with paragraph B71 of IFRS 17).
In respect of the variable fee for the Group\u2019s unit-linked contracts, the Group\u2019s share of the fair value of the underlying items
consists of charges and deductions taken from the unit fund (such as annual management charges or surrender penalties), less
costs that vary directly with the underlying items. The fulfilment cash flows that do not vary based on the returns of the underlying
items are amounts that are expressed as a monetary amount, such as administration expenses, policy fees and the risk adjustment
for non-financial risk. For certain types of cost, such as investment management expenses and additional death benefits in excess
of the unit fund, some costs vary directly with the underlying items and others do not. The whole amount of these types of cost is
included in the fulfilment cash flows that do not vary based on the returns of the underlying items.
For insurance contracts with direct participation features, the carrying amount of the CSM subsequent to initial recognition is
calculated using the Variable Fee Approach (VFA). When measuring a group of direct participating contracts, the Group adjusts
the fulfilment cash flows by the whole of the change in the obligation to pay policyholders an amount equal to the fair value of the
underlying items. These changes do not relate to future services and are recognised in profit or loss. The Group then adjusts any
CSM for changes in the amount of the Group\u2019s share of the fair value of the underlying items, which relate to future services, as
explained below.
The carrying amount of the CSM at each reporting date is the carrying amount at the start of the reporting period, adjusted for:
\u2013 the CSM of any new contracts that are added to the group in the reporting period;
\u2013 the change in the amount of the Group\u2019s share of the fair value of the underlying items and changes in fulfilment cash flows that
relate to future services, except to the extent that:
\u2013 a decrease in the amount of the Group's share of the fair value of the underlying items, or an increase in the fulfilment cash
flows that relate to future services, exceeds the carrying amount of the CSM, giving rise to a loss in profit or loss (included in
insurance service expenses) and creating a loss component; or
\u2013 an increase in the amount of the Group's share of the fair value of the underlying items, or a decrease in the fulfilment cash
flows that relate to future services, is allocated to the loss component;
\u2013 the effect of any currency exchange differences on the CSM; and
\u2013 the amount recognised as insurance revenue because of the services provided in the reporting period.
Changes in fulfilment cash flows that relate to future services include the changes relating to future services specified above for
contracts without direct participation features (measured at current discount rates) and changes in the effect of the time value of
money and financial risks that do not arise from underlying items eg the effect of financial guarantees.
In determining the change in CSM attributable to the effect of the time value of money and financial risk on the Group\u2019s share of the
fair value of the underlying items and the fulfilment cash flows, the Group has chosen not to use the risk mitigation option whereby
the changes would be adjusted to reflect the use of derivatives, non-derivative financial instruments or reinsurance contracts held
to mitigate the effect of financial risk.
After recognising a loss on an onerous group of insurance contracts, specified fulfilment cash flows must be allocated on a
systematic basis between the loss component of the liability for remaining coverage and the liability for remaining coverage
excluding the loss component. For this purpose, the proportion allocated to the loss component is determined as the ratio of the
amount of the loss component to the discounted value of the future cash outflows plus the risk adjustment for non-financial risk.
Reinsurance contracts
To measure a group of reinsurance contracts, the Group applies the same accounting policies as are applied to insurance contracts
without direct participation features, with the following modifications.
The carrying amount of a group of reinsurance contracts at each reporting date is the sum of the asset or liability for remaining
coverage and the asset or liability for incurred claims. The asset or liability for remaining coverage comprises (a) the fulfilment cash
flows that relate to services that will be received under the contracts in future periods and (b) any remaining CSM at that date.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement (continued)
Reinsurance contracts (continued)
The Group measures the estimates of the present value of future cash flows using assumptions that are consistent with those used
to measure the estimates of the present value of future cash flows for the underlying insurance contracts. The present value of the
future cash flows for reinsurance contracts held is also adjusted for any risk of non-performance by the reinsurer. The effect of the
non-performance risk of the reinsurer is assessed at each reporting date and the effect of changes in the non-performance risk is
recognised in profit or loss.
The risk adjustment for non-financial risk is the amount of risk being transferred by the Group to the reinsurer.
On initial recognition, the CSM of a group of reinsurance contracts represents a net cost or net gain on purchasing reinsurance. It is
measured as the amount of the total of (a) the fulfilment cash flows, (b) any amount arising from the derecognition of any assets or
liabilities previously recognised for cash flows related to the group, (c) any cash flows arising at that date and (d) any income
recognised in profit or loss because of onerous underlying contracts recognised at that date.
However, if any net cost on purchasing reinsurance coverage relates to insured events that occurred before the purchase of the
reinsurance, then the Group recognises the cost immediately in profit or loss as an expense.
The carrying amount of the CSM at each reporting date is the carrying amount at the start of the reporting period, adjusted for:
\u2013 the effect of any new contracts that are added to the group in the reporting period;
\u2013 interest accreted on the carrying amount of the CSM during the reporting period, measured at the discount rates determined on
initial recognition;
\u2013 income recognised in profit or loss in the reporting period on initial recognition of an onerous group of underlying contracts;
\u2013 reversals of a loss-recovery component to the extent that they are not changes in the fulfilment cash flows of the group of
reinsurance contracts;
\u2013 changes in fulfilment cash flows that relate to future services, measured at the discount rates determined on initial recognition,
unless they result from changes in fulfilment cash flows allocated to a group of underlying contracts that do not adjust the CSM
for the group of underlying insurance contracts;
\u2013 the effect of any currency exchange differences on the CSM; and
\u2013 the amount recognised in profit or loss because of the services received in the reporting period.
Reinsurance of onerous underlying insurance contracts
The Group adjusts the CSM of the group to which a reinsurance contract belongs and as a result recognises income when it
recognises a loss on initial recognition of an onerous group of underlying contracts, if the reinsurance contract is entered into
before or at the same time as the onerous underlying contracts are recognised. The adjustment to the CSM is determined by
multiplying:
\u2013 the amount of the loss that relates to the underlying contracts; and
\u2013 the percentage of claims on the underlying contracts that the Group expects to recover from the reinsurance contracts.
For reinsurance contracts acquired in a transfer of contracts or a business combination covering onerous underlying contracts, the
adjustment to the CSM is determined by multiplying:
\u2013 the amount of the loss component that relates to the underlying contracts at the date of acquisition; and
\u2013 the percentage of claims on the underlying contracts that the Group expects at the date of acquisition to recover from the
reinsurance contracts.
For reinsurance contracts acquired in a business combination, the adjustment to the CSM reduces goodwill or increases a gain on
a bargain purchase.
If the reinsurance contract covers only some of the insurance contracts included in an onerous group of contracts, then the Group
determines the portion of losses recognised on the onerous group of contracts that relates to underlying contracts covered by the
reinsurance contract.
A loss-recovery component is created or adjusted for the group of reinsurance contracts to depict the adjustment to the CSM,
which determines the amounts that are subsequently presented in profit or loss as reversals of recoveries of losses from the
reinsurance contracts and are excluded from the allocation of reinsurance premiums paid.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(viii) Derecognition and contract modification
The Group derecognises a contract when it is extinguished \u2013 ie when the specified obligations in the contract expire or are
discharged or cancelled.
The Group also derecognises a contract if its terms are modified in a way that would have significantly changed the accounting for
the contract had the new terms always existed, in which case a new contract based on the modified terms is recognised. If a
contract modification does not result in derecognition, then the Group treats the changes in cash flows caused by the modification
as changes in estimates of fulfilment cash flows.
On derecognition of a contract from within a group of contracts:
\u2013 the fulfilment cash flows allocated to the group are adjusted to eliminate those that relate to the rights and obligations
derecognised;
\u2013 the CSM of the group is adjusted for the change in the fulfilment cash flows, except where such changes are allocated to a loss
component; and
\u2013 the number of coverage units for the expected remaining services is adjusted to reflect the coverage units derecognised from
the group (see \u2018Release of the CSM\u2019 below).
If a contract is derecognised because it is transferred to a third party, then the CSM is also adjusted for the premium charged by
the third party, unless the group is onerous.
If a contract is derecognised because its terms are modified, then the CSM is also adjusted for the premium that would have been
charged had the Group entered into a contract with the new contract\u2019s terms at the date of modification, less any additional
premium charged for the modification. The new contract recognised is measured assuming that, at the date of modification, the
Group received the premium that it would have charged less any additional premium charged for the modification.
The Group has applied judgement in determining the appropriate treatment for the modification to the Rothesay reinsurance treaty
which occurred when the majority of the underlying contracts that were reinsured by the treaty were transferred to Rothesay via a
Part VII transfer on 15 December 2021. The Group judges that the amendment to the treaty to facilitate the continued long-term
reinsurance of contracts that were originally intended to be transferred but were removed from the scope of the Part VII, resulted
in a significant change to the contract boundary of the treaty. Therefore the appropriate treatment is to derecognise the original
treaty and recognise the amended treaty as a new contract. As the amendment occurred shortly before the IFRS 17 transition date,
the Group concludes that it is sufficient to determine the premium for the amended treaty as the fair value of the reinsured benefits
as at the date of transition.
(ix) Presentation
Portfolios of insurance contracts that are assets and those that are liabilities, and portfolios of reinsurance contracts that are assets
and those that are liabilities, are presented separately in the consolidated statement of financial position. Any assets or liabilities
recognised for cash flows arising before the recognition of the related group of contracts are included in the carrying amount of the
related portfolios of contracts.
The Group disaggregates amounts recognised in the statement of profit or loss into (a) an insurance service result, comprising
insurance revenue and insurance service expenses; and (b) insurance finance income or expenses. The Group has elected to
disaggregate the change in the risk adjustment for non-financial risk between the insurance service result and insurance finance
income or expenses.
Income and expenses from reinsurance contracts are presented separately from income and expenses from insurance contracts.
Income and expenses from reinsurance contracts, other than insurance finance income or expenses, are presented on a net basis
as \u2018net expenses from reinsurance contracts\u2019 in the insurance service result.
The Group excludes from both insurance revenue and insurance service expenses any non-distinct investment components,
refunds of premiums and other non-insurance components. The Group has made the accounting policy choice that accounting
estimates made in interim financial statements are changed when applying IFRS 17 in the subsequent annual reporting period.
Insurance revenue
The Group recognises insurance revenue as it satisfies its performance obligations ie as it provides services to groups of insurance
contracts. The insurance revenue relating to the services provided for each reporting period represents the total of the changes in
the liability for remaining coverage that relate to services for which the Group expects to receive consideration, and comprises the
following items:
\u2013 A release of the CSM, measured based on coverage units provided (see \u2018Release of the CSM\u2019 below);
\u2013 Changes in the risk adjustment for non-financial risk relating to current services;
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(ix) Presentation (continued)
Insurance revenue (continued)
\u2013 Policyholder tax; and
\u2013 Claims and other insurance service expenses incurred in the reporting period, measured as the amounts expected at the
beginning of the reporting period.
In addition, the Group allocates a portion of premiums that relate to recovering any insurance acquisition cash flows to each period
in a systematic way based on the passage of time. The Group recognises the allocated amount, adjusted for interest accretion at
the discount rates determined on initial recognition of the related group of contracts, as insurance revenue and an equal amount as
insurance service expenses.
Release of the CSM
The amount of the CSM of a group of insurance contracts that is recognised as insurance revenue in the reporting period is
determined by identifying the coverage units in the group, allocating the CSM remaining at the end of the reporting period (before
any allocation) equally to each coverage unit provided in the current reporting period and expected to be provided in future
reporting periods, and recognising in profit or loss the amount of the CSM allocated to coverage units provided in the current
reporting period. The number of coverage units is the quantity of services provided by the contracts in the group, determined by
considering for each contract the quantity of benefits provided and its expected coverage period. The coverage units are reviewed
and updated at each reporting date.
Services provided to insurance contracts include insurance coverage and, for all direct participating contracts, investment services
for managing underlying items on behalf of policyholders (investment-related services). In addition, insurance contracts without
direct participation features may also provide investment services for generating an investment return for the policyholder
(investment-return service), but only if:
\u2013 an investment component exists or the policyholder has a right to withdraw an amount (eg the policyholder\u2019s right to receive a
surrender value on cancellation of a contract);
\u2013 the investment component or withdrawal amount is expected to include an investment return; and
\u2013 the Group expects to perform investment activities to generate that investment return.
The Group defines the coverage units for its contracts as follows:
\u2013 Insurance coverage (where the benefit is a single lump sum payment, eg term assurances): the sum assured.
\u2013 Insurance coverage (where the benefit is a regular income, eg annuities and income protection): the annualised amount of
income, as confirmed by the IFRS Interpretation Committee (IFRIC) in 2022.
\u2013 Investment-related service (with-profits and unit-linked): the asset share or unit fund value.
\u2013 Investment-return service (eg annuities): the transfer amount (for deferred annuities in the accumulation phase) or the payment
of annuity benefits within a guaranteed payment period.
The expected coverage period reflects expectations of lapses and cancellations of contracts, as well as the likelihood of insured
events occurring to the extent that they would affect the expected coverage period. The period of investment services ends no
later than the date on which all amounts due to current policyholders relating to those services have been paid.
Where a contract provides both insurance coverage and investment services the Group must apply judgement to determine
appropriate weightings to assign to the two types of service in order to calculate the coverage units for each reporting period. The
weights are not locked-in at inception of the group of contracts and instead are reviewed and updated at each reporting date,
consistent with the treatment of the coverage units.
With-profits and unit-linked contracts are predominantly investment contracts but may additionally provide insurance coverage if
the contract provides a death benefit in excess of the underlying items. For these contracts weighted coverage units are
determined as the maximum of the asset share or unit fund and the amount payable on death.
IFRS 17 does not provide explicit guidance as to whether the assumptions used to project the expected coverage units for future
reporting periods should be current or locked-in (ie those that applied at inception of the group of contracts). In addition, the
standard does not provide guidance as to whether the future coverage units should be discounted when determining the amount
of CSM to be released in the current reporting period.
The Group judges that in regards to the assumptions used for both GMM and VFA CSM it is appropriate to use current
assumptions to calculate the coverage units expected to be provided in the future. This is on the basis that it results in the most
accurate estimate of the service that will be provided in future.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(ix) Presentation (continued)
Release of the CSM (continued)
In respect of discounting, the Group judges that it is appropriate to discount the future coverage units as that is consistent with the
CSM calculation allowing for the time value of money. The discounting approach follows the method applied in the CSM
calculation, namely coverage units for GMM CSM are discounted using the rates that applied at inception and coverage units for
VFA CSM are discounted using current rates.
Insurance service expenses
Insurance service expenses arising from insurance contracts are recognised in profit or loss as they are incurred. They exclude
repayments of non-distinct investment components, rights to a refund of premiums, and other non-insurance components, and
comprise the following items:
\u2013 Incurred claims and other insurance service expenses.
\u2013 Amortisation of insurance acquisition cash flows: This is equal to the amount of insurance revenue recognised in the reporting
period that relates to recovering insurance acquisition cash flows.
\u2013 Losses on onerous contracts and reversals of such losses.
\u2013 Adjustments to the liabilities for incurred claims that do not arise from the effects of the time value of money, financial risk and
changes therein.
\u2013 Impairment losses on assets for insurance acquisition cash flows and reversals of such impairment losses.
Net expenses from reinsurance contracts
Net expenses from reinsurance contracts comprise an allocation of reinsurance premiums paid less amounts recovered from reinsurers.
The Group recognises an allocation of reinsurance premiums paid in profit or loss as it receives services under groups of
reinsurance contracts. The allocation of reinsurance premiums paid relating to services received for each period represents the
total of the changes in the asset for remaining coverage.
Coverage units for reinsurance contracts held are typically consistent with the underlying insurance contracts, adjusted for
differences in the services received from the reinsurer. For reinsurance contracts held that provide reinsurance of mortality or
morbidity risk, the coverage units are typically defined as the sum at risk reinsured. For longevity swap reinsurance arrangements
in relation to non-profit annuity business, the coverage units are based on the proportion of the actual annuity payments made on
the underlying contracts that the Group recovers from the reinsurer.
For a group of reinsurance contracts covering onerous underlying contracts, the Group establishes a loss-recovery component of
the asset for remaining coverage to depict the recovery of losses recognised:
\u2013 on recognition of onerous underlying contracts, if the reinsurance contract covering those contracts is entered into before or at
the same time as those contracts are recognised; and
\u2013 for changes in fulfilment cash flows of the group of reinsurance contracts relating to future services that result from changes in
fulfilment cash flows of the onerous underlying contracts.
The loss-recovery component determines the amounts that are subsequently presented in profit or loss as reversals of recoveries
of losses from the reinsurance contracts and are excluded from the allocation of reinsurance premiums paid. It is adjusted to reflect
changes in the loss component of the onerous group of underlying contracts, but it cannot exceed the portion of the loss
component of the onerous group of underlying contracts that the Group expects to recover from the reinsurance contracts.
Insurance finance income and expenses
Insurance finance income and expenses comprise changes in the carrying amounts of groups of insurance and reinsurance
contracts arising from the effects of the time value of money, financial risk and changes therein, unless any such changes for
groups of direct participating contracts are allocated to a loss component and included in insurance service expenses. They
include changes in the measurement of groups of contracts caused by changes in the value of underlying items (excluding
additions and withdrawals).
The Group has opted as an accounting policy choice to recognise all insurance finance income or expenses for the reporting period
in profit or loss and to not recognise any part of that income or expenses in other comprehensive income (OCI).
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.3 Investment contracts without discretionary participation features (DPF)
(i) Investment contracts without discretionary participation features (DPF)
Investment contracts without DPF, such as unit-linked savings and similar contracts, are accounted for as financial instruments.
This treatment reflects the deposit nature of the arrangement, with premiums and claims reflected as deposits and withdrawals
and recognised directly on the consolidated statement of financial position as movements in the financial liability. These investment
contracts are classified as financial instruments and designated as FVTPL because the resulting liabilities are managed, and their
performance is evaluated on a fair value basis. For unit-linked contracts, the fair value of the liability is equal to the unit value
obligation.
(ii) Reinsurance
The Group enters into various reinsurance arrangements in relation to unit-linked savings contracts where there is no transfer of
significant insurance risk to the reinsurer (funded reinsurance). Such contracts are classified as a financial instruments and
measured at FVTPL and included with Equity securities and pooled investment funds in the consolidated statement of financial
position.
(iii) Deferred acquisition costs
The Group incurs various costs in acquiring new investment contracts without DPF. The incremental, directly attributable
acquisition costs relating to these contracts are capitalised and amortised in line with the related revenue. If the contracts involve
upfront charges, this income is also deferred and amortised through the consolidated income statement, as the service is provided
in accordance with IFRS 15.
The recoverability of any deferred acquisition costs is reviewed at each reporting date, and to the extent that these are no longer
deemed recoverable from future revenue, the carrying value is written down to the recoverable amount and the related impairment
charge recorded in the consolidated income statement.
1.5.4 Business acquisitions
Business acquisitions are accounted for by applying the acquisition method of accounting, where the identifiable assets and
liabilities of the acquired business are recorded at fair value on the date of acquisition. The excess of the fair value of acquisition
consideration over the recorded value of the assets and liabilities of the acquired entity is recorded on the consolidated statement
of financial position as goodwill. Expenses related to acquiring new business are charged to the consolidated income statement in
the year in which they are incurred. Income and expenses of acquired entities are included in the consolidated income statement
from the date of acquisition.
Acquisitions of entities under common control are accounted for under merger accounting principles. Under merger accounting,
the results and statement of financial position for entities acquired are presented as if they had always been combined. Assets and
liabilities of the entities acquired are recorded at their carrying values and a fair value measurement is not undertaken. No new
goodwill is recognised and the differences between the cost of investment, which is its fair value, and the carrying value of assets
and liabilities acquired is recorded within equity.
1.5.5 Financial instruments
(i) Initial recognition
The classification of financial instruments at initial recognition depends on their contractual terms and the business model for
managing the instruments. Financial instruments are initially recognised on the trade date measured at their fair value.
(ii) Measurement categories
The Group classifies all of its financial assets based on the business model for managing the assets and the asset\u2019s contractual
terms. The categories include the following:
\u2013 Amortised cost
\u2013 Fair Value Through Profit or Loss (FVTPL).
(iii) Financial instruments measured at amortised cost
Financial instruments are held at amortised cost if both of the following conditions are met:
\u2013 The instruments are held within a business model with the objective of holding the instrument to collect the contractual cash
flows; and
\u2013 The contractual terms of the debt instrument give rise on specified dates to cash flows that are Solely Payments of Principal and
Interest (SPPI) on the principal amount outstanding.
The details of these conditions are outlined below.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.5 Financial instruments (continued)
(iv) Business model assessment
The Group determines its business model at the level that best reflects how it manages groups of financial assets to achieve its
business objective.
The Group holds financial assets to generate returns and provide a capital base to provide for settlement of claims as they arise.
The Group considers the timing, amount and volatility of cash flow requirements to support insurance liability portfolios in
determining the business model for the assets as well as the potential to maximise return for shareholders and future business
development.
The Group's business model is not assessed on an instrument-by-instrument basis, but at a higher level of aggregated portfolios
that is based on observable factors such as:
\u2013 How the performance of the business model and the financial assets held within that business model are evaluated and reported
to the Group's key management personnel;
\u2013 The risks that affect the performance of the business model (and the financial assets held within that business model) and, in
particular, the way those risks are managed; and
\u2013 How managers of the business are compensated (for example, whether the compensation is based on the fair value of the assets
managed or on the contractual cash flows collected).
The expected frequency, value and timing of asset sales are also important aspects of the Group\u2019s assessment.
The business model assessment is based on reasonably expected scenarios without taking 'worst case' or 'stress case\u2019 scenarios
into account. If cash flows after initial recognition are realised in a way that is different from the Group's original expectations, the
Group does not change the classification of the remaining financial assets held in that business.
(v) The SPPI test
As a second step of its classification process the Group assesses the contractual terms to identify whether they meet the SPPI test.
\u2018Principal\u2019 for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the
life of the financial asset (for example, if there are repayments of principal or amortisation of the premium/discount).
The most significant elements of interest within a debt arrangement are typically the consideration for the time value of money and
credit risk. To make the SPPI assessment, the Group applies judgement and considers relevant factors such as the currency in
which the financial asset is denominated, and the period for which the interest rate is set.
(vi) Financial assets measured at FVTPL
Financial assets in this category are those that are managed in a fair value business model, or that have been designated by
management upon initial recognition, or are mandatorily required to be measured at fair value under IFRS 9. This category includes
debt instruments whose cash flow characteristics fail the SPPI criterion or are not held within a business model whose objective is
to collect contractual cash flows.
(vii) Subsequent measurement
After initial measurement, deposits, cash and accrued investment income and other debtors are measured at amortised cost, using
the Effective Interest Rate (EIR) method, less allowance for impairment. Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are an integral part of the EIR. An Expected Credit Losses (ECL) is
recognised in investment return in the consolidated income statement when the investments are impaired.
Financial assets at FVTPL are recorded in the consolidated statement of financial position at fair value. Changes in fair value are
recorded in investment return in the consolidated income statement. Interest earned on assets mandatorily required to be
measured at FVTPL is recorded using contractual interest rates. Dividend income from equity instruments measured at FVTPL is
recorded in investment return in the consolidated income statement when the right to the payment has been established.
(viii) Reclassification of financial assets and liabilities
The Group does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances
in which there has been a change in business model.
(ix) Derecognition other than for substantial modification
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:
\u2013 The rights to receive cash flows from the asset have expired; or
\u2013 The Group has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a \u2018pass-through\u2019 arrangement; and either: (a) the Group has transferred
substantially all the risks and rewards of the asset; or (b) the Group has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the asset.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.5 Financial instruments (continued)
(ix) Derecognition other than for substantial modification (continued)
The Group considers control to be transferred if, and only if, the transferee has the practical ability to sell the asset in its entirety to
an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer.
When the Group has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset,
the asset continues to be recognised only to the extent of the Group\u2019s continuing involvement, in which case, the Group also
recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights
and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of consideration the Group could be required to pay.
(x) Derecognition due to substantial modification of terms and conditions
The Group derecognises a financial asset when the terms and conditions have been renegotiated to the extent that, substantially, it
becomes a new instrument, with the difference recognised as a derecognition gain or loss. In the case of debt instruments at
amortised cost, the newly recognised loans are classified as Stage 1 for ECL measurement purposes.
When assessing whether or not to derecognise an instrument, among others, the Group considers the following factors:
\u2013 Change in currency of the debt instrument
\u2013 Introduction of an equity feature
\u2013 Change in counterparty
\u2013 If the modification is such that the instrument would no longer meet the SPPI criterion.
If the modification does not result in cash flows that are substantially different, the modification does not result in derecognition.
Based on the change in cash flows discounted at the original EIR, the Group records a modification gain or loss.
(xi) Impairment of financial assets
The Group recognises an allowance for ECLs for all debt instruments not held at FVTPL. ECLs are based on the difference between
the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive,
discounted at the appropriate effective interest rate.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since
initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months
(12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a
loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the
default (a lifetime ECL).
For certain instruments with investment grade rating, the Group uses the low credit simplification and consequently, a
determination of significant increase in credit risk will not be required and the impairment loss would always be calculated based
on a 12-month ECL.
The Group also makes use of a simplified impairment approach for trade receivables and contract assets as allowed under IFRS 9.
Under this approach, impairment is calculated using a provisioning matrix that is based on days past due.
(xii) Write-offs
Financial assets are written off either partially or in their entirety only when the Group has stopped pursuing the recovery. If the
amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the
allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to credit loss expense.
(xiii) Recognition of interest income
Under IFRS 9, interest income is recorded using the effective interest rate (EIR) method for all financial assets measured at
amortised cost. The EIR is the rate that exactly discounts estimated future cash receipts through the expected life of the financial
asset or, when appropriate, a shorter period, to the gross carrying amount of the financial asset.
The EIR (and therefore, the amortised cost of the financial asset) is calculated by taking into account transaction costs and any
discount or premium on acquisition of the financial asset as well as fees and costs that are an integral part of the EIR. The Group
recognises interest income using a rate of return that represents the best estimate of a constant rate of return over the expected
life of the debt instrument.
If expectations of fixed rate financial assets' cash flows are revised for reasons other than credit risk, the changes to future
contractual cash flows are discounted at the original EIR with a consequential adjustment to the carrying amount. The difference to
the previous carrying amount is booked as a positive or negative adjustment to the carrying amount of the financial asset in the
balance sheet with a corresponding increase or decrease in interest income.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.5 Financial instruments (continued)
(xiv) Interest and similar income
Interest income comprises amounts calculated using the effective interest method for assets measured at amortised cost. These
are disclosed separately on the face of the consolidated income statement.
Other interest income includes interest on all financial assets measured at FVTPL, using the contractual interest rate.
The Group calculates interest income on financial assets, other than those considered credit-impaired, by applying the EIR to the
gross carrying amount of the financial asset.
(xv) Determination of fair value
The Group uses current bid prices to value its investments with quoted prices. Actively traded investments without quoted prices
are valued using prices provided by third parties. Financial assets measured at fair value are classified into a three-level hierarchy
as described in Note 31.
If the market for a financial investment of the Group is not active, the fair value is determined using valuation techniques. The Group
establishes fair value for these financial investments by using quotations from independent third parties, such as brokers or pricing
services, or by using internally developed pricing models. Priority is given to publicly available prices from independent sources
when available, but overall the source of pricing and/or the valuation technique is chosen with the objective of arriving at a fair
value measurement, which reflects the price at which an orderly transaction would take place between market participants on the
measurement date.
The valuation techniques include the use of recent arm\u2019s length transactions, reference to other instruments that are substantially
the same, discounted cash flow analysis, option-adjusted spread models and, if applicable, enterprise valuation and may include a
number of assumptions relating to variables such as credit risk and interest rates. Changes in assumptions relating to these
variables could positively or negatively impact the reported fair value of these financial investments. Details of the financial
investments classified as \u2018level 3\u2019 to which valuation techniques are applied, and the sensitivity of profit before tax to a change in
these items\u2019 valuation, are presented in Note 31.
1.5.6 Fee Income
Revenue arising from contracts with customers consists of investment management and performance fee income from the Group's
asset management business, investment contracts without DPF, platform fee and other fees and commissions.
Management fee income is based on investment assets under management and is only recognised when the Group satisfies its
performance obligation to provide the asset management services. It is recognised in the year in which the services are rendered
and is recognised net of rebates. Since the asset management service the Group provides is a continuous service, it satisfies its
performance obligation over time. Therefore, the Group meets the criteria for its revenue to be recognised over time as the client
benefits from the asset management services received from the Group.
Performance fee income is based on the achievement of prescribed performance hurdles. It is only recognised when the
performance obligations are satisfied or upon the crystallisation event occurring and when it is highly probable that a significant
reversal will not occur.
Fees from investment contracts without DPF are recognised over time as the services are provided, which is the point at which the
cash is received. Other fees and commissions such as from the provision of financial advice to customers are recognised when
performance obligations are satisfied or upon the crystallisation of an event. The price is determined based on the agreed initial or
ongoing adviser charge.
Platform fees are recognised as the related services are provided to the customer.
No significant judgements are applied on the timing or transaction price or the determination of the costs incurred to obtain or fulfil
a contract.
1.5.7 Investment return
Investment return included in the consolidated income statement comprises interest income, rental income, dividends, foreign
exchange gains and losses, realised and unrealised gains and losses on investments designated as FVTPL, and realised gains and
losses (including impairment) on items held at amortised cost. Interest income is recognised as it accrues on an effective interest
basis. Dividends on equity securities are recognised on the ex-dividend date and rental income is recognised on an accruals basis.
1.5.8 Derivatives and hedge accounting
The primary areas of the Group\u2019s operations where derivative instruments are held are in the With-Profits Fund and annuity
business. Management designates derivatives on inception and those that are not designated as hedging instruments are carried
at fair value, with movements in fair value being recorded within investment return in the consolidated income statement.
The Group does not regularly seek to apply fair value or cash flow hedging treatment under IFRS 9 and has had no fair value or
cash flow hedges for the years ended 31\u00a0December 2023 and 31\u00a0December 2022.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.9 Derecognition of financial assets and liabilities
The Group\u2019s policy is to derecognise financial assets when it is deemed that substantially all the risks and rewards of ownership
have been transferred. Gains and losses on disposal are determined as the difference between the net disposal proceeds and the
carrying amount of the asset, and are recognised in the consolidated income statement.
The Group derecognises financial liabilities only when the obligation specified in the contract is discharged, cancelled or has
expired.
1.5.10 Securities lending and reverse repurchase agreements
The Group is party to various securities-lending agreements and repurchase agreements under which securities are transferred to
third parties on a short-term basis. The transferred securities are not derecognised; rather, they continue to be recognised within
the appropriate investment classification. The Group\u2019s policy is that collateral in excess of 100% of the fair value of securities
loaned is required from all securities\u2019 borrowers and typically consists of cash, debt securities, equity securities or letters of credit.
In cases where the Group takes possession of the collateral under its securities lending programme, including cash collateral which
is not legally separated from the Group, the collateral and corresponding obligation to return such collateral is recognised as a
financial liability on the consolidated statement of financial position.
The Group is also party to various reverse repurchase agreements under which securities are purchased from third parties with an
obligation to resell the securities. The securities are not recognised as investments on the consolidated statement of financial
position. The right to receive the return of any cash paid as purchase consideration plus interest is recognised as a financial asset
on the consolidated statement of financial position.
1.5.11 Subordinated liabilities and other borrowings
Subordinated liabilities include loan notes issued by the Group which are classified as financial liabilities as they have a fixed
repayment date and do not represent a residual interest in the net assets of the Company on liquidation. The notes rank junior to all
other liabilities of the Group in the event of liquidation, but above share capital.
Borrowings include operational borrowings attributable to shareholder-financed operations and other borrowings attributable to
the With-Profits Fund.
Subordinated liabilities and other borrowings are initially recognised at fair value, net of transaction costs. Borrowings, excluding
those backing buy-to-let mortgages, which are managed on a fair value basis and designated at FVTPL, are subsequently
accounted for on an amortised cost basis using the effective interest method. Under the effective interest method, the difference
between the redemption value of the borrowing and the initial proceeds (net of related issue costs) is amortised through the
consolidated income statement to the date of maturity, or for hybrid debt, over the expected life of the instrument.
Borrowings backing buy-to-let mortgages are designated at FVTPL in line with the underlying loan assets.
1.5.12 Investment property
Investments in leasehold and freehold properties not for occupation by the Group, including properties under development for
future use as investment property, are carried at fair value, with changes in fair value included in the consolidated income
statement. Properties are valued annually either by the Group\u2019s qualified surveyors or by taking into consideration the advice of
professional external valuers using the Royal Institution of Chartered Surveyors' (RICS) valuation standards. Each property is
externally valued at least once every three years.
1.5.13 Defined benefit pension schemes
For the Group\u2019s defined benefit schemes, if the present value of the defined benefit obligation for the relevant scheme exceeds the
fair value of the scheme assets, then a liability is recorded on the Group\u2019s consolidated statement of financial position in respect of
that scheme. By contrast, if the fair value of the assets of the relevant scheme exceeds the present value of the defined benefit
obligation then the surplus in respect of that scheme will only be recognised if the nature of the arrangements under the trust
deed, and funding arrangements between the Trustee and the employing entity, support the availability of refunds or recoverability
through agreed reductions in future contributions. In addition, if there is a constructive obligation for the employing entity to pay
deficit funding in respect of schemes where there is no unconditional right to a refund to any surplus, this is also recognised such
that the financial position recorded for the scheme reflects the higher of any underlying IAS 19 Employee Benefits deficit and the
obligation for deficit funding.
The Group utilises the projected unit credit method to calculate the defined benefit obligation. This method sees each year of
service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation.
Estimated future cash flows are then discounted at a high-quality corporate bond rate, adjusted to allow for the difference in
duration between the bond index and the pension liabilities where appropriate, to determine its present value. These calculations
are performed by independent actuaries.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.13 Defined benefit pension schemes (continued)
The plan assets of the Group\u2019s pension schemes may include several insurance contracts that have been issued by other entities in
the Group. These assets are excluded from plan assets in determining the pension surplus or deficit recognised on the
consolidated statement of financial position. The plan assets also exclude any reimbursement right assets resulting from buy-in of
the scheme liabilities from other entities in the Group. The aggregate of the actuarially determined service costs of the currently
employed personnel, and the net interest on the net defined benefit obligation at the start of the year, is charged to the
consolidated income statement. Actuarial and other gains and losses as a result of changes in assumptions or experience
variances are recognised as other comprehensive income.
Contributions to the Group\u2019s defined contribution pension schemes are expensed when due.
1.5.14 Tax
The Group applies IAS 12 Income Taxes in accounting for taxes on income. Income tax comprises current tax and deferred tax.
Income tax is recognised in the consolidated income statement except to the extent that it relates to items recognised in other
comprehensive income or directly in equity, in which case the tax is recognised in the same statement as the related item appears.
Current tax expense is charged or credited based upon amounts estimated to be payable or recoverable as a result of taxable
amounts for the current year and adjustments made in relation to prior years. Income tax recoverable on tax allowable losses is
recognised as a current tax asset only to the extent that it is regarded as recoverable by offsetting against taxable profits arising in
the current or prior periods. Current tax is measured using tax rates and tax laws that have been enacted or substantively enacted
at the balance sheet date.
Deferred taxes are provided under the liability method for all relevant temporary differences. IAS 12 Income Taxes does not require
all temporary differences to be provided for, in particular, the Group does not provide for deferred tax on undistributed earnings of
subsidiaries where the Group is able to control the timing of the distribution and the temporary difference created is not expected
to reverse in the foreseeable future. Deferred tax is also not recognised on temporary differences that arise from initial recognition
of an asset or a liability in a transaction (other than a business combination) that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable
profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused
tax losses can be utilised.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability settled,
based on tax rates (and laws) that have been enacted or are substantively enacted at the end of the reporting period. Deferred tax
assets and liabilities are only offset when there is both a legal right to set-off and an intention to settle on a net basis.
The total tax recorded in the consolidated income statement includes tax attributable to both policyholders and shareholders. The
tax attributable to policyholders comprises the tax on the income of the consolidated with-profits and unit-linked funds. In certain
jurisdictions, such as the UK, life insurance companies are taxed on both their shareholders\u2019 profits and on their policyholders\u2019
investment returns on certain insurance and investment products. Although both types of tax are included in the total tax charge in
the Group\u2019s consolidated income statement, they are presented separately in the consolidated income statement to provide the
most relevant information about tax that the Group pays on its profits.
The Group is subject to tax in numerous jurisdictions and the calculation of the total tax charge inherently involves a degree of
estimation and judgement. The positions taken in tax returns, where applicable tax regulation is subject to interpretation, are
recognised in full in the determination of the tax charge in the financial statements if the Group considers that it is probable that the
taxation authority will accept those positions. Otherwise, the Group considers an uncertain tax position to exist and a provision is
recognised to reflect that a taxation authority, upon review of the positions, could alter the tax returns. From recognition, the
provision is measured based on management\u2019s judgement and estimate of the likely amount of the liability, or recovery by
providing for the single best estimate of the most likely outcome or the weighted average expected value where there are multiple
possible outcomes, taking into account external advice where appropriate. Each uncertain tax treatment is considered separately
or together as a group, depending on management\u2019s judgement as to which approach better predicts the resolution of the
uncertainty. It is assumed that tax authorities will examine the uncertain tax treatments and they have full knowledge of all related
information. The judgements and estimates made to recognise and measure the effect of uncertain tax positions are reassessed
whenever circumstances change or when there is new information that affects those judgements.
The judgements and estimates made to recognise and measure the effect of uncertain tax positions are reassessed whenever
circumstances change or when there is new information that affects those judgements.
1.5.15 Goodwill
Goodwill arises when the Group acquires a business and the fair value consideration paid exceeds the fair value of the net assets
acquired. Goodwill arising on acquisitions of subsidiaries and businesses is capitalised and carried on the consolidated statement
of financial position at initial value less any accumulated impairment losses. Goodwill impairment testing is conducted annually and
when there is an indication of impairment. For the purposes of impairment testing, goodwill is allocated to a group of cash-
generating units. Goodwill impairment charges are recognised immediately in the consolidated income statement.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.16 Intangible assets
Intangible assets acquired through business combinations are measured at fair value on acquisition. Separately acquired intangible
assets such as licences and software, are recognised at the price paid to acquire them. Intangible assets arising from development
costs are capitalised when it has been established that the project is technically and financially feasible and the Group has both the
intention and ability to use the completed asset.
Intangible assets are subsequently carried at cost less amortisation and any accumulated impairment losses.
Intangible assets are amortised on a basis to reflect the pattern in which the future economic benefits are expected to be
consumed by reference to new business production levels unless the pattern cannot be determined reliably, in which case a
straight-line method is applied. Impairment testing is conducted when there is an indication of impairment. If an impairment has
occurred, an impairment charge is recognised for the difference between the carrying value and recoverable amount of the asset.
The recoverable amount is the greater of fair value less costs to sell and value in use. Value in use is calculated as the present value
of future expected cash flows from the asset, cash-generating unit or group of cash-generating units to which it is allocated.
Amortisation and impairment of intangible assets is charged to the consolidated income statement.
1.5.17 Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and in hand, deposits held at call with banks, debt securities and money market
funds with less than 90 days' maturity from the date of acquisition.
1.5.18 Dividends
Dividends are recognised when the obligation becomes certain, ie when the dividend is no longer at the discretion of the Company.
In the case of interim dividends, this occurs when the dividends are paid. For final dividends, this occurs when they are
recommended by the Board and approved by shareholders.
1.5.19 Share capital and share premium
An equity instrument is any contract that evidences a residual interest in the assets of the Group, after deducting all of its liabilities.
Shares are classified as equity when their terms do not create an obligation to transfer assets. The nominal value of shares issued
is recorded in share capital.
Where the consideration received from the issue or sale of existing shares exceeds the nominal value recorded in share capital, the
difference is recorded in share premium. Share premium is recorded net of share issue costs.
1.5.20 Treasury shares
Where any of the Group entities purchase the Company\u2019s share capital, the consideration paid, including any attributable
transaction costs, is shown as a deduction from total shareholders\u2019 equity. Any gains and losses arising on treasury shares are
included within equity.
1.5.21 Merger reserve
The merger reserve arises from the application of merger accounting principles to acquisitions of entities under common control. It
represents the difference between the aggregate capital reserves and value of the entities acquired, which is recognised directly in
equity. On disposal of the relevant entity, the related merger reserve is released directly to retained earnings.
1.5.22 Share-based payments
All share-based payments made to employees for services rendered are measured based on the fair value of the equity instrument
granted. The fair value takes into account the impact of market-based vesting conditions and non-vesting conditions, but excludes
any impact of non-market-based vesting conditions. The related share-based payment expense is recognised over the vesting
period. The fair value is determined using an option pricing model such as Black-Scholes or a Monte Carlo simulation where
appropriate, taking into account the terms and conditions of the award.
For equity-settled share-based payments, the fair value of service rendered is based on the fair value of the equity instrument at
grant date, which is not remeasured subsequently. The share-based payment expense is recognised over the vesting period and is
based on the number of equity instruments expected to vest, with the corresponding entry to equity.
For cash-settled share-based payments, the fair value of service rendered is based on the fair value of the liability related to the
equity instrument granted. The fair value of the equity instrument granted is remeasured at each reporting date with any changes
recognised in the share-based payment expense in the consolidated income statement for the period.
A cancellation of an award without the grant of a replacement equity instrument is accounted for as an acceleration of vesting.
Accordingly, any share-based expense that would have been recognised over the remaining vesting period is recognised immediately.
Where replacement equity instruments are granted to employees in place of the cancelled equity instruments, the replacement
award is treated as a modification of the original award. At the point of replacement, the awards are remeasured to the fair value at
the date of replacement, which forms the basis of recognising the expense over the remaining vesting period.
On vesting or exercise, the difference between the expense charged to the consolidated income statement and the actual cost to
the Group is transferred to retained earnings.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.23 Earnings per share (EPS)
Basic EPS is calculated by dividing the profit or loss for the year attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding, excluding treasury shares and shares held by the employee benefit trust.
Diluted EPS is calculated by dividing the profit or loss for the year attributable to ordinary shareholders by the weighted average
number of ordinary shares, excluding treasury shares and shares held by the employee benefit trust, adjusted to take into account
the effect of any dilutive potential ordinary shares.\u00a0The Group\u2019s only class of potentially dilutive ordinary shares are share options
and awards granted to employees. Potential ordinary shares are treated as dilutive when their conversion to ordinary shares
results in a decrease in EPS.
1.5.24 Foreign exchange
The Group\u2019s consolidated financial statements are presented in million pounds sterling, the Group\u2019s presentation currency.
Accordingly, the results and financial position of foreign subsidiaries are translated into the presentation currency of the Group
from their functional currencies. All assets and liabilities of foreign subsidiaries are converted at year-end exchange rates while all
income and expenses are converted at average exchange rates where this is a reasonable approximation of the rates prevailing on
transaction dates.
Foreign currency monetary assets and liabilities are translated at the spot exchange rate for the functional currency at the
reporting date. Changes resulting from exchange rates are recognised in the consolidated income statement.
Foreign currency transactions are translated into functional currencies at the spot rate prevailing on the date of transactions.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency
at the spot exchange rate at the date on which the fair value is determined. Non-monetary items that are measured based on
historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction.
Exchange differences arising on the translation of foreign subsidiaries are recognised in other comprehensive income and taken to
other reserves within equity. On disposal of the foreign subsidiary, the related exchange differences are transferred out of this
reserve and are recognised in the consolidated income statement as part of the gain or loss on disposal.
The income statements and cash flows, and statements of financial position of Group entities that have a different functional
currency from the Group's presentation currency, have been translated using the following principal exchange rates.
2023
2022
Income statement and cash
flows (average rate)
Statement of financial
position (closing rate)
Income statement and cash
flows (average rate)
Statement of financial
position (closing rate)
Euro (EUR)
1.15
1.15
1.17
1.13
Indian Rupee (INR)
102.70
106.08
97.05
99.53
Polish Z\u0142oty (PLN)
5.22
5.01
5.49
5.29
South African Rand (ZAR)
21.02
23.31
20.17
20.59
Swiss Franc (CHF)
1.12
1.07
1.18
1.12
US Dollar (USD)
1.24
1.27
1.24
1.21
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.25 Leases
The Group leases office property to conduct its business. At the inception of a contract, the Group assesses whether a contract is,
or contains, a lease. In simple terms this applies if the contract conveys the right to control the use of an identified asset for a period
of time in exchange for consideration. At inception, the Group allocates the consideration in a contract to each lease component.
However, for the leases of land and buildings, in which the Group acts as lessee, the Group has elected to account for the lease and
non-lease components as a single lease component.
Where the Group acts as a lessee, it recognises a 'right of use' asset and a corresponding lease liability, representing the obligation
to make lease payments at the lease commencement date. The Group applies the cost model to the right of use assets, except for
those that meet the definition of an investment property, to which the fair value model is applied.
The asset is initially measured at cost which comprises the amount of the lease liability, and lease payments made at or before the
commencement date, any initial direct costs incurred and an estimate of the costs related to the dilapidation of the asset that
would be incurred, less any lease incentives received. Subsequently, the asset is depreciated using the straight-line method from
the commencement date to the earlier of (i) the end of the right of use asset\u2019s useful life and (ii) the end of the lease term.
The lease liability is initially measured at the present value of lease payments that are not yet paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group\u2019s own incremental
borrowing rate. Subsequently, the lease liability is measured at amortised cost, using the effective interest method. From time to
time, the lease liability is re-measured where there is a change in future lease payments for example, where the Group reassesses
whether it will exercise a purchase, extension or termination option. Where this happens, a corresponding adjustment is made to
the carrying amount of the right of use asset or an amount is recognised in the consolidated income statement if the carrying
amount of the right of use asset has been reduced to zero.
The Group presents the right of use assets that do not meet the definition of investment property in \u2018Property, plant and
equipment\u2019 on the consolidated statement of financial position. The corresponding lease liabilities are presented in \u2018lease liabilities\u2019.
Where the Group acts as lessor, it classifies and accounts for its leases as operating or finance leases. Where the Group acts as an
intermediate lessor, as it does with some of its property leases, it accounts for its interests in the head lease and the sub-lease
separately. The Group assesses the lease classification of a sub-lease with reference to the right of use asset arising from the head
lease, not with reference to the underlying asset. Where substantially all the risks and rewards of ownership are transferred to the
lessee, the Group recognises a receivable asset on the consolidated statement of financial position, equal to the present value of
the lease payments, within 'Accrued investment income and other debtors'. The Group recognises finance income over the lease
term to reflect the rate of return on the net investment in the lease, within 'Other income'. The Group recognises lease payments
received under operating leases as income on a straight-line basis over the lease term as part of 'Investment return'.
1.5.26 Property, plant and equipment (PPE)
PPE includes Group occupied properties and other tangible assets, such as computer equipment, motor vehicles, leasehold
improvements and fixtures and fittings. PPE including owner-occupied property is measured at cost, which represents the original
purchase price less any expenses incurred in bringing it to its working conditions, and subsequently measured using the cost
model.
Depreciation is charged to the consolidated income statement on a straight-line basis over the assets estimated useful lives* as
follows:
Type of asset
Estimated useful life
Group occupied property
20\u201350 years
Right of use asset
2\u201350 years
Other tangible assets
2\u201340 years
*Note that the useful lives stated are inclusive of PPE held by consolidated infrastructure private equity vehicles which typically have longer useful lives than
other assets of the Group.
Management determines useful lives and residual values for assets when they are acquired. The Group assesses the useful life,
residual value and depreciation method for PPE on an annual basis and any adjustments are made where required.
An impairment review of PPE is carried out whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. Management assesses impairment at the lowest level for which there are separately identifiable cash flows.
Where the carrying amount of an asset is greater than its estimated recoverable amount, which is the higher of the assets fair value
less costs of disposal and value in use, it is written down immediately to its recoverable amount and an impairment loss is
recognised in the consolidated income statement.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.27 Assets and liabilities held for sale
The Group classifies assets and liabilities as held for sale when the carrying amount is expected to be recovered through a sale
transaction, usually within one year, and management is committed to the sale.
Assets and liabilities held for sale are shown separately on the consolidated statement of financial position and are measured at the
lower of their carrying amount and their fair value less costs to sell. No depreciation or amortisation is charged on an asset which is
classified as held for sale.
When the Group is committed to a sale of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale
when the criteria described above are met, regardless of whether the Group retains a non-controlling interest in its former
subsidiary after the sale.
Income and expenses of subsidiaries sold during the year are included in the consolidated income statement up to the date of
disposal. The gain or loss on disposal is calculated as the difference between sale proceeds net of selling costs, less the net assets
of the entity at the date of disposal, adjusted for foreign exchange movements attaching to the sold entity that are required to be
recycled to the consolidated income statement under IAS 21 'The Effects of Changes in Foreign Exchange Rates'.
1.5.28 Provisions and contingent assets and liabilities
Provisions are recognised in the consolidated statement of financial position when the Group has a present legal or constructive
obligation resulting from a past event, it is more probable than not that a loss will be made in settling the obligation and the
amounts can be estimated reliably.
Provisions are measured based on management\u2019s best estimate of the expenditure required to settle the obligation at the
reporting date. Provisions are discounted and represent the present value of the expected expenditure where the effect of the
time value of money is material.
Contingent liabilities are possible obligations of the Group where the timing and amount are subject to significant uncertainty.
Contingent liabilities are not recognised in the consolidated statement of financial position, unless they are assumed by the Group
as part of a business combination. Contingent liabilities are however disclosed, unless they are considered to be remote. If a
contingent liability becomes probable and the amount can be reliably measured, it is no longer treated as contingent and
recognised as a liability.
Contingent assets which are possible benefits to the Group are only disclosed if it is probable that the Group will receive the
benefit. Mirroring the treatment of contingent liabilities, if such a benefit becomes virtually certain, it is no longer considered
contingent and is recognised on the consolidated statement of financial position as an asset.
", "dimensions": { "concept": "ifrs-full:DisclosureOfMaterialAccountingPolicyInformationExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-595": { "value": "
(i) Subsidiaries
Subsidiaries are those investees that the Group controls. Where the Group is deemed to control an entity, the entity is treated as a
subsidiary and its results, assets and liabilities are consolidated. Where the Group holds a minority share in an entity but does not
have control, joint control or significant influence over the entity, the investments are carried at FVTPL within financial investments
in the consolidated statement of financial position.
The Group performs a reassessment of consolidation whenever there is a change in the substance of the relationship between the
Group and an investee.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSubsidiariesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-596": { "value": "
(ii) Joint ventures and associates
Joint ventures are joint arrangements arising from a contractual agreement whereby the Group and other investors have joint
control of the net assets of the arrangement. In these arrangements, the Group\u2019s share of the underlying net assets may be lower
or higher than 50% but the terms of the relevant agreement make it clear that control is jointly exercised between the Group and
the third party, for example, where significant decisions required unanimous approval of all parties, or where all parties have equal
voting rights.
Associates are entities over which the Group has significant influence, but which it does not control. Generally, it is presumed that
the Group has significant influence if it holds between 20% and 50% of the voting rights of the entity.
Investments in associates and joint ventures held by the Group\u2019s insurance or investment funds, including venture capital
businesses, mutual funds and unit trusts, are accounted for at FVTPL. All other investments in joint ventures and associates are
accounted for using the equity method of accounting. Under the equity method, the Group\u2019s share of profit or loss of its joint
ventures and associates is recognised in the consolidated income statement and its share of movements in other comprehensive
income are recognised in other comprehensive income.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-597": { "value": "
1.5.2 Insurance contracts
(i) Contracts within the scope of IFRS 17
An entity must apply IFRS 17 to determine the requirements for recognition, measurement, presentation and disclosure of:
\u2013 Insurance contracts (including reinsurance contracts issued);
\u2013 Reinsurance contracts held; and
\u2013 Investment contracts with DPF issued, provided the entity also issues insurance contracts.
IFRS 17 defines insurance contracts as contracts under which one party (the issuer) accepts significant insurance risk from another
party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event)
adversely affects the policyholder.
Reinsurance contracts are insurance contracts issued by one entity (the reinsurer) to compensate another entity for claims arising
from one or more insurance contracts issued by that other entity (underlying contracts).
The Group judges that a contract transfers significant insurance risk if there is at least one scenario where the amounts that could
be payable under the contract represent 10% or more than the amounts payable if the insured event does not occur.
In addition to accepting insurance risk from the insurance contracts issued, the Group is exposed to financial risk from the
insurance and investment contracts it issues and reinsurance contracts it holds.
The Group\u2019s reinsurance contracts are predominantly contracts held under which risks are transferred to an external third party.
The Group has one reinsurance contract under which it accepts risks from with-profits contracts issued by another insurer.
Insurance contracts can be issued and reinsurance contracts can be initiated by the Group, or they can be acquired in a business
combination or in a transfer of contracts that do not form a business. All references in these accounting policies to \u2018insurance
contracts\u2019 and \u2018reinsurance contracts\u2019 include contracts issued, initiated or acquired by the Group, unless otherwise stated.
Investment contracts with DPF have the legal form of insurance contracts, but do not transfer significant insurance risk and so are
classified as financial instruments. Nevertheless such contracts fall within the scope of IFRS 17.
An investment contract with DPF is a financial instrument that provides a particular investor with the contractual right to receive, as
a supplement to an amount not subject to the discretion of the issuer, additional amounts:
\u2013 that are expected to be a significant portion of the total contractual benefits;
\u2013 the timing or amount of which are contractually at the discretion of the issuer; and
\u2013 that are contractually based on:
\u2013 the returns on a specified pool of contracts or a specified type of contract;
\u2013 realised and/or unrealised investment returns on a specified pool of assets held by the issuer; or
\u2013 the profit or loss of the entity or fund that issues the contract.
The Group judges that the additional discretionary benefits are significant when they are expected to be at least 5% of the total
contractual benefits.
The Group\u2019s investment contracts with DPF comprise the with-profits business that do not transfer significant insurance risk. This
includes investments in the PruFund range of funds available to individual investors.
Investment contracts without DPF are not accounted for under IFRS 17 but instead fall within the scope of IFRS 9. For the Group
these primarily comprise unit-linked contracts that do not transfer significant insurance risk. Also within the scope of IFRS 9 are
contracts issued to corporate bodies to facilitate investment in PruFund, which as a result of cancellation rights included in those
contracts, are judged by the Group to not provide significant discretionary benefits.
If several insurance contracts are transacted with the same or a related counterparty and the Group assesses that the contracts
are designed to achieve an overall commercial effect, the contracts are combined in order to report the substance of the
transactions.
Some investment contracts issued by the Group provide policyholders with the option to invest their premiums in both unit-linked
funds and with-profits funds (including access to PruFund). The Group accounts for such contracts as two separate in substance
contracts enabling the investment in with-profits and PruFund to be accounted for under IFRS 17 and the investment in unit-linked
funds to be accounted for under IFRS 9.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(i) Contracts within the scope of IFRS 17 (continued)
The Group has previously issued and still holds a book of equity release mortgages. These contracts contain a no negative equity
guarantee which ensures that, should the policyholder pass away or move into residential care during the term of the instrument
and the accrued loan value is in excess of the sale proceeds of the mortgaged property, then the policyholder\u2019s beneficiaries would
not have to repay any excess. This feature has been assessed to consider whether it gives rise to insurance risk. The Group judges
the equity release mortgages meet the definition of an insurance contract, but the compensation for insured events is limited to the
amount otherwise required to settle the policyholder's obligation created by the contract. In this circumstance IFRS 17 permits the
issuer of contracts to choose whether to account for these contracts under IFRS 17 or IFRS 9. The Group has opted to account for
these contracts under IFRS 9.
(ii) Separating components
At inception, the Group must identify and separate the following components from contracts within the scope of IFRS 17 and
account for the components as if they were stand-alone financial instruments:
\u2013 derivatives embedded in the contract whose economic characteristics and risks are not closely related to those of the host
contract, and where the component issued as a standalone contract is not itself a contract that falls within the scope of IFRS 17;
and
\u2013 distinct investment components other than investment components with DPF: ie investment components that are not highly
inter-related with the insurance components and for which contracts with equivalent terms are sold, or could be sold, separately
in the same market or the same jurisdiction.
After separating any financial instrument components, the Group must separate any promises to transfer to policyholders distinct
goods or services other than insurance coverage and investment services and account for them as separate contracts with
customers (ie these are accounted for under IFRS 15). A good or service is distinct if the policyholder can benefit from it either on
its own or with other resources that are readily available to the policyholder. A good or service is not distinct and is accounted for
together with the insurance component if the cash flows and risks associated with the good or service are highly inter-related with
the cash flows and risks associated with the insurance component, and the Group provides a significant level of service by
integrating the good or service with the insurance component.
The Group has assessed the contracts it has issued and no contracts were identified as containing embedded derivatives, distinct
investment components or distinct goods and non-insurance services that must be separated and accounted for under other IFRS
standards.
Certain contracts have been determined to contain non-distinct investment components, rights to a refund of premiums, and other
non-insurance components (ie amounts payable to a policyholder that are not contingent on the occurrence of an insured event)
which are not required to be separated from the host insurance contract but do require specific treatment under IFRS 17. These
payments are excluded from the value of insurance revenue and insurance service expenses presented in profit and loss.
Non-distinct investment components, rights to a refund of premiums, and other non-insurance components typically arise in
contracts where there is some form of surrender benefit payable at any time of the policyholder\u2019s choosing. The Group has opted
as an accounting policy choice to consistently define the surrender value to be net of surrender charges or penalties when
determining the amounts to exclude from insurance revenue and insurance service expenses.
(iii) Level of aggregation
Insurance contracts
Insurance contracts issued are aggregated into groups for measurement purposes. Groups of insurance contracts are first
determined by identifying portfolios of insurance contracts, each comprising contracts subject to similar risks and managed
together.
The Group interprets that, when aggregating contracts by similar risk, all risks must be considered but \u2018similar risks\u2019 is not
interpreted to mean \u2018identical risks\u2019. The Group judges that an appropriate method is to aggregate contracts according to which of
the three risk categories of protection, longevity and investment is the dominant risk which the Group is exposed to from writing
the contract. These three categories have been chosen as they best represent the risks that the Group is exposed to without
unnecessary granularity and subdivision.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(iii) Level of aggregation (continued)
Insurance contracts (continued)
In aggregating contracts that are managed together, the Group considers the following factors:
\u2013 the existence of a common pool of assets backing the contracts;
\u2013 the approach to risk management, for example hedging strategies or the existence of reinsurance arrangements;
\u2013 for business in a with-profits fund, the approach to risk-bearing, profit-sharing and the application of discretion;
\u2013 the source of the business, eg UK or overseas; and
\u2013 the categorisation of contracts for the segmental reporting reported in the accounts or for internal management information.
Each portfolio is divided into a minimum of:
\u2013 a group of contracts that are onerous on initial recognition, if any;
\u2013 a group of contracts that at initial recognition have no significant possibility of becoming onerous subsequently, if any; and
\u2013 a group of the remaining contracts in the portfolio, if any.
The Group does not currently have any groups of contracts that fall into the category that on initial recognition have no significant
possibility of becoming onerous subsequently.
Each of these groups must then be further subdivided, if necessary to ensure that each group does not contain contracts that have
been issued more than one year apart.
For annuities, unisex pricing may be required under gender neutral pricing regulations, and may, for example, result in policies sold
to females being onerous and policies sold to males being non-onerous. As the other elements of the pricing basis are identical, the
difference in onerousness is solely due to the legal constraint. IFRS 17 permits such contracts to be included in the same group.
Reinsurance contracts held
Reinsurance contracts held are similarly aggregated into groups for measurement purposes by first identifying portfolios.
However, rather than dividing the portfolios into three groups based on profitability, the contracts are grouped according to
whether or not there is net gain at initial recognition for a group, that is into a minimum of:
\u2013 a group of contracts for which there is a net gain on initial recognition, if any;
\u2013 a group of contracts for which, on initial recognition, there is no significant possibility of there being a net gain subsequently, if
any; and
\u2013 a group of the remaining contracts in the portfolio, if any.
As for groups of contracts issued, no group may contain contracts that have been issued more than one year apart and so the
groups must be further subdivided to meet this requirement as necessary.
The Group does not currently have any groups of contracts that fall into the category of, on initial recognition, having no significant
possibility of there being a net gain subsequently.
Some reinsurance contracts provide cover for underlying contracts that are included in different groups. However, the Group
concludes that the reinsurance contract\u2019s legal form of a single contract reflects the substance of the Group\u2019s contractual rights
and obligations, considering that the different covers lapse together and are not sold separately. As a result, the reinsurance
contract is not separated into multiple insurance components that relate to different underlying groups.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(iv) Recognition
A group of contracts issued by the Group is recognised from the earliest of:
\u2013 the beginning of the coverage period of the group (ie the period during which the Group provides services in respect of any
premiums within the boundaries of the contracts);
\u2013 when the first payment from a policyholder in the group becomes due or, if there is no contractual due date, when it is received
from a policyholder; and
\u2013 for a group of onerous contracts, when the group becomes onerous.
The Group is required to determine whether any contracts form a group of onerous contracts before the earlier of the first two
dates above if facts and circumstances indicate there is such a group.
An insurance contract acquired in a transfer of contracts or a business combination is recognised on the date of acquisition.
When the contract is recognised, it is added to an existing group of contracts or, if the contract does not qualify for inclusion in an
existing group, it forms a new group to which future contracts are added. Groups of contracts are established on initial recognition
and their composition is not revised once all contracts have been added to the group.
The recognition date of an investment contract with DPF is the date that the entity becomes party to the contract.
A group of reinsurance contracts held is recognised from the earlier of the following:
\u2013 the beginning of the coverage period of the group of reinsurance contracts held; and
\u2013 the date the Group recognises an onerous group of underlying insurance contracts, if the Group entered into the related
reinsurance contract held in the group of reinsurance contracts held at or before that date.
For groups of reinsurance contracts held that provide proportionate coverage, which for the Group consists of quota share
reinsurance contracts, recognition is delayed until the date that any underlying insurance contract is initially recognised, if that date
is later than the beginning of the coverage period of the group of reinsurance contracts held.
Reinsurance contracts that are acquired are recognised from the date of acquisition.
(v) Onerous groups of contracts
The Group considers the following factors to identify if a group of contracts is onerous:
\u2013 the Group\u2019s pricing frameworks;
\u2013 profit testing results; and
\u2013 calculations for individual contracts.
(vi) Contract boundary
The measurement of a group of contracts includes all of the future cash flows within the boundary of each contract in the group,
determined as follows:
Insurance contracts
Cash flows are within the contract boundary if they arise from substantive rights and obligations that exist during the reporting
period in which the Group can compel the policyholder to pay premiums or has a substantive obligation to provide services
(including insurance coverage and any investment services).
A substantive obligation to provide services ends when:
\u2013 the Group has the practical ability to reassess the risks of the particular policyholder and can set a price or level of benefits that
fully reflects those reassessed risks; or
\u2013 the Group has the practical ability to reassess the risks of the portfolio that contains the contract and can set a price or level of
benefits that fully reflects the risks of that portfolio, and the pricing of the premiums up to the reassessment date does not take
into account risks that relate to periods after the reassessment date.
The reassessment of risks considers only risks transferred from policyholders to the Group, which may include both insurance and
financial risks, but exclude lapse and expense risks.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vi) Contract boundary (continued)
Investment contracts with DPF
Cash flows are within the contract boundary of an investment contract with DPF if they result from a substantive obligation of the
entity to deliver cash at a present or future date. The entity has no substantive obligation to deliver cash if it has the practical ability
to set a price for the promise to deliver the cash that fully reflects the amount of cash promised and related risks.
Reinsurance contracts
Cash flows are within the contract boundary if they arise from substantive rights and obligations that exist during the reporting
period in which the Group is compelled to pay amounts to the reinsurer or has a substantive right to receive services from the
reinsurer. A substantive right to receive services from the reinsurer ends when the reinsurer:
\u2013 has the practical ability to reassess the risks transferred to it and can set a price or level of benefits that fully reflects those
reassessed risks; or
\u2013 has a substantive right to terminate the coverage.
In assessing contract boundaries for insurance, investment with DPF and reinsurance contracts the Group makes the following
judgements:
Granularity of contract boundary assessment
The contract boundary is assessed at an individual contract level.
Practical ability to set a price or level of benefits that fully reflect the risks
Only policyholder risks (the insurance and financial risks that the insurance contract transfers from the policyholder to the Group)
are considered when assessing the Group\u2019s ability to set a price or level of benefits that fully reflects the risks. Individual
components of a single insurance contract are assessed separately, and the full insurance contract is subject to the same single
boundary which is the longest of the individual components.
The Group considers the practical ability to set a price or level of benefits that fully reflects the risks only exists where the Group is
not prevented from setting the same price it would for a new contract with the same characteristics. In addition to the constraints
that apply in relation to new business, constraints on the Group\u2019s ability to set a price or level of benefits that fully reflects the risks
also include wider market competitiveness and commercial considerations and contractual, legal or regulatory restrictions.
The constraints must have commercial substance to bind the Group, where commercial substance is defined as having a
\u2018discernible effect on the economics of the transaction\u2019.
Right to terminate the contract
Policyholder behaviour is not relevant in assessing whether a contract binds the Group. The Group includes, within the fulfilment
cash flows, the probability-weighted expectation of contract terminations, including allowance for policyholder behaviour.
Adding insurance coverage
Where there is an option to add insurance coverage to the same contract at a future date, then the cash flows arising from the
option will only fall outside the contract boundary if the Group has the practical ability to fully reassess the risks for the entire
contract (including the option) at the point the option is exercised.
Frequency of assessment
The assessment of the contract boundary is performed and reassessed to include the effect of changes in circumstances on the
entity's substantive rights and obligations.
Treatment of non-contractual premium top-ups for accumulating with-profits and PruFund range of funds
The Group judges that, on initial recognition of an accumulating with-profits contract or PruFund range of funds contract, it has no
substantive right to any profits associated with future non-contractual premiums and no substantive obligations. Therefore future
non-contractual premiums are considered to be outside the contract boundary of the original contract. Non-contractual top-up
premiums for these contracts are recognised from the date of payment and are reported as new business in the year of payment.
(vii) Measurement
Insurance contracts \u2013 initial measurement
On initial recognition, the Group measures a group of insurance contracts as the total of:
\u2013 the fulfilment cash flows, which comprise estimates of future cash flows, adjusted to reflect the time value of money and the
associated financial risks, and a risk adjustment for non-financial risk; and
\u2013 the CSM.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement (continued)
Estimates of future cash flows
The estimated future cash flows are an explicit, unbiased and probability-weighted estimate (ie expected value) of the present
value of the future cash outflows minus the present value of the future cash inflows that will arise as the entity fulfils insurance
contracts. For most contracts the cash inflows and outflows primarily consist of premiums, claims and costs relating to the
fulfilment of the contracts.
The With-Profits Fund contains surplus assets that have accumulated from a number of sources over a long period. Surpluses may
continue to arise, for example if the amounts charged to policies exceed the costs they are intended to cover. These surpluses
accrue to the With-Profits Fund and can be utilised to meet deficits arising on other with-profits contracts or to enhance the
benefits payable to current or future policyholders. The expression 'mutualisation' is used to refer to the feature whereby the cash
flows of some contracts may affect or be affected by the cash flows of other contracts.
This feature of the With-Profits Fund is recognised under IFRS 17 through:
\u2013 Adjustments to the estimated future cash flows of each with-profits group of insurance contracts to reflect the policyholders\u2019
share of the future surpluses/deficits that are expected to emerge from that group of insurance contracts.
\u2013 A liability that is separate to the liabilities for the groups of insurance contracts that reflects the additional amounts expected to
be paid to current or future policyholders (in accordance with paragraph B71 of IFRS 17).
Estimating the policyholders\u2019 share of the surplus assets is an area requiring significant judgement.
IFRS 17 requires that only costs that are directly attributable to fulfilling the insurance contracts are included in the cash flows.
Management considers that the majority of the expenses incurred in relation to contracts within the scope of IFRS 17 meet this
requirement. Examples of costs that would typically be excluded are those relating to corporate restructuring, brand marketing,
and regulatory failings.
IFRS 17 requires that cash flows within the contract boundary include costs that the entity will incur in providing an investment
activity to enhance benefits for the policyholder. The Group\u2019s interpretation is that the Investment Management Expenses (IMEs)
incurred on assets backing the fulfilment cash flows are included in the fulfilment cash flows for the majority of business, with the
exception of non-profit protection contracts. This is on the basis of the effect of the Group\u2019s investment activities and expected
investment returns on the benefits payable, even if the benefits are contractually fixed at inception (as for annuity contracts). If the
Group were to invest the premiums received for annuity contracts in less risky asset classes, a lower level of benefits would then
be offered for the same premiums. Therefore, the benefits to the policyholder if an insured event occurs are enhanced by the
investment activities performed, and so the associated expenses are included within the fulfilment cash flows.
Where there are cash flows between different components of the reporting entity (such as policyholder funds and shareholder
funds) IFRS 17 requires that these are not included when estimating the cash flows that will arise as the entity fulfils an existing
insurance contract, provided these cash flows do not change the amount that will be paid to the policyholders.
The Group\u2019s interpretation is that expenses will reflect the costs incurred by the Group, which may differ from the internal charges
to companies within the Group.
The cash flows of a group of insurance contracts do not reflect the Group\u2019s non-performance risk.
Discount rates
Cash flows are discounted using risk-free yield curves adjusted to reflect the liquidity characteristics of the contracts.
The Group determines the adjustment for illiquidity using either a top-down or a bottom-up approach.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement (continued)
Discount rates (continued)
Under the top-down approach a yield curve that reflects the current market rates of return implicit in a fair value measurement of a
reference portfolio of assets is adjusted to eliminate any factors that are not relevant to the insurance contracts, such as cash flow
mismatching and credit risk. There is no requirement to adjust the yield curve for differences in the liquidity characteristics of the
insurance contracts and the reference portfolio. Judgement is required to choose an appropriate reference portfolio and to
determine the element of the yield on the portfolio that is attributable to factors not relevant to the insurance contracts.
Under the bottom-up approach a liquid risk-free yield curve is increased to reflect the differences between the liquidity
characteristics of the financial instruments that underlie the risk-free rates observed in the market and the liquidity characteristics
of the insurance contracts. Judgement is required to determine the illiquidity premium.
The Group applies the top-down approach for non-profit annuity contracts and the bottom-up approach for all other contracts,
including with-profits.
The reference portfolios chosen for non-profit annuities are the Assigned Portfolios used for the Solvency II Matching Adjustment.
These are considered to be suitable as reference portfolios for IFRS 17 reporting because their objective is to closely match the
liability cash flows and there is strong governance around their management.
The largest adjustment made to reference portfolio yield is in relation to credit risk. IFRS 17 is not prescriptive as to how the
adjustment for credit risk is determined other than that it should reflect market risk premiums for credit risk. The Group continues
to calculate the credit risk adjustment using the same approach previously used for IFRS 4 reporting. This methodology is
considered appropriate for IFRS 17 reporting as it incorporates allowances for expected and unexpected credit events, including
internal and external views on the outlook for credit risk, and considers the relationship between credit risk and yield spreads.
For with-profits contracts the illiquidity premium is derived from a portfolio of fixed interest assets, comprising highly liquid
government bonds and less liquid corporate bonds, that have similar characteristics and duration to the liabilities. The illiquidity
premium for this portfolio is determined as the spread over risk-free rates less an allowance for credit risk. A weighting is then
applied to this premium to reflect the relative liquidity characteristics of the with-profits contracts.
Risk adjustment for non-financial risk
The risk adjustment for non-financial risk for a group of insurance contracts, determined separately from the other estimates, is the
compensation that the Group requires for bearing uncertainty about the amount and timing of the cash flows that arises from non-
financial risk, such as insurance risk, expense risk and lapse risk.
For all lines of business, the Group uses a confidence level technique under which the target confidence level is determined by
consideration of the Group\u2019s pricing framework for insurance contracts issued and the prices at which the Group has previously
transacted reinsurance contracts held. The target confidence level is translated into product-specific non-financial assumptions by
reference to the Group\u2019s view of the likely risk distributions of non-financial risk events, which have a time horizon of one year. The
risk adjustment for non-financial risk is determined as the increase in the discounted value of the future cash flows from using
these assumptions instead of unbiased non-financial assumptions.
There is significant overlap in the risks considered between IFRS 17 and Solvency II reporting. The IFRS 17 risk adjustment does not
include financial risks or non-financial risks that do not arise from insurance contracts.
The risk adjustment reflects the impact of diversification of non-financial risks within each entity in the Group but not diversification
of risks between entities. The risk adjustment is calculated separately gross of reinsurance and for reinsurance contracts held.
For reinsurance contracts held, the risk adjustment represents the amount of risk being transferred by the Group to the reinsurer.
The same approach is used to determine the risk adjustment, ie as the difference in the discounted value of future cash flows
between using best estimate assumptions and assumptions calibrated to the required confidence level.
CSM
The CSM of a group of insurance contracts represents the unearned profit that the Group will recognise as it provides services
under those contracts. On initial recognition of a group of insurance contracts, if the total of (a) the fulfilment cash flows, (b) any
cash flows arising at that date and (c) any amount arising from the derecognition of any assets or liabilities previously recognised
for cash flows related to the group is a net inflow, then the group is not onerous. In this case, the CSM is measured as the value of
the net inflow, which results in no income or expenses arising on initial recognition.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement (continued)
CSM (continued)
For groups of contracts acquired in a transfer of contracts or a business combination, the consideration received for the contracts
is included in the fulfilment cash flows as a proxy for the premiums received at the date of acquisition. In a business combination,
the consideration received is the fair value of the contracts at that date.
If the total is a net outflow, then the group is onerous. In this case, the net outflow is recognised as a loss in profit or loss, or as an
adjustment to goodwill or a gain on a bargain purchase if the contracts are acquired in a business combination. A loss component
is created to depict the amount of the net outflow, which determines the amounts that are subsequently presented in profit or loss
as reversals of losses on onerous contracts and are excluded from insurance revenue.
Insurance contracts \u2013 subsequent measurement
The carrying amount of a group of insurance contracts at each reporting date is the sum of the liability for remaining coverage and
the liability for incurred claims. The liability for remaining coverage comprises (a) the fulfilment cash flows that relate to services
that will be provided under the contracts in future periods and (b) any remaining CSM at that date. The liability for incurred claims
includes the fulfilment cash flows for incurred claims and expenses that have not yet been paid, including claims that have been
incurred but not yet reported.
The fulfilment cash flows of groups of insurance contracts are measured at the reporting date using current estimates of future
cash flows, current discount rates and current estimates of the risk adjustment for non-financial risk.
The method for calculating the CSM for a group of contracts subsequent to initial recognition of the group depends on whether the
group consists of contracts that are with or without direct participation features.
A contract within the scope of IFRS 17 is considered to have direct participation features (ie required to be measured applying the
Variable Fee Approach) if at inception:
\u2013 the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying items;
\u2013 the entity expects to pay to the policyholder an amount equal to a substantial share of the fair value returns on the underlying
items; and
\u2013 the entity expects a substantial proportion of any change in the amounts to be paid to the policyholder to vary with the change in
fair value of the underlying items.
Conversely all contracts that do not meet the definition of being with direct participation features at inception are contracts
without direct participation features.
Contracts must be individually assessed to determine whether they are with direct participation features and once classified they
are not reassessed unless the contract is modified.
Where contracts are subject to mutualisation, criteria (b) and (c) are assessed allowing for the impact of mutualisation.
The Group\u2019s contracts with direct participation features comprise all of the with-profits business and unit-linked contracts
accounted for under IFRS 17.
All of the Group\u2019s other business that is within the scope of IFRS 17 are contracts without direct participation features. In particular
IFRS 17 prescribes that reinsurance contracts, held or issued, can only be contracts without direct participation features.
Underlying items
The underlying items are items that determine some of the amounts payable to a policyholder. Underlying items can comprise any
items, for example, a reference portfolio of assets, the net assets of the entity, or a specified subset of the net assets of the entity.
For in-force with-profits contracts the Group defines the underlying items to be the assets backing asset shares (which are the
accumulated value of all items of income and outgo) and, where applicable, the assets backing the amounts expected to be added
to asset shares in the future, for example to reflect miscellaneous surplus that has arisen (such as from some non-profit business
written in the With-Profits Fund).
A liability, that is separate to the liabilities for the in-force with-profits contracts (in accordance with paragraph B71 of IFRS 17), is
held in the With-Profits Fund that reflects the additional amounts expected to be paid to current or future policyholders. The Group
defines the underlying items for these benefits to be:
\u2013 the entirety of the assets in the With-Profits Fund;
\u2013 less: the underlying items of the in-force with-profits contracts;
\u2013 less: the assets held to meet other liabilities of the With-Profits Fund, for example for non-profit contracts.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement (continued)
Underlying items (continued)
For unit-linked contracts the Group defines the underlying items to be the assets backing the units allocated to all contracts in the
unit of account (the \u2018unit fund\u2019). For contracts where actuarial funding is used the underlying items are defined as the funded value
of units, that is the face value of units multiplied by the actuarial funding factor.
Insurance contracts without direct participation features
For insurance contracts without direct participation features, the carrying amount of the CSM subsequent to initial recognition is
calculated using the General Measurement Model (GMM). Applying GMM, the carrying amount of the CSM at each reporting date
is the carrying amount at the start of the reporting period, adjusted for:
\u2013 the effect of any new contracts that are added to the group in the reporting period;
\u2013 interest accreted on the carrying amount of the CSM during the reporting period, measured at the discount rates determined on
initial recognition;
\u2013 changes in fulfilment cash flows that relate to future service, except to the extent that:
\u2013 any increases in the fulfilment cash flows exceed the carrying amount of the CSM, in which case the excess is recognised as a
loss in profit or loss and creates a loss component; or
\u2013 any decreases in the fulfilment cash flows are allocated to the loss component;
\u2013 the effect of any currency exchange differences on the CSM; and
\u2013 the amount recognised as insurance revenue because of the services provided in the reporting period.
Changes in fulfilment cash flows that relate to future service comprise:
\u2013 experience adjustments arising from premiums received in the reporting period that relate to future services and related cash
flows, measured at the discount rates determined on initial recognition;
\u2013 changes in estimates of the present value of future cash flows in the liability for remaining coverage, measured at the discount
rates determined on initial recognition, except for changes that arise from the effects of the time value of money, financial risk
and changes therein;
\u2013 differences between (a) any investment component expected to become payable in the reporting period, determined as the
payment expected at the start of the reporting period plus any insurance finance income or expenses related to that expected
payment before it becomes payable; and (b) the actual amount that becomes payable in the reporting period; and
\u2013 changes in the risk adjustment for non-financial risk that relate to future services.
A key aspect of GMM is that adjustments to the CSM resulting from changes to the present value of future cash flows must be
measured using the discount rate that applied at inception of the group of contracts. However, the standard does not explicitly
state whether this is intended to extend to all financial assumptions. The Group\u2019s interpretation is that all financial assumptions
must be set at inception but are only \u2018locked-in\u2019 for future years, therefore the estimates of cash flows up to the measurement date
reflect the effect of actual historical financial risk experience. For example, for index-linked annuities the estimated future cash
flows reflect the actual inflationary increases that have been added to benefits since inception rather than the locked-in assumed
inflationary increases.
After recognising a loss on an onerous group of insurance contracts, specified fulfilment cash flows must be allocated on a
systematic basis between the loss component of the liability for remaining coverage and the liability for remaining coverage
excluding the loss component. For this purpose, the proportion allocated to the loss component is determined as the ratio of the
amount of the loss component to the discounted value of the future cash outflows plus the risk adjustment for non-financial risk.
Insurance contracts with direct participation features
Direct participating contracts are contracts under which the Group\u2019s obligation to the policyholder is the net of:
\u2013 the obligation to pay the policyholder an amount equal to the fair value of the underlying items; and
\u2013 a variable fee in exchange for future services provided by the contracts, being the amount of the Group's share of the fair value of
the underlying items less fulfilment cash flows that do not vary based on the returns on underlying items. The Group provides
investment services under these contracts by promising an investment return based on underlying items, in addition to
insurance coverage.
In respect of the variable fee for the Group\u2019s in-force with-profits contracts, the Group's share of the fair value of the underlying
items consists of:
\u2013 shareholder transfers, gross of tax; and
\u2013 the Group's share of the excess of charges and deductions taken from the asset share (such as annual management charges or
surrender penalties) over shareholder transfers, gross of tax, and costs that vary directly with the underlying items.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement (continued)
Insurance contracts with direct participation features (continued)
The fulfilment cash flows that do not vary based on the returns of the underlying items are:
\u2013 the Group's share of amounts that are expressed as a monetary amount, such as administration expenses, policy fees and the
risk adjustment for non-financial risk. For certain types of cost, such as investment management expenses and additional death
benefits in excess of the asset share, some costs vary directly with the underlying items and others do not. The whole amount of
these types of cost is included in the fulfilment cash flows that do not vary based on the returns of the underlying items.
\u2013 less the fee margin charged by the Group\u2019s asset managers for managing the investments backing the with-profits contracts.
There is no variable fee or CSM in relation to the additional amounts expected to be paid to current or future policyholders (that are
recognised in accordance with paragraph B71 of IFRS 17).
In respect of the variable fee for the Group\u2019s unit-linked contracts, the Group\u2019s share of the fair value of the underlying items
consists of charges and deductions taken from the unit fund (such as annual management charges or surrender penalties), less
costs that vary directly with the underlying items. The fulfilment cash flows that do not vary based on the returns of the underlying
items are amounts that are expressed as a monetary amount, such as administration expenses, policy fees and the risk adjustment
for non-financial risk. For certain types of cost, such as investment management expenses and additional death benefits in excess
of the unit fund, some costs vary directly with the underlying items and others do not. The whole amount of these types of cost is
included in the fulfilment cash flows that do not vary based on the returns of the underlying items.
For insurance contracts with direct participation features, the carrying amount of the CSM subsequent to initial recognition is
calculated using the Variable Fee Approach (VFA). When measuring a group of direct participating contracts, the Group adjusts
the fulfilment cash flows by the whole of the change in the obligation to pay policyholders an amount equal to the fair value of the
underlying items. These changes do not relate to future services and are recognised in profit or loss. The Group then adjusts any
CSM for changes in the amount of the Group\u2019s share of the fair value of the underlying items, which relate to future services, as
explained below.
The carrying amount of the CSM at each reporting date is the carrying amount at the start of the reporting period, adjusted for:
\u2013 the CSM of any new contracts that are added to the group in the reporting period;
\u2013 the change in the amount of the Group\u2019s share of the fair value of the underlying items and changes in fulfilment cash flows that
relate to future services, except to the extent that:
\u2013 a decrease in the amount of the Group's share of the fair value of the underlying items, or an increase in the fulfilment cash
flows that relate to future services, exceeds the carrying amount of the CSM, giving rise to a loss in profit or loss (included in
insurance service expenses) and creating a loss component; or
\u2013 an increase in the amount of the Group's share of the fair value of the underlying items, or a decrease in the fulfilment cash
flows that relate to future services, is allocated to the loss component;
\u2013 the effect of any currency exchange differences on the CSM; and
\u2013 the amount recognised as insurance revenue because of the services provided in the reporting period.
Changes in fulfilment cash flows that relate to future services include the changes relating to future services specified above for
contracts without direct participation features (measured at current discount rates) and changes in the effect of the time value of
money and financial risks that do not arise from underlying items eg the effect of financial guarantees.
In determining the change in CSM attributable to the effect of the time value of money and financial risk on the Group\u2019s share of the
fair value of the underlying items and the fulfilment cash flows, the Group has chosen not to use the risk mitigation option whereby
the changes would be adjusted to reflect the use of derivatives, non-derivative financial instruments or reinsurance contracts held
to mitigate the effect of financial risk.
After recognising a loss on an onerous group of insurance contracts, specified fulfilment cash flows must be allocated on a
systematic basis between the loss component of the liability for remaining coverage and the liability for remaining coverage
excluding the loss component. For this purpose, the proportion allocated to the loss component is determined as the ratio of the
amount of the loss component to the discounted value of the future cash outflows plus the risk adjustment for non-financial risk.
Reinsurance contracts
To measure a group of reinsurance contracts, the Group applies the same accounting policies as are applied to insurance contracts
without direct participation features, with the following modifications.
The carrying amount of a group of reinsurance contracts at each reporting date is the sum of the asset or liability for remaining
coverage and the asset or liability for incurred claims. The asset or liability for remaining coverage comprises (a) the fulfilment cash
flows that relate to services that will be received under the contracts in future periods and (b) any remaining CSM at that date.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement (continued)
Reinsurance contracts (continued)
The Group measures the estimates of the present value of future cash flows using assumptions that are consistent with those used
to measure the estimates of the present value of future cash flows for the underlying insurance contracts. The present value of the
future cash flows for reinsurance contracts held is also adjusted for any risk of non-performance by the reinsurer. The effect of the
non-performance risk of the reinsurer is assessed at each reporting date and the effect of changes in the non-performance risk is
recognised in profit or loss.
The risk adjustment for non-financial risk is the amount of risk being transferred by the Group to the reinsurer.
On initial recognition, the CSM of a group of reinsurance contracts represents a net cost or net gain on purchasing reinsurance. It is
measured as the amount of the total of (a) the fulfilment cash flows, (b) any amount arising from the derecognition of any assets or
liabilities previously recognised for cash flows related to the group, (c) any cash flows arising at that date and (d) any income
recognised in profit or loss because of onerous underlying contracts recognised at that date.
However, if any net cost on purchasing reinsurance coverage relates to insured events that occurred before the purchase of the
reinsurance, then the Group recognises the cost immediately in profit or loss as an expense.
The carrying amount of the CSM at each reporting date is the carrying amount at the start of the reporting period, adjusted for:
\u2013 the effect of any new contracts that are added to the group in the reporting period;
\u2013 interest accreted on the carrying amount of the CSM during the reporting period, measured at the discount rates determined on
initial recognition;
\u2013 income recognised in profit or loss in the reporting period on initial recognition of an onerous group of underlying contracts;
\u2013 reversals of a loss-recovery component to the extent that they are not changes in the fulfilment cash flows of the group of
reinsurance contracts;
\u2013 changes in fulfilment cash flows that relate to future services, measured at the discount rates determined on initial recognition,
unless they result from changes in fulfilment cash flows allocated to a group of underlying contracts that do not adjust the CSM
for the group of underlying insurance contracts;
\u2013 the effect of any currency exchange differences on the CSM; and
\u2013 the amount recognised in profit or loss because of the services received in the reporting period.
Reinsurance of onerous underlying insurance contracts
The Group adjusts the CSM of the group to which a reinsurance contract belongs and as a result recognises income when it
recognises a loss on initial recognition of an onerous group of underlying contracts, if the reinsurance contract is entered into
before or at the same time as the onerous underlying contracts are recognised. The adjustment to the CSM is determined by
multiplying:
\u2013 the amount of the loss that relates to the underlying contracts; and
\u2013 the percentage of claims on the underlying contracts that the Group expects to recover from the reinsurance contracts.
For reinsurance contracts acquired in a transfer of contracts or a business combination covering onerous underlying contracts, the
adjustment to the CSM is determined by multiplying:
\u2013 the amount of the loss component that relates to the underlying contracts at the date of acquisition; and
\u2013 the percentage of claims on the underlying contracts that the Group expects at the date of acquisition to recover from the
reinsurance contracts.
For reinsurance contracts acquired in a business combination, the adjustment to the CSM reduces goodwill or increases a gain on
a bargain purchase.
If the reinsurance contract covers only some of the insurance contracts included in an onerous group of contracts, then the Group
determines the portion of losses recognised on the onerous group of contracts that relates to underlying contracts covered by the
reinsurance contract.
A loss-recovery component is created or adjusted for the group of reinsurance contracts to depict the adjustment to the CSM,
which determines the amounts that are subsequently presented in profit or loss as reversals of recoveries of losses from the
reinsurance contracts and are excluded from the allocation of reinsurance premiums paid.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(viii) Derecognition and contract modification
The Group derecognises a contract when it is extinguished \u2013 ie when the specified obligations in the contract expire or are
discharged or cancelled.
The Group also derecognises a contract if its terms are modified in a way that would have significantly changed the accounting for
the contract had the new terms always existed, in which case a new contract based on the modified terms is recognised. If a
contract modification does not result in derecognition, then the Group treats the changes in cash flows caused by the modification
as changes in estimates of fulfilment cash flows.
On derecognition of a contract from within a group of contracts:
\u2013 the fulfilment cash flows allocated to the group are adjusted to eliminate those that relate to the rights and obligations
derecognised;
\u2013 the CSM of the group is adjusted for the change in the fulfilment cash flows, except where such changes are allocated to a loss
component; and
\u2013 the number of coverage units for the expected remaining services is adjusted to reflect the coverage units derecognised from
the group (see \u2018Release of the CSM\u2019 below).
If a contract is derecognised because it is transferred to a third party, then the CSM is also adjusted for the premium charged by
the third party, unless the group is onerous.
If a contract is derecognised because its terms are modified, then the CSM is also adjusted for the premium that would have been
charged had the Group entered into a contract with the new contract\u2019s terms at the date of modification, less any additional
premium charged for the modification. The new contract recognised is measured assuming that, at the date of modification, the
Group received the premium that it would have charged less any additional premium charged for the modification.
The Group has applied judgement in determining the appropriate treatment for the modification to the Rothesay reinsurance treaty
which occurred when the majority of the underlying contracts that were reinsured by the treaty were transferred to Rothesay via a
Part VII transfer on 15 December 2021. The Group judges that the amendment to the treaty to facilitate the continued long-term
reinsurance of contracts that were originally intended to be transferred but were removed from the scope of the Part VII, resulted
in a significant change to the contract boundary of the treaty. Therefore the appropriate treatment is to derecognise the original
treaty and recognise the amended treaty as a new contract. As the amendment occurred shortly before the IFRS 17 transition date,
the Group concludes that it is sufficient to determine the premium for the amended treaty as the fair value of the reinsured benefits
as at the date of transition.
(ix) Presentation
Portfolios of insurance contracts that are assets and those that are liabilities, and portfolios of reinsurance contracts that are assets
and those that are liabilities, are presented separately in the consolidated statement of financial position. Any assets or liabilities
recognised for cash flows arising before the recognition of the related group of contracts are included in the carrying amount of the
related portfolios of contracts.
The Group disaggregates amounts recognised in the statement of profit or loss into (a) an insurance service result, comprising
insurance revenue and insurance service expenses; and (b) insurance finance income or expenses. The Group has elected to
disaggregate the change in the risk adjustment for non-financial risk between the insurance service result and insurance finance
income or expenses.
Income and expenses from reinsurance contracts are presented separately from income and expenses from insurance contracts.
Income and expenses from reinsurance contracts, other than insurance finance income or expenses, are presented on a net basis
as \u2018net expenses from reinsurance contracts\u2019 in the insurance service result.
The Group excludes from both insurance revenue and insurance service expenses any non-distinct investment components,
refunds of premiums and other non-insurance components. The Group has made the accounting policy choice that accounting
estimates made in interim financial statements are changed when applying IFRS 17 in the subsequent annual reporting period.
Insurance revenue
The Group recognises insurance revenue as it satisfies its performance obligations ie as it provides services to groups of insurance
contracts. The insurance revenue relating to the services provided for each reporting period represents the total of the changes in
the liability for remaining coverage that relate to services for which the Group expects to receive consideration, and comprises the
following items:
\u2013 A release of the CSM, measured based on coverage units provided (see \u2018Release of the CSM\u2019 below);
\u2013 Changes in the risk adjustment for non-financial risk relating to current services;
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(ix) Presentation (continued)
Insurance revenue (continued)
\u2013 Policyholder tax; and
\u2013 Claims and other insurance service expenses incurred in the reporting period, measured as the amounts expected at the
beginning of the reporting period.
In addition, the Group allocates a portion of premiums that relate to recovering any insurance acquisition cash flows to each period
in a systematic way based on the passage of time. The Group recognises the allocated amount, adjusted for interest accretion at
the discount rates determined on initial recognition of the related group of contracts, as insurance revenue and an equal amount as
insurance service expenses.
Release of the CSM
The amount of the CSM of a group of insurance contracts that is recognised as insurance revenue in the reporting period is
determined by identifying the coverage units in the group, allocating the CSM remaining at the end of the reporting period (before
any allocation) equally to each coverage unit provided in the current reporting period and expected to be provided in future
reporting periods, and recognising in profit or loss the amount of the CSM allocated to coverage units provided in the current
reporting period. The number of coverage units is the quantity of services provided by the contracts in the group, determined by
considering for each contract the quantity of benefits provided and its expected coverage period. The coverage units are reviewed
and updated at each reporting date.
Services provided to insurance contracts include insurance coverage and, for all direct participating contracts, investment services
for managing underlying items on behalf of policyholders (investment-related services). In addition, insurance contracts without
direct participation features may also provide investment services for generating an investment return for the policyholder
(investment-return service), but only if:
\u2013 an investment component exists or the policyholder has a right to withdraw an amount (eg the policyholder\u2019s right to receive a
surrender value on cancellation of a contract);
\u2013 the investment component or withdrawal amount is expected to include an investment return; and
\u2013 the Group expects to perform investment activities to generate that investment return.
The Group defines the coverage units for its contracts as follows:
\u2013 Insurance coverage (where the benefit is a single lump sum payment, eg term assurances): the sum assured.
\u2013 Insurance coverage (where the benefit is a regular income, eg annuities and income protection): the annualised amount of
income, as confirmed by the IFRS Interpretation Committee (IFRIC) in 2022.
\u2013 Investment-related service (with-profits and unit-linked): the asset share or unit fund value.
\u2013 Investment-return service (eg annuities): the transfer amount (for deferred annuities in the accumulation phase) or the payment
of annuity benefits within a guaranteed payment period.
The expected coverage period reflects expectations of lapses and cancellations of contracts, as well as the likelihood of insured
events occurring to the extent that they would affect the expected coverage period. The period of investment services ends no
later than the date on which all amounts due to current policyholders relating to those services have been paid.
Where a contract provides both insurance coverage and investment services the Group must apply judgement to determine
appropriate weightings to assign to the two types of service in order to calculate the coverage units for each reporting period. The
weights are not locked-in at inception of the group of contracts and instead are reviewed and updated at each reporting date,
consistent with the treatment of the coverage units.
With-profits and unit-linked contracts are predominantly investment contracts but may additionally provide insurance coverage if
the contract provides a death benefit in excess of the underlying items. For these contracts weighted coverage units are
determined as the maximum of the asset share or unit fund and the amount payable on death.
IFRS 17 does not provide explicit guidance as to whether the assumptions used to project the expected coverage units for future
reporting periods should be current or locked-in (ie those that applied at inception of the group of contracts). In addition, the
standard does not provide guidance as to whether the future coverage units should be discounted when determining the amount
of CSM to be released in the current reporting period.
The Group judges that in regards to the assumptions used for both GMM and VFA CSM it is appropriate to use current
assumptions to calculate the coverage units expected to be provided in the future. This is on the basis that it results in the most
accurate estimate of the service that will be provided in future.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(ix) Presentation (continued)
Release of the CSM (continued)
In respect of discounting, the Group judges that it is appropriate to discount the future coverage units as that is consistent with the
CSM calculation allowing for the time value of money. The discounting approach follows the method applied in the CSM
calculation, namely coverage units for GMM CSM are discounted using the rates that applied at inception and coverage units for
VFA CSM are discounted using current rates.
Insurance service expenses
Insurance service expenses arising from insurance contracts are recognised in profit or loss as they are incurred. They exclude
repayments of non-distinct investment components, rights to a refund of premiums, and other non-insurance components, and
comprise the following items:
\u2013 Incurred claims and other insurance service expenses.
\u2013 Amortisation of insurance acquisition cash flows: This is equal to the amount of insurance revenue recognised in the reporting
period that relates to recovering insurance acquisition cash flows.
\u2013 Losses on onerous contracts and reversals of such losses.
\u2013 Adjustments to the liabilities for incurred claims that do not arise from the effects of the time value of money, financial risk and
changes therein.
\u2013 Impairment losses on assets for insurance acquisition cash flows and reversals of such impairment losses.
Net expenses from reinsurance contracts
Net expenses from reinsurance contracts comprise an allocation of reinsurance premiums paid less amounts recovered from reinsurers.
The Group recognises an allocation of reinsurance premiums paid in profit or loss as it receives services under groups of
reinsurance contracts. The allocation of reinsurance premiums paid relating to services received for each period represents the
total of the changes in the asset for remaining coverage.
Coverage units for reinsurance contracts held are typically consistent with the underlying insurance contracts, adjusted for
differences in the services received from the reinsurer. For reinsurance contracts held that provide reinsurance of mortality or
morbidity risk, the coverage units are typically defined as the sum at risk reinsured. For longevity swap reinsurance arrangements
in relation to non-profit annuity business, the coverage units are based on the proportion of the actual annuity payments made on
the underlying contracts that the Group recovers from the reinsurer.
For a group of reinsurance contracts covering onerous underlying contracts, the Group establishes a loss-recovery component of
the asset for remaining coverage to depict the recovery of losses recognised:
\u2013 on recognition of onerous underlying contracts, if the reinsurance contract covering those contracts is entered into before or at
the same time as those contracts are recognised; and
\u2013 for changes in fulfilment cash flows of the group of reinsurance contracts relating to future services that result from changes in
fulfilment cash flows of the onerous underlying contracts.
The loss-recovery component determines the amounts that are subsequently presented in profit or loss as reversals of recoveries
of losses from the reinsurance contracts and are excluded from the allocation of reinsurance premiums paid. It is adjusted to reflect
changes in the loss component of the onerous group of underlying contracts, but it cannot exceed the portion of the loss
component of the onerous group of underlying contracts that the Group expects to recover from the reinsurance contracts.
Insurance finance income and expenses
Insurance finance income and expenses comprise changes in the carrying amounts of groups of insurance and reinsurance
contracts arising from the effects of the time value of money, financial risk and changes therein, unless any such changes for
groups of direct participating contracts are allocated to a loss component and included in insurance service expenses. They
include changes in the measurement of groups of contracts caused by changes in the value of underlying items (excluding
additions and withdrawals).
The Group has opted as an accounting policy choice to recognise all insurance finance income or expenses for the reporting period
in profit or loss and to not recognise any part of that income or expenses in other comprehensive income (OCI).
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInsuranceContracts", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-598": { "value": "
1.5.4 Business acquisitions
Business acquisitions are accounted for by applying the acquisition method of accounting, where the identifiable assets and
liabilities of the acquired business are recorded at fair value on the date of acquisition. The excess of the fair value of acquisition
consideration over the recorded value of the assets and liabilities of the acquired entity is recorded on the consolidated statement
of financial position as goodwill. Expenses related to acquiring new business are charged to the consolidated income statement in
the year in which they are incurred. Income and expenses of acquired entities are included in the consolidated income statement
from the date of acquisition.
Acquisitions of entities under common control are accounted for under merger accounting principles. Under merger accounting,
the results and statement of financial position for entities acquired are presented as if they had always been combined. Assets and
liabilities of the entities acquired are recorded at their carrying values and a fair value measurement is not undertaken. No new
goodwill is recognised and the differences between the cost of investment, which is its fair value, and the carrying value of assets
and liabilities acquired is recorded within equity.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsAndGoodwillExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-601": { "value": "
1.5.5 Financial instruments
(i) Initial recognition
The classification of financial instruments at initial recognition depends on their contractual terms and the business model for
managing the instruments. Financial instruments are initially recognised on the trade date measured at their fair value.
(ii) Measurement categories
The Group classifies all of its financial assets based on the business model for managing the assets and the asset\u2019s contractual
terms. The categories include the following:
\u2013 Amortised cost
\u2013 Fair Value Through Profit or Loss (FVTPL).
(iii) Financial instruments measured at amortised cost
Financial instruments are held at amortised cost if both of the following conditions are met:
\u2013 The instruments are held within a business model with the objective of holding the instrument to collect the contractual cash
flows; and
\u2013 The contractual terms of the debt instrument give rise on specified dates to cash flows that are Solely Payments of Principal and
Interest (SPPI) on the principal amount outstanding.
The details of these conditions are outlined below.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.5 Financial instruments (continued)
(iv) Business model assessment
The Group determines its business model at the level that best reflects how it manages groups of financial assets to achieve its
business objective.
The Group holds financial assets to generate returns and provide a capital base to provide for settlement of claims as they arise.
The Group considers the timing, amount and volatility of cash flow requirements to support insurance liability portfolios in
determining the business model for the assets as well as the potential to maximise return for shareholders and future business
development.
The Group's business model is not assessed on an instrument-by-instrument basis, but at a higher level of aggregated portfolios
that is based on observable factors such as:
\u2013 How the performance of the business model and the financial assets held within that business model are evaluated and reported
to the Group's key management personnel;
\u2013 The risks that affect the performance of the business model (and the financial assets held within that business model) and, in
particular, the way those risks are managed; and
\u2013 How managers of the business are compensated (for example, whether the compensation is based on the fair value of the assets
managed or on the contractual cash flows collected).
The expected frequency, value and timing of asset sales are also important aspects of the Group\u2019s assessment.
The business model assessment is based on reasonably expected scenarios without taking 'worst case' or 'stress case\u2019 scenarios
into account. If cash flows after initial recognition are realised in a way that is different from the Group's original expectations, the
Group does not change the classification of the remaining financial assets held in that business.
(v) The SPPI test
As a second step of its classification process the Group assesses the contractual terms to identify whether they meet the SPPI test.
\u2018Principal\u2019 for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the
life of the financial asset (for example, if there are repayments of principal or amortisation of the premium/discount).
The most significant elements of interest within a debt arrangement are typically the consideration for the time value of money and
credit risk. To make the SPPI assessment, the Group applies judgement and considers relevant factors such as the currency in
which the financial asset is denominated, and the period for which the interest rate is set.
(vi) Financial assets measured at FVTPL
Financial assets in this category are those that are managed in a fair value business model, or that have been designated by
management upon initial recognition, or are mandatorily required to be measured at fair value under IFRS 9. This category includes
debt instruments whose cash flow characteristics fail the SPPI criterion or are not held within a business model whose objective is
to collect contractual cash flows.
(vii) Subsequent measurement
After initial measurement, deposits, cash and accrued investment income and other debtors are measured at amortised cost, using
the Effective Interest Rate (EIR) method, less allowance for impairment. Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are an integral part of the EIR. An Expected Credit Losses (ECL) is
recognised in investment return in the consolidated income statement when the investments are impaired.
Financial assets at FVTPL are recorded in the consolidated statement of financial position at fair value. Changes in fair value are
recorded in investment return in the consolidated income statement. Interest earned on assets mandatorily required to be
measured at FVTPL is recorded using contractual interest rates. Dividend income from equity instruments measured at FVTPL is
recorded in investment return in the consolidated income statement when the right to the payment has been established.
(viii) Reclassification of financial assets and liabilities
The Group does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances
in which there has been a change in business model.
(ix) Derecognition other than for substantial modification
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:
\u2013 The rights to receive cash flows from the asset have expired; or
\u2013 The Group has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a \u2018pass-through\u2019 arrangement; and either: (a) the Group has transferred
substantially all the risks and rewards of the asset; or (b) the Group has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the asset.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.5 Financial instruments (continued)
(ix) Derecognition other than for substantial modification (continued)
The Group considers control to be transferred if, and only if, the transferee has the practical ability to sell the asset in its entirety to
an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer.
When the Group has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset,
the asset continues to be recognised only to the extent of the Group\u2019s continuing involvement, in which case, the Group also
recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights
and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of consideration the Group could be required to pay.
(x) Derecognition due to substantial modification of terms and conditions
The Group derecognises a financial asset when the terms and conditions have been renegotiated to the extent that, substantially, it
becomes a new instrument, with the difference recognised as a derecognition gain or loss. In the case of debt instruments at
amortised cost, the newly recognised loans are classified as Stage 1 for ECL measurement purposes.
When assessing whether or not to derecognise an instrument, among others, the Group considers the following factors:
\u2013 Change in currency of the debt instrument
\u2013 Introduction of an equity feature
\u2013 Change in counterparty
\u2013 If the modification is such that the instrument would no longer meet the SPPI criterion.
If the modification does not result in cash flows that are substantially different, the modification does not result in derecognition.
Based on the change in cash flows discounted at the original EIR, the Group records a modification gain or loss.
(xi) Impairment of financial assets
The Group recognises an allowance for ECLs for all debt instruments not held at FVTPL. ECLs are based on the difference between
the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive,
discounted at the appropriate effective interest rate.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since
initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months
(12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a
loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the
default (a lifetime ECL).
For certain instruments with investment grade rating, the Group uses the low credit simplification and consequently, a
determination of significant increase in credit risk will not be required and the impairment loss would always be calculated based
on a 12-month ECL.
The Group also makes use of a simplified impairment approach for trade receivables and contract assets as allowed under IFRS 9.
Under this approach, impairment is calculated using a provisioning matrix that is based on days past due.
(xii) Write-offs
Financial assets are written off either partially or in their entirety only when the Group has stopped pursuing the recovery. If the
amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the
allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to credit loss expense.
(xiii) Recognition of interest income
Under IFRS 9, interest income is recorded using the effective interest rate (EIR) method for all financial assets measured at
amortised cost. The EIR is the rate that exactly discounts estimated future cash receipts through the expected life of the financial
asset or, when appropriate, a shorter period, to the gross carrying amount of the financial asset.
The EIR (and therefore, the amortised cost of the financial asset) is calculated by taking into account transaction costs and any
discount or premium on acquisition of the financial asset as well as fees and costs that are an integral part of the EIR. The Group
recognises interest income using a rate of return that represents the best estimate of a constant rate of return over the expected
life of the debt instrument.
If expectations of fixed rate financial assets' cash flows are revised for reasons other than credit risk, the changes to future
contractual cash flows are discounted at the original EIR with a consequential adjustment to the carrying amount. The difference to
the previous carrying amount is booked as a positive or negative adjustment to the carrying amount of the financial asset in the
balance sheet with a corresponding increase or decrease in interest income.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.5 Financial instruments (continued)
(xiv) Interest and similar income
Interest income comprises amounts calculated using the effective interest method for assets measured at amortised cost. These
are disclosed separately on the face of the consolidated income statement.
Other interest income includes interest on all financial assets measured at FVTPL, using the contractual interest rate.
The Group calculates interest income on financial assets, other than those considered credit-impaired, by applying the EIR to the
gross carrying amount of the financial asset.
(xv) Determination of fair value
The Group uses current bid prices to value its investments with quoted prices. Actively traded investments without quoted prices
are valued using prices provided by third parties. Financial assets measured at fair value are classified into a three-level hierarchy
as described in Note 31.
If the market for a financial investment of the Group is not active, the fair value is determined using valuation techniques. The Group
establishes fair value for these financial investments by using quotations from independent third parties, such as brokers or pricing
services, or by using internally developed pricing models. Priority is given to publicly available prices from independent sources
when available, but overall the source of pricing and/or the valuation technique is chosen with the objective of arriving at a fair
value measurement, which reflects the price at which an orderly transaction would take place between market participants on the
measurement date.
The valuation techniques include the use of recent arm\u2019s length transactions, reference to other instruments that are substantially
the same, discounted cash flow analysis, option-adjusted spread models and, if applicable, enterprise valuation and may include a
number of assumptions relating to variables such as credit risk and interest rates. Changes in assumptions relating to these
variables could positively or negatively impact the reported fair value of these financial investments. Details of the financial
investments classified as \u2018level 3\u2019 to which valuation techniques are applied, and the sensitivity of profit before tax to a change in
these items\u2019 valuation, are presented in Note 31.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-600": { "value": "
1.5.5 Financial instruments
(i) Initial recognition
The classification of financial instruments at initial recognition depends on their contractual terms and the business model for
managing the instruments. Financial instruments are initially recognised on the trade date measured at their fair value.
(ii) Measurement categories
The Group classifies all of its financial assets based on the business model for managing the assets and the asset\u2019s contractual
terms. The categories include the following:
\u2013 Amortised cost
\u2013 Fair Value Through Profit or Loss (FVTPL).
(iii) Financial instruments measured at amortised cost
Financial instruments are held at amortised cost if both of the following conditions are met:
\u2013 The instruments are held within a business model with the objective of holding the instrument to collect the contractual cash
flows; and
\u2013 The contractual terms of the debt instrument give rise on specified dates to cash flows that are Solely Payments of Principal and
Interest (SPPI) on the principal amount outstanding.
The details of these conditions are outlined below.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.5 Financial instruments (continued)
(iv) Business model assessment
The Group determines its business model at the level that best reflects how it manages groups of financial assets to achieve its
business objective.
The Group holds financial assets to generate returns and provide a capital base to provide for settlement of claims as they arise.
The Group considers the timing, amount and volatility of cash flow requirements to support insurance liability portfolios in
determining the business model for the assets as well as the potential to maximise return for shareholders and future business
development.
The Group's business model is not assessed on an instrument-by-instrument basis, but at a higher level of aggregated portfolios
that is based on observable factors such as:
\u2013 How the performance of the business model and the financial assets held within that business model are evaluated and reported
to the Group's key management personnel;
\u2013 The risks that affect the performance of the business model (and the financial assets held within that business model) and, in
particular, the way those risks are managed; and
\u2013 How managers of the business are compensated (for example, whether the compensation is based on the fair value of the assets
managed or on the contractual cash flows collected).
The expected frequency, value and timing of asset sales are also important aspects of the Group\u2019s assessment.
The business model assessment is based on reasonably expected scenarios without taking 'worst case' or 'stress case\u2019 scenarios
into account. If cash flows after initial recognition are realised in a way that is different from the Group's original expectations, the
Group does not change the classification of the remaining financial assets held in that business.
(v) The SPPI test
As a second step of its classification process the Group assesses the contractual terms to identify whether they meet the SPPI test.
\u2018Principal\u2019 for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the
life of the financial asset (for example, if there are repayments of principal or amortisation of the premium/discount).
The most significant elements of interest within a debt arrangement are typically the consideration for the time value of money and
credit risk. To make the SPPI assessment, the Group applies judgement and considers relevant factors such as the currency in
which the financial asset is denominated, and the period for which the interest rate is set.
(vi) Financial assets measured at FVTPL
Financial assets in this category are those that are managed in a fair value business model, or that have been designated by
management upon initial recognition, or are mandatorily required to be measured at fair value under IFRS 9. This category includes
debt instruments whose cash flow characteristics fail the SPPI criterion or are not held within a business model whose objective is
to collect contractual cash flows.
(vii) Subsequent measurement
After initial measurement, deposits, cash and accrued investment income and other debtors are measured at amortised cost, using
the Effective Interest Rate (EIR) method, less allowance for impairment. Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are an integral part of the EIR. An Expected Credit Losses (ECL) is
recognised in investment return in the consolidated income statement when the investments are impaired.
Financial assets at FVTPL are recorded in the consolidated statement of financial position at fair value. Changes in fair value are
recorded in investment return in the consolidated income statement. Interest earned on assets mandatorily required to be
measured at FVTPL is recorded using contractual interest rates. Dividend income from equity instruments measured at FVTPL is
recorded in investment return in the consolidated income statement when the right to the payment has been established.
(viii) Reclassification of financial assets and liabilities
The Group does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances
in which there has been a change in business model.
(ix) Derecognition other than for substantial modification
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:
\u2013 The rights to receive cash flows from the asset have expired; or
\u2013 The Group has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a \u2018pass-through\u2019 arrangement; and either: (a) the Group has transferred
substantially all the risks and rewards of the asset; or (b) the Group has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the asset.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.5 Financial instruments (continued)
(ix) Derecognition other than for substantial modification (continued)
The Group considers control to be transferred if, and only if, the transferee has the practical ability to sell the asset in its entirety to
an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer.
When the Group has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset,
the asset continues to be recognised only to the extent of the Group\u2019s continuing involvement, in which case, the Group also
recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights
and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of consideration the Group could be required to pay.
(x) Derecognition due to substantial modification of terms and conditions
The Group derecognises a financial asset when the terms and conditions have been renegotiated to the extent that, substantially, it
becomes a new instrument, with the difference recognised as a derecognition gain or loss. In the case of debt instruments at
amortised cost, the newly recognised loans are classified as Stage 1 for ECL measurement purposes.
When assessing whether or not to derecognise an instrument, among others, the Group considers the following factors:
\u2013 Change in currency of the debt instrument
\u2013 Introduction of an equity feature
\u2013 Change in counterparty
\u2013 If the modification is such that the instrument would no longer meet the SPPI criterion.
If the modification does not result in cash flows that are substantially different, the modification does not result in derecognition.
Based on the change in cash flows discounted at the original EIR, the Group records a modification gain or loss.
(xi) Impairment of financial assets
The Group recognises an allowance for ECLs for all debt instruments not held at FVTPL. ECLs are based on the difference between
the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive,
discounted at the appropriate effective interest rate.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since
initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months
(12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a
loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the
default (a lifetime ECL).
For certain instruments with investment grade rating, the Group uses the low credit simplification and consequently, a
determination of significant increase in credit risk will not be required and the impairment loss would always be calculated based
on a 12-month ECL.
The Group also makes use of a simplified impairment approach for trade receivables and contract assets as allowed under IFRS 9.
Under this approach, impairment is calculated using a provisioning matrix that is based on days past due.
(xii) Write-offs
Financial assets are written off either partially or in their entirety only when the Group has stopped pursuing the recovery. If the
amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the
allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to credit loss expense.
(xiii) Recognition of interest income
Under IFRS 9, interest income is recorded using the effective interest rate (EIR) method for all financial assets measured at
amortised cost. The EIR is the rate that exactly discounts estimated future cash receipts through the expected life of the financial
asset or, when appropriate, a shorter period, to the gross carrying amount of the financial asset.
The EIR (and therefore, the amortised cost of the financial asset) is calculated by taking into account transaction costs and any
discount or premium on acquisition of the financial asset as well as fees and costs that are an integral part of the EIR. The Group
recognises interest income using a rate of return that represents the best estimate of a constant rate of return over the expected
life of the debt instrument.
If expectations of fixed rate financial assets' cash flows are revised for reasons other than credit risk, the changes to future
contractual cash flows are discounted at the original EIR with a consequential adjustment to the carrying amount. The difference to
the previous carrying amount is booked as a positive or negative adjustment to the carrying amount of the financial asset in the
balance sheet with a corresponding increase or decrease in interest income.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.5 Financial instruments (continued)
(xiv) Interest and similar income
Interest income comprises amounts calculated using the effective interest method for assets measured at amortised cost. These
are disclosed separately on the face of the consolidated income statement.
Other interest income includes interest on all financial assets measured at FVTPL, using the contractual interest rate.
The Group calculates interest income on financial assets, other than those considered credit-impaired, by applying the EIR to the
gross carrying amount of the financial asset.
(xv) Determination of fair value
The Group uses current bid prices to value its investments with quoted prices. Actively traded investments without quoted prices
are valued using prices provided by third parties. Financial assets measured at fair value are classified into a three-level hierarchy
as described in Note 31.
If the market for a financial investment of the Group is not active, the fair value is determined using valuation techniques. The Group
establishes fair value for these financial investments by using quotations from independent third parties, such as brokers or pricing
services, or by using internally developed pricing models. Priority is given to publicly available prices from independent sources
when available, but overall the source of pricing and/or the valuation technique is chosen with the objective of arriving at a fair
value measurement, which reflects the price at which an orderly transaction would take place between market participants on the
measurement date.
The valuation techniques include the use of recent arm\u2019s length transactions, reference to other instruments that are substantially
the same, discounted cash flow analysis, option-adjusted spread models and, if applicable, enterprise valuation and may include a
number of assumptions relating to variables such as credit risk and interest rates. Changes in assumptions relating to these
variables could positively or negatively impact the reported fair value of these financial investments. Details of the financial
investments classified as \u2018level 3\u2019 to which valuation techniques are applied, and the sensitivity of profit before tax to a change in
these items\u2019 valuation, are presented in Note 31.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-599": { "value": "
1.5.5 Financial instruments
(i) Initial recognition
The classification of financial instruments at initial recognition depends on their contractual terms and the business model for
managing the instruments. Financial instruments are initially recognised on the trade date measured at their fair value.
(ii) Measurement categories
The Group classifies all of its financial assets based on the business model for managing the assets and the asset\u2019s contractual
terms. The categories include the following:
\u2013 Amortised cost
\u2013 Fair Value Through Profit or Loss (FVTPL).
(iii) Financial instruments measured at amortised cost
Financial instruments are held at amortised cost if both of the following conditions are met:
\u2013 The instruments are held within a business model with the objective of holding the instrument to collect the contractual cash
flows; and
\u2013 The contractual terms of the debt instrument give rise on specified dates to cash flows that are Solely Payments of Principal and
Interest (SPPI) on the principal amount outstanding.
The details of these conditions are outlined below.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.5 Financial instruments (continued)
(iv) Business model assessment
The Group determines its business model at the level that best reflects how it manages groups of financial assets to achieve its
business objective.
The Group holds financial assets to generate returns and provide a capital base to provide for settlement of claims as they arise.
The Group considers the timing, amount and volatility of cash flow requirements to support insurance liability portfolios in
determining the business model for the assets as well as the potential to maximise return for shareholders and future business
development.
The Group's business model is not assessed on an instrument-by-instrument basis, but at a higher level of aggregated portfolios
that is based on observable factors such as:
\u2013 How the performance of the business model and the financial assets held within that business model are evaluated and reported
to the Group's key management personnel;
\u2013 The risks that affect the performance of the business model (and the financial assets held within that business model) and, in
particular, the way those risks are managed; and
\u2013 How managers of the business are compensated (for example, whether the compensation is based on the fair value of the assets
managed or on the contractual cash flows collected).
The expected frequency, value and timing of asset sales are also important aspects of the Group\u2019s assessment.
The business model assessment is based on reasonably expected scenarios without taking 'worst case' or 'stress case\u2019 scenarios
into account. If cash flows after initial recognition are realised in a way that is different from the Group's original expectations, the
Group does not change the classification of the remaining financial assets held in that business.
(v) The SPPI test
As a second step of its classification process the Group assesses the contractual terms to identify whether they meet the SPPI test.
\u2018Principal\u2019 for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the
life of the financial asset (for example, if there are repayments of principal or amortisation of the premium/discount).
The most significant elements of interest within a debt arrangement are typically the consideration for the time value of money and
credit risk. To make the SPPI assessment, the Group applies judgement and considers relevant factors such as the currency in
which the financial asset is denominated, and the period for which the interest rate is set.
(vi) Financial assets measured at FVTPL
Financial assets in this category are those that are managed in a fair value business model, or that have been designated by
management upon initial recognition, or are mandatorily required to be measured at fair value under IFRS 9. This category includes
debt instruments whose cash flow characteristics fail the SPPI criterion or are not held within a business model whose objective is
to collect contractual cash flows.
(vii) Subsequent measurement
After initial measurement, deposits, cash and accrued investment income and other debtors are measured at amortised cost, using
the Effective Interest Rate (EIR) method, less allowance for impairment. Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are an integral part of the EIR. An Expected Credit Losses (ECL) is
recognised in investment return in the consolidated income statement when the investments are impaired.
Financial assets at FVTPL are recorded in the consolidated statement of financial position at fair value. Changes in fair value are
recorded in investment return in the consolidated income statement. Interest earned on assets mandatorily required to be
measured at FVTPL is recorded using contractual interest rates. Dividend income from equity instruments measured at FVTPL is
recorded in investment return in the consolidated income statement when the right to the payment has been established.
(viii) Reclassification of financial assets and liabilities
The Group does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances
in which there has been a change in business model.
(ix) Derecognition other than for substantial modification
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:
\u2013 The rights to receive cash flows from the asset have expired; or
\u2013 The Group has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a \u2018pass-through\u2019 arrangement; and either: (a) the Group has transferred
substantially all the risks and rewards of the asset; or (b) the Group has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the asset.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.5 Financial instruments (continued)
(ix) Derecognition other than for substantial modification (continued)
The Group considers control to be transferred if, and only if, the transferee has the practical ability to sell the asset in its entirety to
an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer.
When the Group has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset,
the asset continues to be recognised only to the extent of the Group\u2019s continuing involvement, in which case, the Group also
recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights
and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of consideration the Group could be required to pay.
(x) Derecognition due to substantial modification of terms and conditions
The Group derecognises a financial asset when the terms and conditions have been renegotiated to the extent that, substantially, it
becomes a new instrument, with the difference recognised as a derecognition gain or loss. In the case of debt instruments at
amortised cost, the newly recognised loans are classified as Stage 1 for ECL measurement purposes.
When assessing whether or not to derecognise an instrument, among others, the Group considers the following factors:
\u2013 Change in currency of the debt instrument
\u2013 Introduction of an equity feature
\u2013 Change in counterparty
\u2013 If the modification is such that the instrument would no longer meet the SPPI criterion.
If the modification does not result in cash flows that are substantially different, the modification does not result in derecognition.
Based on the change in cash flows discounted at the original EIR, the Group records a modification gain or loss.
(xi) Impairment of financial assets
The Group recognises an allowance for ECLs for all debt instruments not held at FVTPL. ECLs are based on the difference between
the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive,
discounted at the appropriate effective interest rate.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since
initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months
(12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a
loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the
default (a lifetime ECL).
For certain instruments with investment grade rating, the Group uses the low credit simplification and consequently, a
determination of significant increase in credit risk will not be required and the impairment loss would always be calculated based
on a 12-month ECL.
The Group also makes use of a simplified impairment approach for trade receivables and contract assets as allowed under IFRS 9.
Under this approach, impairment is calculated using a provisioning matrix that is based on days past due.
(xii) Write-offs
Financial assets are written off either partially or in their entirety only when the Group has stopped pursuing the recovery. If the
amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the
allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to credit loss expense.
(xiii) Recognition of interest income
Under IFRS 9, interest income is recorded using the effective interest rate (EIR) method for all financial assets measured at
amortised cost. The EIR is the rate that exactly discounts estimated future cash receipts through the expected life of the financial
asset or, when appropriate, a shorter period, to the gross carrying amount of the financial asset.
The EIR (and therefore, the amortised cost of the financial asset) is calculated by taking into account transaction costs and any
discount or premium on acquisition of the financial asset as well as fees and costs that are an integral part of the EIR. The Group
recognises interest income using a rate of return that represents the best estimate of a constant rate of return over the expected
life of the debt instrument.
If expectations of fixed rate financial assets' cash flows are revised for reasons other than credit risk, the changes to future
contractual cash flows are discounted at the original EIR with a consequential adjustment to the carrying amount. The difference to
the previous carrying amount is booked as a positive or negative adjustment to the carrying amount of the financial asset in the
balance sheet with a corresponding increase or decrease in interest income.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.5 Financial instruments (continued)
(xiv) Interest and similar income
Interest income comprises amounts calculated using the effective interest method for assets measured at amortised cost. These
are disclosed separately on the face of the consolidated income statement.
Other interest income includes interest on all financial assets measured at FVTPL, using the contractual interest rate.
The Group calculates interest income on financial assets, other than those considered credit-impaired, by applying the EIR to the
gross carrying amount of the financial asset.
(xv) Determination of fair value
The Group uses current bid prices to value its investments with quoted prices. Actively traded investments without quoted prices
are valued using prices provided by third parties. Financial assets measured at fair value are classified into a three-level hierarchy
as described in Note 31.
If the market for a financial investment of the Group is not active, the fair value is determined using valuation techniques. The Group
establishes fair value for these financial investments by using quotations from independent third parties, such as brokers or pricing
services, or by using internally developed pricing models. Priority is given to publicly available prices from independent sources
when available, but overall the source of pricing and/or the valuation technique is chosen with the objective of arriving at a fair
value measurement, which reflects the price at which an orderly transaction would take place between market participants on the
measurement date.
The valuation techniques include the use of recent arm\u2019s length transactions, reference to other instruments that are substantially
the same, discounted cash flow analysis, option-adjusted spread models and, if applicable, enterprise valuation and may include a
number of assumptions relating to variables such as credit risk and interest rates. Changes in assumptions relating to these
variables could positively or negatively impact the reported fair value of these financial investments. Details of the financial
investments classified as \u2018level 3\u2019 to which valuation techniques are applied, and the sensitivity of profit before tax to a change in
these items\u2019 valuation, are presented in Note 31.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-602": { "value": "
1.5.6 Fee Income
Revenue arising from contracts with customers consists of investment management and performance fee income from the Group's
asset management business, investment contracts without DPF, platform fee and other fees and commissions.
Management fee income is based on investment assets under management and is only recognised when the Group satisfies its
performance obligation to provide the asset management services. It is recognised in the year in which the services are rendered
and is recognised net of rebates. Since the asset management service the Group provides is a continuous service, it satisfies its
performance obligation over time. Therefore, the Group meets the criteria for its revenue to be recognised over time as the client
benefits from the asset management services received from the Group.
Performance fee income is based on the achievement of prescribed performance hurdles. It is only recognised when the
performance obligations are satisfied or upon the crystallisation event occurring and when it is highly probable that a significant
reversal will not occur.
Fees from investment contracts without DPF are recognised over time as the services are provided, which is the point at which the
cash is received. Other fees and commissions such as from the provision of financial advice to customers are recognised when
performance obligations are satisfied or upon the crystallisation of an event. The price is determined based on the agreed initial or
ongoing adviser charge.
Platform fees are recognised as the related services are provided to the customer.
No significant judgements are applied on the timing or transaction price or the determination of the costs incurred to obtain or fulfil
a contract.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFeeAndCommissionIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-603": { "value": "
1.5.7 Investment return
Investment return included in the consolidated income statement comprises interest income, rental income, dividends, foreign
exchange gains and losses, realised and unrealised gains and losses on investments designated as FVTPL, and realised gains and
losses (including impairment) on items held at amortised cost. Interest income is recognised as it accrues on an effective interest
basis. Dividends on equity securities are recognised on the ex-dividend date and rental income is recognised on an accruals basis.
", "dimensions": { "concept": "mgplc:DescriptionOfAccountingPolicyForInvestmentReturnTextBlock", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-606": { "value": "
1.5.8 Derivatives and hedge accounting
The primary areas of the Group\u2019s operations where derivative instruments are held are in the With-Profits Fund and annuity
business. Management designates derivatives on inception and those that are not designated as hedging instruments are carried
at fair value, with movements in fair value being recorded within investment return in the consolidated income statement.
The Group does not regularly seek to apply fair value or cash flow hedging treatment under IFRS 9 and has had no fair value or
cash flow hedges for the years ended 31\u00a0December 2023 and 31\u00a0December 2022.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-605": { "value": "
1.5.8 Derivatives and hedge accounting
The primary areas of the Group\u2019s operations where derivative instruments are held are in the With-Profits Fund and annuity
business. Management designates derivatives on inception and those that are not designated as hedging instruments are carried
at fair value, with movements in fair value being recorded within investment return in the consolidated income statement.
The Group does not regularly seek to apply fair value or cash flow hedging treatment under IFRS 9 and has had no fair value or
cash flow hedges for the years ended 31\u00a0December 2023 and 31\u00a0December 2022.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-604": { "value": "
1.5.8 Derivatives and hedge accounting
The primary areas of the Group\u2019s operations where derivative instruments are held are in the With-Profits Fund and annuity
business. Management designates derivatives on inception and those that are not designated as hedging instruments are carried
at fair value, with movements in fair value being recorded within investment return in the consolidated income statement.
The Group does not regularly seek to apply fair value or cash flow hedging treatment under IFRS 9 and has had no fair value or
cash flow hedges for the years ended 31\u00a0December 2023 and 31\u00a0December 2022.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-607": { "value": "
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.9 Derecognition of financial assets and liabilities
The Group\u2019s policy is to derecognise financial assets when it is deemed that substantially all the risks and rewards of ownership
have been transferred. Gains and losses on disposal are determined as the difference between the net disposal proceeds and the
carrying amount of the asset, and are recognised in the consolidated income statement.
The Group derecognises financial liabilities only when the obligation specified in the contract is discharged, cancelled or has
expired.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerecognitionOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-608": { "value": "
1.5.10 Securities lending and reverse repurchase agreements
The Group is party to various securities-lending agreements and repurchase agreements under which securities are transferred to
third parties on a short-term basis. The transferred securities are not derecognised; rather, they continue to be recognised within
the appropriate investment classification. The Group\u2019s policy is that collateral in excess of 100% of the fair value of securities
loaned is required from all securities\u2019 borrowers and typically consists of cash, debt securities, equity securities or letters of credit.
In cases where the Group takes possession of the collateral under its securities lending programme, including cash collateral which
is not legally separated from the Group, the collateral and corresponding obligation to return such collateral is recognised as a
financial liability on the consolidated statement of financial position.
The Group is also party to various reverse repurchase agreements under which securities are purchased from third parties with an
obligation to resell the securities. The securities are not recognised as investments on the consolidated statement of financial
position. The right to receive the return of any cash paid as purchase consideration plus interest is recognised as a financial asset
on the consolidated statement of financial position.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRepurchaseAndReverseRepurchaseAgreementsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-609": { "value": "
1.5.11 Subordinated liabilities and other borrowings
Subordinated liabilities include loan notes issued by the Group which are classified as financial liabilities as they have a fixed
repayment date and do not represent a residual interest in the net assets of the Company on liquidation. The notes rank junior to all
other liabilities of the Group in the event of liquidation, but above share capital.
Borrowings include operational borrowings attributable to shareholder-financed operations and other borrowings attributable to
the With-Profits Fund.
Subordinated liabilities and other borrowings are initially recognised at fair value, net of transaction costs. Borrowings, excluding
those backing buy-to-let mortgages, which are managed on a fair value basis and designated at FVTPL, are subsequently
accounted for on an amortised cost basis using the effective interest method. Under the effective interest method, the difference
between the redemption value of the borrowing and the initial proceeds (net of related issue costs) is amortised through the
consolidated income statement to the date of maturity, or for hybrid debt, over the expected life of the instrument.
Borrowings backing buy-to-let mortgages are designated at FVTPL in line with the underlying loan assets.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-610": { "value": "
1.5.12 Investment property
Investments in leasehold and freehold properties not for occupation by the Group, including properties under development for
future use as investment property, are carried at fair value, with changes in fair value included in the consolidated income
statement. Properties are valued annually either by the Group\u2019s qualified surveyors or by taking into consideration the advice of
professional external valuers using the Royal Institution of Chartered Surveyors' (RICS) valuation standards. Each property is
externally valued at least once every three years.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentPropertyExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-611": { "value": "
1.5.13 Defined benefit pension schemes
For the Group\u2019s defined benefit schemes, if the present value of the defined benefit obligation for the relevant scheme exceeds the
fair value of the scheme assets, then a liability is recorded on the Group\u2019s consolidated statement of financial position in respect of
that scheme. By contrast, if the fair value of the assets of the relevant scheme exceeds the present value of the defined benefit
obligation then the surplus in respect of that scheme will only be recognised if the nature of the arrangements under the trust
deed, and funding arrangements between the Trustee and the employing entity, support the availability of refunds or recoverability
through agreed reductions in future contributions. In addition, if there is a constructive obligation for the employing entity to pay
deficit funding in respect of schemes where there is no unconditional right to a refund to any surplus, this is also recognised such
that the financial position recorded for the scheme reflects the higher of any underlying IAS 19 Employee Benefits deficit and the
obligation for deficit funding.
The Group utilises the projected unit credit method to calculate the defined benefit obligation. This method sees each year of
service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation.
Estimated future cash flows are then discounted at a high-quality corporate bond rate, adjusted to allow for the difference in
duration between the bond index and the pension liabilities where appropriate, to determine its present value. These calculations
are performed by independent actuaries.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.13 Defined benefit pension schemes (continued)
The plan assets of the Group\u2019s pension schemes may include several insurance contracts that have been issued by other entities in
the Group. These assets are excluded from plan assets in determining the pension surplus or deficit recognised on the
consolidated statement of financial position. The plan assets also exclude any reimbursement right assets resulting from buy-in of
the scheme liabilities from other entities in the Group. The aggregate of the actuarially determined service costs of the currently
employed personnel, and the net interest on the net defined benefit obligation at the start of the year, is charged to the
consolidated income statement. Actuarial and other gains and losses as a result of changes in assumptions or experience
variances are recognised as other comprehensive income.
Contributions to the Group\u2019s defined contribution pension schemes are expensed when due.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-613": { "value": "
1.5.14 Tax
The Group applies IAS 12 Income Taxes in accounting for taxes on income. Income tax comprises current tax and deferred tax.
Income tax is recognised in the consolidated income statement except to the extent that it relates to items recognised in other
comprehensive income or directly in equity, in which case the tax is recognised in the same statement as the related item appears.
Current tax expense is charged or credited based upon amounts estimated to be payable or recoverable as a result of taxable
amounts for the current year and adjustments made in relation to prior years. Income tax recoverable on tax allowable losses is
recognised as a current tax asset only to the extent that it is regarded as recoverable by offsetting against taxable profits arising in
the current or prior periods. Current tax is measured using tax rates and tax laws that have been enacted or substantively enacted
at the balance sheet date.
Deferred taxes are provided under the liability method for all relevant temporary differences. IAS 12 Income Taxes does not require
all temporary differences to be provided for, in particular, the Group does not provide for deferred tax on undistributed earnings of
subsidiaries where the Group is able to control the timing of the distribution and the temporary difference created is not expected
to reverse in the foreseeable future. Deferred tax is also not recognised on temporary differences that arise from initial recognition
of an asset or a liability in a transaction (other than a business combination) that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable
profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused
tax losses can be utilised.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability settled,
based on tax rates (and laws) that have been enacted or are substantively enacted at the end of the reporting period. Deferred tax
assets and liabilities are only offset when there is both a legal right to set-off and an intention to settle on a net basis.
The total tax recorded in the consolidated income statement includes tax attributable to both policyholders and shareholders. The
tax attributable to policyholders comprises the tax on the income of the consolidated with-profits and unit-linked funds. In certain
jurisdictions, such as the UK, life insurance companies are taxed on both their shareholders\u2019 profits and on their policyholders\u2019
investment returns on certain insurance and investment products. Although both types of tax are included in the total tax charge in
the Group\u2019s consolidated income statement, they are presented separately in the consolidated income statement to provide the
most relevant information about tax that the Group pays on its profits.
The Group is subject to tax in numerous jurisdictions and the calculation of the total tax charge inherently involves a degree of
estimation and judgement. The positions taken in tax returns, where applicable tax regulation is subject to interpretation, are
recognised in full in the determination of the tax charge in the financial statements if the Group considers that it is probable that the
taxation authority will accept those positions. Otherwise, the Group considers an uncertain tax position to exist and a provision is
recognised to reflect that a taxation authority, upon review of the positions, could alter the tax returns. From recognition, the
provision is measured based on management\u2019s judgement and estimate of the likely amount of the liability, or recovery by
providing for the single best estimate of the most likely outcome or the weighted average expected value where there are multiple
possible outcomes, taking into account external advice where appropriate. Each uncertain tax treatment is considered separately
or together as a group, depending on management\u2019s judgement as to which approach better predicts the resolution of the
uncertainty. It is assumed that tax authorities will examine the uncertain tax treatments and they have full knowledge of all related
information. The judgements and estimates made to recognise and measure the effect of uncertain tax positions are reassessed
whenever circumstances change or when there is new information that affects those judgements.
The judgements and estimates made to recognise and measure the effect of uncertain tax positions are reassessed whenever
circumstances change or when there is new information that affects those judgements.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-612": { "value": "
1.5.14 Tax
The Group applies IAS 12 Income Taxes in accounting for taxes on income. Income tax comprises current tax and deferred tax.
Income tax is recognised in the consolidated income statement except to the extent that it relates to items recognised in other
comprehensive income or directly in equity, in which case the tax is recognised in the same statement as the related item appears.
Current tax expense is charged or credited based upon amounts estimated to be payable or recoverable as a result of taxable
amounts for the current year and adjustments made in relation to prior years. Income tax recoverable on tax allowable losses is
recognised as a current tax asset only to the extent that it is regarded as recoverable by offsetting against taxable profits arising in
the current or prior periods. Current tax is measured using tax rates and tax laws that have been enacted or substantively enacted
at the balance sheet date.
Deferred taxes are provided under the liability method for all relevant temporary differences. IAS 12 Income Taxes does not require
all temporary differences to be provided for, in particular, the Group does not provide for deferred tax on undistributed earnings of
subsidiaries where the Group is able to control the timing of the distribution and the temporary difference created is not expected
to reverse in the foreseeable future. Deferred tax is also not recognised on temporary differences that arise from initial recognition
of an asset or a liability in a transaction (other than a business combination) that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable
profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused
tax losses can be utilised.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability settled,
based on tax rates (and laws) that have been enacted or are substantively enacted at the end of the reporting period. Deferred tax
assets and liabilities are only offset when there is both a legal right to set-off and an intention to settle on a net basis.
The total tax recorded in the consolidated income statement includes tax attributable to both policyholders and shareholders. The
tax attributable to policyholders comprises the tax on the income of the consolidated with-profits and unit-linked funds. In certain
jurisdictions, such as the UK, life insurance companies are taxed on both their shareholders\u2019 profits and on their policyholders\u2019
investment returns on certain insurance and investment products. Although both types of tax are included in the total tax charge in
the Group\u2019s consolidated income statement, they are presented separately in the consolidated income statement to provide the
most relevant information about tax that the Group pays on its profits.
The Group is subject to tax in numerous jurisdictions and the calculation of the total tax charge inherently involves a degree of
estimation and judgement. The positions taken in tax returns, where applicable tax regulation is subject to interpretation, are
recognised in full in the determination of the tax charge in the financial statements if the Group considers that it is probable that the
taxation authority will accept those positions. Otherwise, the Group considers an uncertain tax position to exist and a provision is
recognised to reflect that a taxation authority, upon review of the positions, could alter the tax returns. From recognition, the
provision is measured based on management\u2019s judgement and estimate of the likely amount of the liability, or recovery by
providing for the single best estimate of the most likely outcome or the weighted average expected value where there are multiple
possible outcomes, taking into account external advice where appropriate. Each uncertain tax treatment is considered separately
or together as a group, depending on management\u2019s judgement as to which approach better predicts the resolution of the
uncertainty. It is assumed that tax authorities will examine the uncertain tax treatments and they have full knowledge of all related
information. The judgements and estimates made to recognise and measure the effect of uncertain tax positions are reassessed
whenever circumstances change or when there is new information that affects those judgements.
The judgements and estimates made to recognise and measure the effect of uncertain tax positions are reassessed whenever
circumstances change or when there is new information that affects those judgements.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-614": { "value": "
1.5.15 Goodwill
Goodwill arises when the Group acquires a business and the fair value consideration paid exceeds the fair value of the net assets
acquired. Goodwill arising on acquisitions of subsidiaries and businesses is capitalised and carried on the consolidated statement
of financial position at initial value less any accumulated impairment losses. Goodwill impairment testing is conducted annually and
when there is an indication of impairment. For the purposes of impairment testing, goodwill is allocated to a group of cash-
generating units. Goodwill impairment charges are recognised immediately in the consolidated income statement.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-615": { "value": "
1.5.16 Intangible assets
Intangible assets acquired through business combinations are measured at fair value on acquisition. Separately acquired intangible
assets such as licences and software, are recognised at the price paid to acquire them. Intangible assets arising from development
costs are capitalised when it has been established that the project is technically and financially feasible and the Group has both the
intention and ability to use the completed asset.
Intangible assets are subsequently carried at cost less amortisation and any accumulated impairment losses.
Intangible assets are amortised on a basis to reflect the pattern in which the future economic benefits are expected to be
consumed by reference to new business production levels unless the pattern cannot be determined reliably, in which case a
straight-line method is applied. Impairment testing is conducted when there is an indication of impairment. If an impairment has
occurred, an impairment charge is recognised for the difference between the carrying value and recoverable amount of the asset.
The recoverable amount is the greater of fair value less costs to sell and value in use. Value in use is calculated as the present value
of future expected cash flows from the asset, cash-generating unit or group of cash-generating units to which it is allocated.
Amortisation and impairment of intangible assets is charged to the consolidated income statement.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-616": { "value": "
1.5.17 Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and in hand, deposits held at call with banks, debt securities and money market
funds with less than 90 days' maturity from the date of acquisition.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-617": { "value": "
1.5.18 Dividends
Dividends are recognised when the obligation becomes certain, ie when the dividend is no longer at the discretion of the Company.
In the case of interim dividends, this occurs when the dividends are paid. For final dividends, this occurs when they are
recommended by the Board and approved by shareholders.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDividendsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-618": { "value": "
1.5.19 Share capital and share premium
An equity instrument is any contract that evidences a residual interest in the assets of the Group, after deducting all of its liabilities.
Shares are classified as equity when their terms do not create an obligation to transfer assets. The nominal value of shares issued
is recorded in share capital.
Where the consideration received from the issue or sale of existing shares exceeds the nominal value recorded in share capital, the
difference is recorded in share premium. Share premium is recorded net of share issue costs.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIssuedCapitalExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-619": { "value": "
1.5.20 Treasury shares
Where any of the Group entities purchase the Company\u2019s share capital, the consideration paid, including any attributable
transaction costs, is shown as a deduction from total shareholders\u2019 equity. Any gains and losses arising on treasury shares are
included within equity.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTreasurySharesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-620": { "value": "
1.5.21 Merger reserve
The merger reserve arises from the application of merger accounting principles to acquisitions of entities under common control. It
represents the difference between the aggregate capital reserves and value of the entities acquired, which is recognised directly in
equity. On disposal of the relevant entity, the related merger reserve is released directly to retained earnings.
", "dimensions": { "concept": "mgplc:DescriptionOfAccountingPolicyForMergerReserveTextBlock", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-621": { "value": "
1.5.22 Share-based payments
All share-based payments made to employees for services rendered are measured based on the fair value of the equity instrument
granted. The fair value takes into account the impact of market-based vesting conditions and non-vesting conditions, but excludes
any impact of non-market-based vesting conditions. The related share-based payment expense is recognised over the vesting
period. The fair value is determined using an option pricing model such as Black-Scholes or a Monte Carlo simulation where
appropriate, taking into account the terms and conditions of the award.
For equity-settled share-based payments, the fair value of service rendered is based on the fair value of the equity instrument at
grant date, which is not remeasured subsequently. The share-based payment expense is recognised over the vesting period and is
based on the number of equity instruments expected to vest, with the corresponding entry to equity.
For cash-settled share-based payments, the fair value of service rendered is based on the fair value of the liability related to the
equity instrument granted. The fair value of the equity instrument granted is remeasured at each reporting date with any changes
recognised in the share-based payment expense in the consolidated income statement for the period.
A cancellation of an award without the grant of a replacement equity instrument is accounted for as an acceleration of vesting.
Accordingly, any share-based expense that would have been recognised over the remaining vesting period is recognised immediately.
Where replacement equity instruments are granted to employees in place of the cancelled equity instruments, the replacement
award is treated as a modification of the original award. At the point of replacement, the awards are remeasured to the fair value at
the date of replacement, which forms the basis of recognising the expense over the remaining vesting period.
On vesting or exercise, the difference between the expense charged to the consolidated income statement and the actual cost to
the Group is transferred to retained earnings.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-622": { "value": "
1.5.23 Earnings per share (EPS)
Basic EPS is calculated by dividing the profit or loss for the year attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding, excluding treasury shares and shares held by the employee benefit trust.
Diluted EPS is calculated by dividing the profit or loss for the year attributable to ordinary shareholders by the weighted average
number of ordinary shares, excluding treasury shares and shares held by the employee benefit trust, adjusted to take into account
the effect of any dilutive potential ordinary shares.\u00a0The Group\u2019s only class of potentially dilutive ordinary shares are share options
and awards granted to employees. Potential ordinary shares are treated as dilutive when their conversion to ordinary shares
results in a decrease in EPS.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEarningsPerShareExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-623": { "value": "
1.5.24 Foreign exchange
The Group\u2019s consolidated financial statements are presented in million pounds sterling, the Group\u2019s presentation currency.
Accordingly, the results and financial position of foreign subsidiaries are translated into the presentation currency of the Group
from their functional currencies. All assets and liabilities of foreign subsidiaries are converted at year-end exchange rates while all
income and expenses are converted at average exchange rates where this is a reasonable approximation of the rates prevailing on
transaction dates.
Foreign currency monetary assets and liabilities are translated at the spot exchange rate for the functional currency at the
reporting date. Changes resulting from exchange rates are recognised in the consolidated income statement.
Foreign currency transactions are translated into functional currencies at the spot rate prevailing on the date of transactions.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency
at the spot exchange rate at the date on which the fair value is determined. Non-monetary items that are measured based on
historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction.
Exchange differences arising on the translation of foreign subsidiaries are recognised in other comprehensive income and taken to
other reserves within equity. On disposal of the foreign subsidiary, the related exchange differences are transferred out of this
reserve and are recognised in the consolidated income statement as part of the gain or loss on disposal.
The income statements and cash flows, and statements of financial position of Group entities that have a different functional
currency from the Group's presentation currency, have been translated using the following principal exchange rates.
2023
2022
Income statement and cash
flows (average rate)
Statement of financial
position (closing rate)
Income statement and cash
flows (average rate)
Statement of financial
position (closing rate)
Euro (EUR)
1.15
1.15
1.17
1.13
Indian Rupee (INR)
102.70
106.08
97.05
99.53
Polish Z\u0142oty (PLN)
5.22
5.01
5.49
5.29
South African Rand (ZAR)
21.02
23.31
20.17
20.59
Swiss Franc (CHF)
1.12
1.07
1.18
1.12
US Dollar (USD)
1.24
1.27
1.24
1.21
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-624": { "value": "
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.25 Leases
The Group leases office property to conduct its business. At the inception of a contract, the Group assesses whether a contract is,
or contains, a lease. In simple terms this applies if the contract conveys the right to control the use of an identified asset for a period
of time in exchange for consideration. At inception, the Group allocates the consideration in a contract to each lease component.
However, for the leases of land and buildings, in which the Group acts as lessee, the Group has elected to account for the lease and
non-lease components as a single lease component.
Where the Group acts as a lessee, it recognises a 'right of use' asset and a corresponding lease liability, representing the obligation
to make lease payments at the lease commencement date. The Group applies the cost model to the right of use assets, except for
those that meet the definition of an investment property, to which the fair value model is applied.
The asset is initially measured at cost which comprises the amount of the lease liability, and lease payments made at or before the
commencement date, any initial direct costs incurred and an estimate of the costs related to the dilapidation of the asset that
would be incurred, less any lease incentives received. Subsequently, the asset is depreciated using the straight-line method from
the commencement date to the earlier of (i) the end of the right of use asset\u2019s useful life and (ii) the end of the lease term.
The lease liability is initially measured at the present value of lease payments that are not yet paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group\u2019s own incremental
borrowing rate. Subsequently, the lease liability is measured at amortised cost, using the effective interest method. From time to
time, the lease liability is re-measured where there is a change in future lease payments for example, where the Group reassesses
whether it will exercise a purchase, extension or termination option. Where this happens, a corresponding adjustment is made to
the carrying amount of the right of use asset or an amount is recognised in the consolidated income statement if the carrying
amount of the right of use asset has been reduced to zero.
The Group presents the right of use assets that do not meet the definition of investment property in \u2018Property, plant and
equipment\u2019 on the consolidated statement of financial position. The corresponding lease liabilities are presented in \u2018lease liabilities\u2019.
Where the Group acts as lessor, it classifies and accounts for its leases as operating or finance leases. Where the Group acts as an
intermediate lessor, as it does with some of its property leases, it accounts for its interests in the head lease and the sub-lease
separately. The Group assesses the lease classification of a sub-lease with reference to the right of use asset arising from the head
lease, not with reference to the underlying asset. Where substantially all the risks and rewards of ownership are transferred to the
lessee, the Group recognises a receivable asset on the consolidated statement of financial position, equal to the present value of
the lease payments, within 'Accrued investment income and other debtors'. The Group recognises finance income over the lease
term to reflect the rate of return on the net investment in the lease, within 'Other income'. The Group recognises lease payments
received under operating leases as income on a straight-line basis over the lease term as part of 'Investment return'.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-625": { "value": "
1.5.26 Property, plant and equipment (PPE)
PPE includes Group occupied properties and other tangible assets, such as computer equipment, motor vehicles, leasehold
improvements and fixtures and fittings. PPE including owner-occupied property is measured at cost, which represents the original
purchase price less any expenses incurred in bringing it to its working conditions, and subsequently measured using the cost
model.
Depreciation is charged to the consolidated income statement on a straight-line basis over the assets estimated useful lives* as
follows:
Type of asset
Estimated useful life
Group occupied property
20\u201350 years
Right of use asset
2\u201350 years
Other tangible assets
2\u201340 years
*Note that the useful lives stated are inclusive of PPE held by consolidated infrastructure private equity vehicles which typically have longer useful lives than
other assets of the Group.
Management determines useful lives and residual values for assets when they are acquired. The Group assesses the useful life,
residual value and depreciation method for PPE on an annual basis and any adjustments are made where required.
An impairment review of PPE is carried out whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. Management assesses impairment at the lowest level for which there are separately identifiable cash flows.
Where the carrying amount of an asset is greater than its estimated recoverable amount, which is the higher of the assets fair value
less costs of disposal and value in use, it is written down immediately to its recoverable amount and an impairment loss is
recognised in the consolidated income statement.
1 Basis of preparation and\u00a0material accounting policies (continued)
1.5 Accounting policies (continued)
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-626": { "value": "
1.5.27 Assets and liabilities held for sale
The Group classifies assets and liabilities as held for sale when the carrying amount is expected to be recovered through a sale
transaction, usually within one year, and management is committed to the sale.
Assets and liabilities held for sale are shown separately on the consolidated statement of financial position and are measured at the
lower of their carrying amount and their fair value less costs to sell. No depreciation or amortisation is charged on an asset which is
classified as held for sale.
When the Group is committed to a sale of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale
when the criteria described above are met, regardless of whether the Group retains a non-controlling interest in its former
subsidiary after the sale.
Income and expenses of subsidiaries sold during the year are included in the consolidated income statement up to the date of
disposal. The gain or loss on disposal is calculated as the difference between sale proceeds net of selling costs, less the net assets
of the entity at the date of disposal, adjusted for foreign exchange movements attaching to the sold entity that are required to be
recycled to the consolidated income statement under IAS 21 'The Effects of Changes in Foreign Exchange Rates'.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-628": { "value": "
1.5.28 Provisions and contingent assets and liabilities
Provisions are recognised in the consolidated statement of financial position when the Group has a present legal or constructive
obligation resulting from a past event, it is more probable than not that a loss will be made in settling the obligation and the
amounts can be estimated reliably.
Provisions are measured based on management\u2019s best estimate of the expenditure required to settle the obligation at the
reporting date. Provisions are discounted and represent the present value of the expected expenditure where the effect of the
time value of money is material.
Contingent liabilities are possible obligations of the Group where the timing and amount are subject to significant uncertainty.
Contingent liabilities are not recognised in the consolidated statement of financial position, unless they are assumed by the Group
as part of a business combination. Contingent liabilities are however disclosed, unless they are considered to be remote. If a
contingent liability becomes probable and the amount can be reliably measured, it is no longer treated as contingent and
recognised as a liability.
Contingent assets which are possible benefits to the Group are only disclosed if it is probable that the Group will receive the
benefit. Mirroring the treatment of contingent liabilities, if such a benefit becomes virtually certain, it is no longer considered
contingent and is recognised on the consolidated statement of financial position as an asset.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-627": { "value": "
1.5.28 Provisions and contingent assets and liabilities
Provisions are recognised in the consolidated statement of financial position when the Group has a present legal or constructive
obligation resulting from a past event, it is more probable than not that a loss will be made in settling the obligation and the
amounts can be estimated reliably.
Provisions are measured based on management\u2019s best estimate of the expenditure required to settle the obligation at the
reporting date. Provisions are discounted and represent the present value of the expected expenditure where the effect of the
time value of money is material.
Contingent liabilities are possible obligations of the Group where the timing and amount are subject to significant uncertainty.
Contingent liabilities are not recognised in the consolidated statement of financial position, unless they are assumed by the Group
as part of a business combination. Contingent liabilities are however disclosed, unless they are considered to be remote. If a
contingent liability becomes probable and the amount can be reliably measured, it is no longer treated as contingent and
recognised as a liability.
Contingent assets which are possible benefits to the Group are only disclosed if it is probable that the Group will receive the
benefit. Mirroring the treatment of contingent liabilities, if such a benefit becomes virtually certain, it is no longer considered
contingent and is recognised on the consolidated statement of financial position as an asset.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-629": { "value": "
2 Group structure and\u00a0products
2.1 Group composition
The following diagram is an extract of the Group structure at 31\u00a0December 2023 and gives an overview of the composition of the
Group. M&G plc is the holding company of the Group.
\"GroupStructure_rgb.svg\"
A list of the Group\u2019s related undertakings comprising subsidiaries, joint ventures, associates and other significant holdings is
contained within Note 39.
2 Group structure and\u00a0products
2.2 Corporate transactions
My Continuum Financial Limited acquisition
On 8 March 2023, M&G Wealth Advice Limited (MGWAL), a wholly owned subsidiary of the Group, acquired a 49.9% holding in My
Continuum Financial Limited (MCFL), the holding company of Continuum (Financial Services) LLP (CFSL) and My Continuum
Wealth (MCW), collectively referred to as 'Continuum', for a purchase consideration of \u00a322m, including an adjustment for capital.
The Group acquired a further 25.05% stake on 19 March 2024, with a view to acquiring the remaining stake in March 2025 (see
Note 38 for further details).
Continuum is now part of M&G Wealth within our Wealth segment and brings to M&G a fast-growing in-house discretionary Model
Portfolio Service as its central investment offering allowing M&G to further grow and build our advisory capability across the UK,
and to provide a wider range of investment solutions to more clients. Continuum is based in Plymouth and has more than 60 self-
employed advisers operating nationally.
The acquisition of the initial stake in Continuum has been treated as an investment in an associate accounted for under the equity
method in the consolidated statement of financial position for the year ended 31 December 2023.
2.3 Insurance and investment contracts written by the Group\u2019s insurance entities
A description of the main contract types written by the Group\u2019s insurance entities is provided below.
The Group\u2019s with-profits contracts are written in the With-Profits Fund in which policyholders share in the profit of the fund. Up
until 1 April 2021 there were three with-profits sub-funds: the With-Profits Sub-Fund (WPSF), the Defined Charge Participating
Sub-Fund (DCPSF) and the Scottish Amicable Insurance Fund ( SAIF). On 1 April 2021 SAIF merged with the WPSF and the assets
and liabilities of SAIF were combined with those of the WPSF.
Shareholder-backed business represents all insurance and investment contracts in the Group other than contracts written in the
With-Profits Fund. The profit on these contracts accrues directly to the Group's shareholders.
2.3.1 With-profits contracts
With-profits contracts provide returns to policyholders through bonuses that are smoothed to reduce the impact of volatility of the
investment performance of the assets in the fund.
2.3.1.1 Conventional and accumulating with-profits contracts written in WPSF and DCPSF
Conventional and accumulating with-profits policyholders receive their share of profit by way of regular and final bonuses.
Regular bonus rates are determined for each type of policy primarily by targeting the bonus level at a prudent proportion of the
long-term expected future investment return on underlying assets, reduced as appropriate for each type of policy to allow for items
such as expenses, charges, tax and shareholder transfers.
In normal investment conditions, the Group expects changes in regular bonus rates to be gradual over time. However, the Group
retains the discretion whether or not to declare a regular bonus each year, and there is no limit on the amount by which regular
bonus rates can change.
A final bonus, which is normally declared annually, may be added when a claim is paid. The rates of final bonus usually vary by type
of policy and by reference to the period, usually a year, in which the policy commences or each premium is paid. These rates are
determined by reference to the asset shares of representative sample policies and are subject to smoothing.
Regular bonuses are typically declared once a year, and once credited are guaranteed in accordance with the terms of the
particular product. Final bonus rates are guaranteed only until the next bonus declaration.
Contracts are predominantly written in the WPSF, where the shareholders are entitled to an amount up to one-ninth of the bonus
declared, which is payable as a cash transfer from the With-Profits Fund.
For the business written in the DCPSF, the charges accrue to shareholders who also meet the corresponding expenses. Profits
arising in the DCPSF are attributed wholly to DCPSF policyholders. The shareholders\u2019 profit arises as the difference between
charges and expenses.
2 Group structure and\u00a0products (continued)
2.3 Insurance and investment contracts written by the Group\u2019s insurance entities (continued)
2.3.1 With-profits contracts (continued)
2.3.1.2 With-profits contracts with a PruFund investment option ('PruFund contracts')
These are a range of with-profits contracts offering policyholders a choice of investment profiles (PruFund funds). Unlike the with-
profits contracts described above, no regular or final bonuses are declared. Instead, policyholders participate in profits by means of
an increase in their investment, which grows in line with an Expected Growth Rate (EGR). The EGR is adjusted for significant
market movements.
The EGR may be applied for each of the different PruFund funds within the range, varying depending on the individual asset mix of
that fund. The applicable EGR, net of the relevant charges, is applied to calculate the \u2018smoothed unit value\u2019 of policyholder funds.
The EGRs are reviewed and updated quarterly, with the smoothed unit value calculated daily. In normal investment conditions, the
EGR is expected to reflect the Prudential Assurance Company's (PAC) view of how the funds will perform over the longer term.
Policyholders are protected from some of the extreme short-term ups and downs of direct investments by using an established
smoothing process.\u00a0Prescribed adjustments are made to the smoothed unit value if it moves outside a specified range relative to
the value of the underlying assets.\u00a0
PruFund contracts are predominantly written in the WPSF, where the shareholder is entitled to an amount up to one-ninth of the
difference between the smoothed unit value on withdrawal and the initial investment. The DCPSF also contains PruFund contracts,
and for these contracts the shareholders receive profits or losses arising from the difference between the charges and expenses
on this business.
2.3.1.3 SAIF with-profits contracts
SAIF was a ring-fenced with-profits sub-fund which merged with the WPSF on 1 April 2021. No new business was written in SAIF,
although regular premiums and top-ups were still being collected on in-force policies. The fund was solely for the benefit of
policyholders of SAIF. Shareholders had no entitlement to a proportion of the bonuses declared and this remains the case post-
merger with the WPSF. The process of determining policyholder bonuses of SAIF with-profits policies was similar to that for the
with-profits policies of the WPSF. In addition, the surplus assets in SAIF were allocated to policies in an orderly and equitable
distribution over time as enhancements to policyholder benefits.
The Group\u2019s main exposure to guaranteed annuity options arises through contracts in SAIF. More detail on the provisions held in
respect of guaranteed annuity options is provided in Note 24.1.3.
2.3.2 Unit-linked contracts
Unit-linked contracts are contracts where the value of the policy is linked to the value of underlying investments (such as collective
investment schemes, internal investment pools or other property) or fluctuations in the value of underlying investments or indices.
Investment risk associated with the product is primarily borne by the policyholder. Some unit-linked contracts provide an element
of insurance coverage, such as a benefit payable on death in excess of the value of the units, and these contracts are classified as
insurance contracts and accounted for under IFRS 17 (see Note 24.1.4).
Charges are deducted from the unit-linked funds for investment and administration services and, for certain contracts, insurance
coverage. Benefits payable will depend on the price of the units prevailing at the time of surrender, death or the maturity of the
product.
2.3.3 Annuities
Annuities are contracts which offer policyholders a regular income over the policyholder\u2019s life, in exchange for an upfront premium,
and may be immediate or deferred. For immediate annuities, the regular income starts immediately after the premium payment
but, for deferred annuities, the regular income is delayed until a specified date in the future. There are various types of annuity
contracts written across the Group: level, fixed increase, inflation-linked (all referred to as 'non-profit annuities') and with-profits
annuities.
\u2013 Level annuities: provide a regular (for example, monthly) fixed annuity payment over the policyholder\u2019s life.
\u2013 Fixed increase annuities: provide a regular annuity payment which incorporates automatic increases in annuity payments by
either fixed percentages or fixed amounts over the policyholder\u2019s life.
\u2013 Inflation-linked annuities: provide a regular annuity payment to which an additional amount is added periodically based on the
increase in an inflation index.
\u2013 With-profits annuities: are written in the With-Profits Fund. These combine the income features of annuity contracts with the
investment smoothing features of with-profits products and enable policyholders to obtain exposure to investment returns on
the With-Profits Fund.
", "dimensions": { "concept": "mgplc:DisclosureOfGroupStructureAndProductsTextBlock", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-630": { "value": "
2.1 Group composition
The following diagram is an extract of the Group structure at 31\u00a0December 2023 and gives an overview of the composition of the
Group. M&G plc is the holding company of the Group.
\"GroupStructure_rgb.svg\"
A list of the Group\u2019s related undertakings comprising subsidiaries, joint ventures, associates and other significant holdings is
contained within Note 39.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCompositionOfGroupExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-631": { "value": "
3 Segmental analysis
The Group\u2019s operating segments are defined and presented in accordance with IFRS 8: Operating Segments on the basis of the
Group\u2019s management reporting structure and its financial management information. The Group\u2019s primary reporting format is by
product type. The Chief Operating Decision Maker for the Group is the Group Executive Committee.
The Group\u2019s operating segments have been revised during the year to reflect a change in management structure. Our previous
operating segment, 'Retail and Savings' has been replaced with two new operating segments: 'Life' and 'Wealth'. Comparatives for
2022 are re-presented on the new segment basis.
3.1 Operating segments
The Group\u2019s operating segments are:
Asset Management
The Group's investment management capability is offered to both wholesale and institutional clients. The Group's wholesale clients
invest through either UK domiciled OEICs or Luxembourg domiciled SICAVs and have access to a broad range of actively managed
investment products, including Equities, Fixed Income, Multi-Asset and Real Estate. The Group serves these clients through its
many business-to-business relationships both in the UK and overseas, which include independent financial advisers, high-street
banks and wealth managers. The Group's institutional investors, include pension funds, insurance companies and banks from
around the world, who invest through segregated mandates and pooled funds into a diverse range of Fixed Income and Real Estate
investment products and services.
The Asset Management segment generates revenues by charging fees which are typically based on the level of assets under
management. The Asset Management segment also earns investment management revenues from the management of a
significant proportion of Life and Wealth assets it manages.
Life
The Life business operates in the savings and pensions market and includes corporate risk, individual and international solutions.
The majority of the products in the Life business are closed to new customers but may accept further contributions from existing
policyholdersi. During the year, the Life business re-entered the bulk purchase annuity market and transacted with certain
schemes to secure the annuity benefits of immediate and deferred annuity members. The bulk purchase annuities, along with
workplace pensions make up our corporate risk solutions.
Individual products include annuity contracts: level annuities, which provide a fixed annuity payment; fixed increase annuities,
which incorporate a periodic automatic fixed increase in annuity payments; and inflation-linked annuities, which incorporate a
periodic increase based on a defined inflation index. Some inflation-linked annuities have minimum and/or maximum increases
relative to the corresponding inflation index. The life products are primarily whole of life assurance, endowment assurances, term
assurance contracts, lifetime mortgages, income protection, and critical illness products. Investment products include unit-linked
contracts and the Prudential bond offering, which mainly consists of single-premium-invested whole of life policies, where the
client has the option of taking ad hoc withdrawals, regular income or the option of fully surrendering their bond.
International solutions include our savings businesses based in Ireland (Prudential International Assurance plc) and Poland. The
Group's products which give non-UK clients access to the PruFund investment proposition are also included.
Some of the Group's products written through conventional and accumulating with-profits contracts, in the PAC with-profits sub-
funds, provide returns to policyholders through \u2018regular\u2019 and \u2018final\u2019 bonuses that reflect a smoothed investment return.
Wealth
M&G Wealth provides access to a range of retirement, savings and investment management solutions to its clients. These
products are distributed to clients through the wrap platform, intermediaries and advisers, and include the Retirement Account (a
combined individual pension and income drawdown product), individual pensions, ISAs, collective investments and a range of on-
shore and off-shore bonds.
All of the Group's products that give access to the UK PruFund investment proposition are included in M&G Wealth. The UK
PruFund investment proposition gives customers access to savings contracts with smoothed investment returns and a wide
choice of investment profiles. Unlike the conventional and accumulating with-profits contracts in the Life business, no regular or
final bonuses are declared. Instead, policyholders participate in profits by means of an increase in their investment, which grows in
line with an expected growth rate.
The Group's other reportable segment is:
Corporate Centre
Corporate Centre includes central corporate costs and debt costs.
i The Group accepts new members to existing Corporate Pension schemes and writes a small number of new annuity policies with customers who have a
pension issued by PAC.
3.2 Adjusted operating profit before tax methodology
Adjusted operating profit before tax is the Group\u2019s non-GAAP alternative performance measure, which complements IFRS GAAP
measures and is key to decision-making and the internal performance management of operating segments.
The Group\u2019s adjusted operating profit before tax methodology has been updated since it was disclosed in the 2022 consolidated
financial statements following the adoption of IFRS 17 \u2018Insurance Contracts\u2019 (as first reported in the interim reporting for the six
months ended 30 June 2023). Where relevant, the principles used to derive adjusted operating profit before tax remain consistent
with IFRS 4. Other changes to the methodology have also been made to exclude from adjusted operating profit the foreign
exchange movements on non-GBP denominated subordinated debt and the fair value movement on strategic investments since
these movements reflect short-term fluctuations in investment return (again, first reported in the interim reporting for the six
months ended 30 June 2023). Details of the methodology are presented below:
Fee based business
For the Group's fee based business written by Asset Management, Life and Wealth segments, adjusted operating profit before tax
includes fees received from clients and operating costs for the business including overheads, expenses required to meet
regulatory requirements and regular business development/restructuring and other costs. Costs associated with fundamental
Group-wide restructuring and transformation are not included in adjusted operating profit before tax.
Business written in the With-Profits Fund
For the Group\u2019s business written in the With-Profits Fund in the Life and Wealth segments, adjusted operating profit before tax
includes the release of the risk adjustment and the expected release of the CSM for the period. The expected CSM release for the
period is calculated as the CSM at the start of the period updated to reflect long-term expected investment returns multiplied by
the expected amortisation factor for the period.
\u2013 The long-term expected investment returns are calculated on the assumption of real-world investment returns, which are
determined by reference to the risk-free rate plus a risk premium based on the mix of assets held to back the asset shares. In the
calculation of the expected CSM release for with-profits business, the long-term expected investment returns for the year ended
31\u00a0December 2023 were 8.5% p.a. (4.8% p.a. for the year ended 31\u00a0December 2022).
\u2013 The expected amortisation factor for the period reflects the expected pattern of release of the CSM for the with-profits business
over the life of the contracts. The expected amortisation factor used for the year ended 31\u00a0December 2023 was 12.7% p.a. (11.9%
p.a. for the year ended 31\u00a0December 2022).
Adjusted operating profit before tax for the Group\u2019s business written in the With-Profits Fund also includes the expected
investment return for the shareholder\u2019s share of the IFRS value of the excess assets in the Fund. For the year ended 31\u00a0December
2023, the return was 6.0% p.a. (2.4% p.a. for the year ended 31\u00a0December 2022).
Adjusted operating profit does not include the impact of any margins on investment management fee earned by other Group
entities. These are recognised in the Asset Management segment as they emerge.
The application of IFRS 17 to non-profit contracts in the with-profits funds results in a mismatch due to the difference between
their value under the IFRS 17 General Measurement Model accounting for these contracts (primarily annuities) and how these
contracts are treated in determining their fair value when assessing current and future with-profits contracts under the Variable
Fee Approach (VFA). Although the impact of this mismatch balances over the life of the current and future with-profit contracts as
the CSM under the VFA is set up and released, results for the period do not reflect the long-term economics of the transaction.
Therefore, the impact of the mismatch has been excluded from adjusted operating profit before tax.
Shareholder annuity business
For the Group's shareholder annuity products written by the Life segment, adjusted operating profit before tax includes the release
of the CSM and the risk adjustment for the period. Adjusted operating profit before tax also includes the returns on surplus assets
in excess of IFRS 17 liabilities based on long-term expected investment returns, which are determined by reference to the risk-free
rate plus a risk premium based on the mix of assets. For the year ended 31\u00a0December 2023 the long-term expected investment
returns for shareholder annuities were 6.6% p.a. (2.2% p.a. for the year ended 31\u00a0December 2022). The net effect of changes to the
valuation rate of interest due to asset trading and portfolio rebalancing, and experience variances are also included in adjusted
operating profit before tax.
The results of the intercompany buy-in transaction executed between the trustees of M&G Group Pension Pension Scheme
(M&GGPS) and PAC in 2023 are included in adjusted operating profit before tax as this generates economic value for the Group.
Adjusted operating profit before tax for shareholder annuities excludes the impact of the mismatch resulting from the
measurement of fulfilment cash flows using current interest rates and any changes to CSM being measured using locked-in rates.
Corporate Centre
For the Corporate Centre adjusted operating profit before tax is the expense incurred to run the head office and the actual
investment return on treasury activities.
3 Segmental analysis (continued)
3.2 Adjusted operating profit before tax methodology (continued)
Key adjusting items between IFRS profit before tax and adjusted operating profit before tax
Certain adjustments that are considered to be non-recurring or strategic, or due to short-term movements not reflective of longer-
term performance are made to IFRS profit or loss before tax to determine adjusted operating profit before tax. Adjustments are in
respect of short-term fluctuations in investment returns, mismatches arising on the application of IFRS 17, impairment and
amortisation in respect of acquired intangibles, costs associated with fundamental Group-wide restructuring and transformation,
profit or loss arising on corporate transactions and profit or loss before tax from any discontinued operations.
Short-term fluctuations in investment returns
The adjustment for short-term fluctuations in investment returns represents:
\u2013 Difference between actual CSM release for the period and expected CSM release for the period for with-profit contracts;
\u2013 Movements in the fair value of instruments held to mitigate equity risk in the future with-profits shareholder transfer and to
optimise the Group\u2019s capital position on a Solvency II basis;
\u2013 Difference between actual and long-term expected investment return on surplus assets backing the shareholder annuity capital
and shareholders' share of excess assets in the With-Profits Fund measured on an IFRS basis;
\u2013 Foreign exchange movements on the US dollar subordinated debt held in the Corporate Centre;
\u2013 Fair value movements on strategic investments;
\u2013 Impact of short-term credit risk provisioning and experience variances on the measurement of best estimate liabilities,
specifically:
\u2013 The impact of credit risk provisioning for short-term adverse credit risk experience;
\u2013 The impact of credit risk provisioning for actual upgrade and downgrade experience during the year. This is calculated by
reference to current interest rates;
\u2013 Credit experience variance relative to long-term assumptions, reflecting the impact of defaults and other similar experience,
such as asset exchanges arising from debt restructuring; and
\u2013 The impact of market movements on bond portfolio weightings and the subsequent impact on credit provisions.
Mismatches arising on the application of IFRS 17
The application of IFRS 17 results in the following mismatches in valuation basis being recognised in total profit/loss before tax. For
the purposes of calculating adjusted operating profit before tax the impact of the mismatch has been excluded.
\u2013 Difference between the value under IFRS 17 General Measurement Model for non-profit contracts (primarily annuities) written in
the With-Profits Fund and how these contracts are treated in determining their fair value when assessing current and future
with-profits contracts under the VFA; and
\u2013 Mismatch resulting from measurement of fulfilment cash flows for shareholder non-profit business (primarily annuities) using
current interest rates while related changes to the CSM are measured using locked-in rates.
Amortisation and impairment of intangible assets acquired in business combinations
Amortisation and impairment of intangible assets (including goodwill) acquired in business combinations are excluded from
adjusted operating profit before tax.
Profit/(loss) on disposal of businesses and corporate transactions
Certain additional items are excluded from adjusted operating profit before tax where those items are considered to be non-
recurring or strategic, or considered to be one-off, due to their size or nature, and therefore not indicative of the long-term
operating performance of the Group, including profits or losses arising on corporate transactions and profits or losses on
discontinued operations.
Restructuring costs and other
Restructuring costs and other primarily reflect the shareholder allocation of costs associated with the transformation of our
business. These costs represent fundamental Group-wide restructuring and transformation and are therefore excluded from
adjusted operating profit before tax.
This also includes the elimination on consolidation of the results of the intercompany buy-in transaction executed between the
trustees of M&G Group Pension Pension Scheme (M&GGPS) and PAC in 2023.
3.3 Analysis of Group adjusted operating profit before tax by segment
On 1 January 2023 we adopted the new accounting standard IFRS 17 Insurance Contracts which has led to changes to our
adjusted operating profit methodology. As a result, adjusted operating profit before tax for the year ended 31\u00a0December 2022 has
been restated from that reported previously. The restatement is driven by the change in profit recognition profile of the annuities
and with-profits business in the Life and Wealth segments as a result of the new insurance standard and also other changes to our
adjusted operating profit methodology, unrelated to the adoption of IFRS 17, which were implemented at the same time. These
unrelated changes to our adjusted operating methodology are to classify foreign exchange movements on non-GBP denominated
subordinated debt and fair value movements on strategic investments as non-operating items.
The overall impact of the restatement on adjusted operating profit before tax is summarised in the table below for the year ended
31\u00a0December 2022:
As previously
reported
Changes as
a\u00a0result of
IFRS\u00a017
Other AOP
methodology
changes
Restated
Adjusted operating profit/(loss) before tax for the year ended 31 December 2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Asset Management
264
\u2014
\u2014
264
Life i
476
(16)
\u2014
460
Wealth i
96
62
\u2014
158
Corporate Centre
(307)
\u2014
50
(257)
Adjusted operating profit/(loss) before tax
529
46
50
625
iLife and Wealth were previously reported under Retail and Savings.
Analysis of Group adjusted operating profit/(loss) before tax by segment:
2023
Restated i
2022
For the year ended 31 December
\u00a3m
\u00a3m
Asset Management
242
264
Life
586
460
Wealth
180
158
Corporate Centre
(211)
(257)
Total segmented adjusted operating profit before tax
797
625
Short-term fluctuations in investment returnsii
(171)
(2,858)
Mismatches arising on application of IFRS 17
(41)
(244)
Amortisation of intangible assets acquired in business combinations
(39)
(35)
Restructuring costs and otheriii
(141)
(147)
IFRS profit/(loss) before tax and non-controlling interests attributable to equity holders
405
(2,659)
IFRS profit attributable to non-controlling interestsiv
16
19
IFRS profit/(loss) before tax attributable to equity holders
421
(2,640)
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
iiMarket conditions have led to lower losses from short-term fluctuations in investment returns in the current period with the impact of rising rates for the
year ended 31\u00a0December 2023 not being as significant as the year to 31\u00a0December 2022. The overall losses primarily comprise of a \u00a34m gain (2022: \u00a3989m
loss) on interest rate swaps purchased to protect PAC's Solvency II capital position against falls in interest rates and \u00a3159m loss (2022: \u00a31,301m loss) from
the difference in actual and long-term expected investment return on surplus assets backing the annuity portfolio, both of which have significantly
improved due to the smaller increase in yields in 2023 compared to 2022. There were also losses of \u00a3123m (2022: \u00a3104m gain) on the hedging instruments
held to protect the Solvency II capital position from falling equity markets, which moved to a loss as a result of increases in US and European equity
markets.
iiiRestructuring costs and other excluded from adjusted operating profit includes costs that relate to the transformation of our business which are allocated
to the shareholder. These differ to Restructuring costs incurred in the analysis of administrative and other expenses in Note 7 which include costs
allocated to the Policyholder. In the year ended 31\u00a0December 2023 restructuring costs and other include \u00a373m (2022: \u00a348m) in relation to operational
transformation, \u00a330m (2022: \u00a336m) in respect of investment spend in building out capability in our Asset Management business, and \u00a319m (2022: \u00a332m) in
respect of the development of the M&G Wealth platform business.
ivExcludes non-controlling interests in relation to amortisation of intangible assets acquired in business combinations which is presented net within the non-
operating line item
3.4 Analysis of Group revenue by segment
The following table shows revenue by segment for the Group:
2023
2022
For the year ended 31 December
\u00a3m
\u00a3m
Life
3,235
2,938
Wealth
652
387
Total segmented insurance revenue i
3,887
3,325
Asset Management
11
\u2014
Life
1,663
1,385
Wealth
1,391
1,009
Corporate Centre
53
26
Total segmented interest revenue
3,118
2,420
Asset Managementii
1,025
1,051
Life
37
42
Wealth
106
108
Total segmented fee income
1,168
1,201
i Following a review of the Group's presentation of policyholder tax, comparatives for 31 December 2022 have been restated from those previously reported
in the 2023 interim financial statements.
ii The Asset Management segmented fee income differs from the fee income in Note 6 due to the netting of certain items that have no profit impact in
adjusted operating profit. Asset management fee income includes net inter-segment fee income of \u00a3165m (2022: \u00a3164m).
The Group has a widely diversified client base. There are no clients whose revenue represents greater than 10% of fee income.
3.5 Total external revenue by geography
The following table provides a geographical segmentation of insurance revenue and other income (includes fee income and other
income), as presented in the consolidated income statement:
2023
Restated i
2022
For the year ended 31 December
\u00a3m
\u00a3m
United Kingdom:
Insurance revenue
3,765
3,249
Fee and other income
450
525
Total United Kingdom
4,215
3,774
Rest of the World:
Insurance revenue
122
76
Fee and other income
590
582
Total Rest of the World
712
658
Total:
Insurance revenue
3,887
3,325
Fee and other income
1,040
1,107
Total
4,927
4,432
The geographical analyses of revenues from long-term business are based on the territory of the operating unit assuming the risk.
Other income from external customers and clients in Asset Management reflect the domicile of where revenues are generated.
The following table provides a segmentation of non-current, non-financial assets as presented in the consolidated statement of
financial position:
Total non-current, non-financial assets by geographical location
2023
Restated i
2022
For the year ended 31 December
\u00a3m
\u00a3m
UK
13,356
14,308
Rest of the World
6,256
6,471
Total
19,612
20,779
i The comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
Non-current, non-financial assets for this purpose consist of goodwill and intangible assets, deferred acquisition costs, property,
plant and equipment, investment property, and investment in joint ventures and associates accounted for using the equity method.
", "dimensions": { "concept": "mgplc:DisclosureOfSegmentalAnalysisTextBlock", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-632": { "value": "
3.1 Operating segments
The Group\u2019s operating segments are:
Asset Management
The Group's investment management capability is offered to both wholesale and institutional clients. The Group's wholesale clients
invest through either UK domiciled OEICs or Luxembourg domiciled SICAVs and have access to a broad range of actively managed
investment products, including Equities, Fixed Income, Multi-Asset and Real Estate. The Group serves these clients through its
many business-to-business relationships both in the UK and overseas, which include independent financial advisers, high-street
banks and wealth managers. The Group's institutional investors, include pension funds, insurance companies and banks from
around the world, who invest through segregated mandates and pooled funds into a diverse range of Fixed Income and Real Estate
investment products and services.
The Asset Management segment generates revenues by charging fees which are typically based on the level of assets under
management. The Asset Management segment also earns investment management revenues from the management of a
significant proportion of Life and Wealth assets it manages.
Life
The Life business operates in the savings and pensions market and includes corporate risk, individual and international solutions.
The majority of the products in the Life business are closed to new customers but may accept further contributions from existing
policyholdersi. During the year, the Life business re-entered the bulk purchase annuity market and transacted with certain
schemes to secure the annuity benefits of immediate and deferred annuity members. The bulk purchase annuities, along with
workplace pensions make up our corporate risk solutions.
Individual products include annuity contracts: level annuities, which provide a fixed annuity payment; fixed increase annuities,
which incorporate a periodic automatic fixed increase in annuity payments; and inflation-linked annuities, which incorporate a
periodic increase based on a defined inflation index. Some inflation-linked annuities have minimum and/or maximum increases
relative to the corresponding inflation index. The life products are primarily whole of life assurance, endowment assurances, term
assurance contracts, lifetime mortgages, income protection, and critical illness products. Investment products include unit-linked
contracts and the Prudential bond offering, which mainly consists of single-premium-invested whole of life policies, where the
client has the option of taking ad hoc withdrawals, regular income or the option of fully surrendering their bond.
International solutions include our savings businesses based in Ireland (Prudential International Assurance plc) and Poland. The
Group's products which give non-UK clients access to the PruFund investment proposition are also included.
Some of the Group's products written through conventional and accumulating with-profits contracts, in the PAC with-profits sub-
funds, provide returns to policyholders through \u2018regular\u2019 and \u2018final\u2019 bonuses that reflect a smoothed investment return.
Wealth
M&G Wealth provides access to a range of retirement, savings and investment management solutions to its clients. These
products are distributed to clients through the wrap platform, intermediaries and advisers, and include the Retirement Account (a
combined individual pension and income drawdown product), individual pensions, ISAs, collective investments and a range of on-
shore and off-shore bonds.
All of the Group's products that give access to the UK PruFund investment proposition are included in M&G Wealth. The UK
PruFund investment proposition gives customers access to savings contracts with smoothed investment returns and a wide
choice of investment profiles. Unlike the conventional and accumulating with-profits contracts in the Life business, no regular or
final bonuses are declared. Instead, policyholders participate in profits by means of an increase in their investment, which grows in
line with an expected growth rate.
The Group's other reportable segment is:
Corporate Centre
Corporate Centre includes central corporate costs and debt costs.
i The Group accepts new members to existing Corporate Pension schemes and writes a small number of new annuity policies with customers who have a
pension issued by PAC.
", "dimensions": { "concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-633": { "value": "
4 Insurance revenue
The Group\u2019s exposure to risks arising from insurance assets and liabilities is different for each component of the Group\u2019s business.
The Group\u2019s Insurance revenue is presented below for the different components of business:
2023
With-profits
sub-funds
Unit-linked
liabilities
Annuity and
other long-
term
business
Total
For the year ended 31\u00a0December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Amounts relating to the changes in the liability for remaining coverage:
Expected incurred claims and other expenses
1,609
36
1,226
2,871
Change in the risk adjustment for non-financial risk for the risk expired
24
1
32
57
CSM recognised in profit or loss for the services provided
499
9
141
649
Revenue recognised for incurred policyholder tax
249
6
\u2014
255
Amounts relating to the recovery of insurance acquisition cash flows:
Allocation of premium
26
\u2014
29
55
Total insurance revenue
2,407
52
1,428
3,887
2022
With-profits
sub-funds
Unit-linked
liabilities
Annuity and
other long-
term
business
Total
For the year ended 31\u00a0December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Amounts relating to the changes in the liability for remaining coverage:
Expected incurred claims and other expenses
1,623
37
1,166
2,826
Change in the risk adjustment for non-financial risk for the risk expired
22
\u2014
41
63
CSM recognised in profit or loss for the services provided
526
11
127
664
Expense recognised for incurred policyholder tax i
(243)
(19)
\u2014
(262)
Amounts relating to the recovery of insurance acquisition cash flows:
Allocation of premium
9
\u2014
25
34
Total insurance revenue
1,937
29
1,359
3,325
i Following a review of the Group's presentation of policyholder tax, comparatives for 31 December 2022 have been restated from those previously reported
in the 2023 interim financial statements.
Insurance revenue is recognised as services under the group of insurance contracts are provided to policyholders at an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those services but excludes investment
components.
The amount of CSM recognised in the profit or loss in the period is based on coverage units provided during the current period.
The number of coverage units is the quantity of services provided by the contracts in the group, determined by considering for
each contract the quantity of benefits provided and its expected coverage period.
Services provided to insurance contracts include insurance coverage and, for all direct participating contracts, investment services
for managing underlying items on behalf of policyholders (investment-related services). In addition, insurance contracts without
direct participation features may also provide investment services for generating an investment return for the policyholder
(investment-return service). The number of coverage units is a quantification of services provided under the contracts in the group.", "dimensions": { "concept": "ifrs-full:DisclosureOfInsurancePremiumRevenueExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-634": { "value": "
5 Investment income and\u00a0insurance finance expenses
An analysis of net investment income and net insurance finance expenses by each component of the Group's business is
presented below:
2023
With-profits
sub-funds
Unit-linked
liabilities
Annuity and
other long-
term
business
Other
Total
For the year ended 31\u00a0December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest revenue from financial assets not measured at FVTPL
488
69
77
38
672
Interest revenue from financial assets measured at FVTPL
1,675
167
570
34
2,446
Net change in investments contract liabilities without DPF
(122)
(521)
(57)
\u2014
(700)
Net credit impairment (losses)/reversal
2
1
\u2014
(1)
2
Other investment return:
Dividend income
2,041
333
1
\u2014
2,375
Net gains on financial assets measured at FVTPL
3,222
449
336
55
4,062
Rental income from investment properties
849
35
72
\u2014
956
Net losses on investment properties
(951)
(33)
(69)
\u2014
(1,053)
Foreign exchange (losses)/gains
(137)
(1)
1
11
(126)
Total other investment return
5,024
783
341
66
6,214
Total investment return
7,067
499
931
137
8,634
Insurance finance income/(expenses) from insurance
contracts\u00a0issued
Due to changes in the value of underlying assets of contracts
measured under the VFA
(5,761)
(239)
(22)
\u2014
(6,022)
Interest accreted to insurance contracts measured under GMM
(395)
\u2014
(780)
\u2014
(1,175)
Due to changes in interest rates and other financial assumptions
24
\u2014
(145)
\u2014
(121)
Total insurance finance income/(expenses) from insurance
contracts issued
(6,132)
(239)
(947)
\u2014
(7,318)
Reinsurance finance income/(expenses) from reinsurance
contracts\u00a0held
Interest accreted to reinsurance contracts measured under GMM
\u2014
(2)
40
\u2014
38
Due to changes in interest rates and other financial assumptions
(1)
(1)
3
\u2014
1
Total reinsurance finance income/(expenses) from reinsurance
contracts held
(1)
(3)
43
\u2014
39
Total net investment return and insurance finance income/
(expenses)
934
257
27
137
1,355
In relation to the business in scope of IFRS 17, the table above provides detail of the total investment income (income and gains)
and detail of the resulting or corresponding changes in liabilities included in insurance and reinsurance finance income/(expenses).
The key offsetting movements in liabilities are:
\u2013 the offsetting change in liabilities due to changes in the underlying items of contracts measured under the VFA;
\u2013 the offsetting changes in liabilities due to changes in interest rates and other financial assumptions; and
\u2013 the interest accreted to contracts measured under the GMM.
As a result, the overall net position reflects income and gains on surplus assets.
5 Investment income and\u00a0insurance finance expenses (continued)
2022
With-profits
sub-funds
Unit-linked
liabilities
Annuity and
other long-
term
business
Other
Total
For the year ended 31\u00a0December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest revenue from financial assets not measured at FVTPL
174
16
18
9
217
Interest revenue from financial assets designated as at FVTPL
1,444
160
580
19
2,203
Net change in investments contract liabilities without DPF
10
1,671
(44)
\u2014
1,637
Net credit impairment (losses)/reversal
30
1
\u2014
\u2014
31
Other investment return:
Dividend income
1,902
333
\u2014
\u2014
2,235
Net losses on financial assets measured at FVTPL
(10,976)
(2,578)
(6,745)
(16)
(20,315)
Rental income from investment properties
802
10
72
\u2014
884
Net losses on investment properties
(1,225)
(71)
(181)
\u2014
(1,477)
Foreign exchange gains/(losses)
598
32
(7)
(47)
576
Total other investment return
(8,899)
(2,274)
(6,861)
(63)
(18,097)
Total investment return
(7,241)
(426)
(6,307)
(35)
(14,009)
Insurance finance income/(expenses) from insurance contracts\u00a0issued
Due to changes in the value of underlying assets of contracts measured
under the VFA
5,217
357
14
\u2014
5,588
Interest accreted to insurance contracts measured under GMM
(229)
\u2014
(441)
\u2014
(670)
Due to changes in interest rates and other financial assumptions
1,993
1
4,911
\u2014
6,905
Total insurance finance income/(expenses) from insurance
contracts\u00a0issued
6,981
358
4,484
\u2014
11,823
Reinsurance finance income/(expenses) from reinsurance
contracts\u00a0held
Interest accreted to reinsurance contracts measured under GMM
\u2014
1
40
\u2014
41
Due to changes in interest rates and other financial assumptions
(2)
8
(519)
\u2014
(513)
Total reinsurance finance income/(expenses) from reinsurance
contracts held
(2)
9
(479)
\u2014
(472)
Total net investment return and insurance finance income/(expenses)
(262)
(59)
(2,302)
(35)
(2,658)
", "dimensions": { "concept": "mgplc:DisclosureOfInvestmentIncomeAndInsuranceFinanceExpensesTextBlock", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-635": { "value": "
The interest revenue, dividend income, net gains or losses at FVTPL and other investment income for each class of financial asset
are as follows:
2023
Fair value through
profit\u00a0or loss
Amortised
cost
Total
Designated
Mandatory
For the year ended 31\u00a0December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest revenue from financial assets not measured at FVTPL:
Cash and cash equivalents
\u2014
\u2014
76
76
Deposits with credit institutions
\u2014
\u2014
596
596
\u2014
\u2014
672
672
Interest revenue from financial assets measured at FVTPL:
Loans
\u2014
272
\u2014
272
Debt securities
\u2014
2,174
\u2014
2,174
\u2014
2,446
\u2014
2,446
Dividend income
\u2014
2,375
\u2014
2,375
Net gains/(losses) from financial assets measured at FVTPL:
Equity securities and pooled investment funds
\u2014
1,779
\u2014
1,779
Loans
\u2014
64
\u2014
64
Debt securities
\u2014
955
\u2014
955
Derivatives
\u2014
1,264
\u2014
1,264
\u2014
4,062
\u2014
4,062
Net change in investment contract liabilities without DPF
(700)
\u2014
\u2014
(700)
Reversal of previous impairment charges
\u2014
\u2014
2
2
Foreign exchange (losses)
\u2014
\u2014
(126)
(126)
Total interest revenue and investment income from financial assets and liabilities
(700)
8,883
548
8,731
Restated i 2022
Fair value through
profit\u00a0or\u00a0loss
Amortised
cost
Total
Designated
Mandatory
For the year ended 31\u00a0December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Interest revenue from financial assets not measured at FVTPL:
Cash and cash equivalents
\u2014
\u2014
25
25
Deposits with credit institutions
\u2014
\u2014
192
192
\u2014
\u2014
217
217
Interest revenue from financial assets measured at FVTPL:
Loans
\u2014
193
\u2014
193
Debt securities
\u2014
2,010
\u2014
2,010
\u2014
2,203
\u2014
2,203
Dividend income
\u2014
2,235
\u2014
2,235
Net gains/(losses) from financial assets measured at FVTPL:
Equity securities and pooled investment funds
\u2014
(2,794)
\u2014
(2,794)
Loans
\u2014
(901)
\u2014
(901)
Debt securities
\u2014
(12,637)
\u2014
(12,637)
Derivatives
\u2014
(3,983)
\u2014
(3,983)
\u2014
(20,315)
\u2014
(20,315)
Net change in investment contract liabilities without DPF
1,637
\u2014
\u2014
1,637
Reversal of previous impairment charges
\u2014
\u2014
31
31
Foreign exchange gains
\u2014
\u2014
576
576
Total interest revenue and investment income from financial assets and liabilities
1,637
(15,877)
824
(13,416)
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
", "dimensions": { "concept": "mgplc:DisclosureOfInvestmentReturnTextBlock", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-636": { "value": "
6 Fee income
The following table disaggregates management fee revenue by segment:
2023
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
Total Asset Management fee income:
Management fees
870
870
Rebates
(19)
(24)
Performance fees and carried interest
9
41
860
887
Total Life fee income:
Investment contracts without DPF
37
42
37
42
Total Wealth fee income:
Platform fees
30
31
Advice fees
76
77
106
108
Total fee income
1,003
1,037
", "dimensions": { "concept": "ifrs-full:DisclosureOfFeeAndCommissionIncomeExpenseExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-637": { "value": "
7 Administrative and\u00a0other\u00a0expenses
2023
Restated i
2022
For the year ended 31\u00a0December
Note
\u00a3m
\u00a3m
Staff and employment costs
8
874
791
Acquisition costs incurred:
Investment contracts without DPF
14
9
Other contracts
144
138
Acquisition costs deferred:
Investment contracts without DPF
\u2014
\u2014
Other contracts
(2)
(6)
Amortisation of deferred acquisition costs:
Investment contracts without DPF
5
4
Other contracts
5
6
Impairment of deferred acquisition costs
\u2014
1
Depreciation of property, plant and equipment
15
143
142
Impairment of property, plant and equipment ii
15
65
3
Amortisation of intangible assets
13
33
34
Impairment of goodwill and intangible assets
13
17
25
Restructuring costs
226
228
Interest expense
206
136
Commission expense
159
193
Investment management fees
128
132
Property-related costs
201
192
Other expenses
802
1,064
3,020
3,092
Less amounts directly attributable to insurance results:
Expenses attributed to insurance acquisition cash flows incurred during the year
(142)
(147)
Other directly attributable expenses
(637)
(690)
Administrative and other expenses
2,241
2,255
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
iiIncludes impairment of certain PPE held by the Group's infrastructure capital private equity vehicles of \u00a375m (2022: \u00a311m). Includes impairment recognised
in respect of our future ways of working of \u00a311m (2022: \u00a36m reversal) included in 'restructuring costs and other' within the Segmental Analysis in Note 3.
In addition to the interest expense shown above of \u00a3206m (2022: \u00a3136m), the interest expense incurred in respect of subordinated
liabilities for the year ended 31\u00a0December 2023 was \u00a3160m (2022: \u00a3162m). This is shown as finance costs in the consolidated
income statement.
", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralAndAdministrativeExpenseExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-638": { "value": "
8 Staff and employment costs
The average number of staff employed by the Group during the year was:
For the year ended 31\u00a0December
2023
2022
Average staff headcount i
8,145
7,637
iThe headcount includes employees of the Group's consolidated infrastructure and private equity funds.
The following table shows the staff costs and other employee-related costs:
2023
2022
For the year ended 31\u00a0December
Note
\u00a3m
\u00a3m
Wages and salaries
797
746
Social security costs
97
91
Share-based payments
37
32
34
Pension costs:
Defined benefit schemes
17
13
25
Defined contribution schemes
64
59
Total staff and employment costs
1,003
955
Information in respect of Directors\u2019 remuneration is provided in the Directors\u2019 remuneration report on pages 120 to 150.
The table below provides a breakdown of staff and employment costs charged within administrative and other expenses:
2023
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
Staff and employment costs
874
791
Acquisition costs
57
65
Restructuring costs
61
82
Other expenses
11
17
Total staff and employment costs
1,003
955
", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-639": { "value": "
9 Fees payable to the auditor
The following table shows the auditor remuneration, excluding VAT:
2023
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
Fees payable to the Company\u2019s auditor and its associates for audit and assurance services:
Fees payable to the Company\u2019s auditor for the audit of the Company\u2019s individual and consolidated financial
statements
8.7
4.1
Audit of subsidiaries pursuant to legislation
10.6
10.1
Audit-related assurance services
2.1
2.0
Other assurance services
0.9
0.5
Total fees payable to the auditor
22.3
16.7
Fees payable to the auditor disclosed above exclude audit and non-audit fees payable to the Group\u2019s principal auditor by funds
managed by the Group, but which are not controlled by the Group, and therefore are not consolidated in the Group financial
statements. The increase in the statutory group audit includes the audit of the IFRS 17 transition of \u00a34.3m.
For more information on non-audit services, refer to the Audit Committee Report on page 117.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-640": { "value": "
10.1 Tax charged/(credited) to the consolidated income statement
The comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further
information. IFRS 17 has a relatively minor impact on the effective tax rate and is described in footnote (iii) of the table in 10.1.2
below. The impact on deferred tax in relation to insurance and investment contract balances is described in footnote (vii) of the
table in 10.2.2. The adoption of IFRS 9 has had no impact on tax balances.
2023
Restated i
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
The total tax charge comprises:
Current tax:
Current year
491
158
Adjustments in respect of prior years
7
(19)
Total current tax
498
139
Deferred tax:
Origination and reversal of temporary differences in the year
(44)
(1,103)
Adjustments in respect of prior years
(14)
\u2014
Total deferred tax
(58)
(1,103)
Total tax charge/(credit)
440
(964)
The tax charge/(credit) above, comprising current and deferred tax, can be analysed as follows:
2023
Restated i
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
UK tax
498
(1,148)
Overseas tax
(58)
184
Total tax charge/(credit)
440
(964)
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
10.1.1 Allocation of profit/(loss) before tax and tax charge between equity holders and policyholders
The profit before tax reflected in the consolidated income statement for the year ended 31\u00a0December 2023 of \u00a3749m (2022
(Restated): \u00a33,019m loss before tax) comprises profit attributable to equity holders and pre-tax profit attributable to policyholders
of unit-linked and with-profits funds. This is the formal measure of profit before tax under IFRS but it is not the result attributable to
equity holders.
This is principally because the corporate taxes of the Group include those on the income of consolidated with-profits and unit-
linked funds that, through adjustments to benefits, are borne by policyholders. These amounts are required to be included in the
tax charge of the Company under IAS 12. Consequently, this measure of profit before all taxes is not representative of pre-tax
profits attributable to equity holders.
The tax charge attributable to policyholder returns is removed from the Group\u2019s total profit before tax in arriving at the Group\u2019s
profit before tax attributable to equity holders. As the net of tax profits attributable to policyholders is zero, the Group\u2019s pre-tax
profit attributable to policyholders is an amount equal and opposite to the tax charge attributable to policyholders included in the
total tax (credit)/charge.
2023
Restated i 2022
Equity
holders
Policyholders
Total
Equity
holders
Policyholders
Total
For the year ended 31\u00a0December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Profit/(loss) before tax
421
328
749
(2,640)
(379)
(3,019)
Tax (charge)/credit
(112)
(328)
(440)
585
379
964
Profit/(loss) for the year
309
\u2014
309
(2,055)
\u2014
(2,055)
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
10 Tax (continued)
10.1 Tax charged/(credited) to the consolidated income statement (continued)
10.1.2 Tax reconciliation
Restatedi
2023
2022
Equity
holders
Policyholders
Total
Equity
holders
Policyholders
Total
For the year ended 31\u00a0December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Profit/(loss) before tax
421
328
749
(2,640)
(379)
(3,019)
Tax charge/(credit) based on the standard UK corporation
tax rate of 23.5% (2022: 19.0%)
99
77
176
(502)
(72)
(574)
Impact of (losses)/profits earned in jurisdictions with
different statutory rates to the UK
(2)
\u2014
(2)
3
\u2014
3
Recurring items:
Different basis of taxation - policyholders
\u2014
243
243
\u2014
(283)
(283)
Deductions not allowable for tax purposes ii
39
\u2014
39
30
\u2014
30
Differences arising on rate of deferred tax compared to
standard UK corporation tax rateiii
(16)
\u2014
(16)
13
\u2014
13
Income and gains not taxable or taxable at concessionary
ratesiv
(1)
\u2014
(1)
(8)
\u2014
(8)
Changes in recognition of deferred tax and effect of
unrecognised tax lossesv
(3)
\u2014
(3)
(7)
\u2014
(7)
Other
5
\u2014
5
1
\u2014
1
Non-recurring items:
Adjustments in relation to prior periods vi
(15)
8
(7)
5
(24)
(19)
Impact of deferred tax recognised at 25% on current year
movementsvii
\u2014
\u2014
\u2014
(125)
\u2014
(125)
Impairment of goodwill
6
\u2014
6
5
\u2014
5
Tax charge/(credit)
112
328
440
(585)
(379)
(964)
i The comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
ii Of the 2023 amount of \u00a339m, \u00a333m (2022: \u00a322m) relates to the non-taxable adjustment in relation to joint venture agreements in respect of long term
assurance business. The remaining amount relates to expenses that are not deductible for tax purposes, primarily in the UK.
iii This represents deferred tax recognised during the period at a rate that differs to the standard UK Corporation tax rate. It primarily represents deferred tax
recognised on accounting differences between IFRS and local GAAP which is used for the purposes of preparing statutory corporation tax returns.
iv Predominantly relates to non-taxable dividend income in the UK.
v This represents deferred tax recognised during the period at a rate that differs to the standard UK Corporation tax rate. It primarily represents deferred tax
recognised on accounting differences between IFRS and local GAAP which is used for the purposes of preparing statutory corporation tax returns.
vi The equity holders impact of \u00a315m credit (2022: \u00a35m charge) relates to changes in estimates of prior year positions. The policyholders impact of \u00a38m
charge primarily also relates to changes in estimates of prior year positions (2022: \u00a324m credit primarily due to changes in estimates to deferred tax assets
due to agreement reached with HMRC to amend the application of income allocation methodology within the life insurance business).
vii Benefit arising on deferred tax movements in the period booked at the future rate of corporation tax in the UK of 25% compared to the current period rate
of 19%.
The Group\u2019s profits are taxed at different rates depending on the country or territory in which the profits arise. The key applicable
tax rate for 2023 is the UK Corporation tax rate of 25% (effective from 1 April 2023) (2022: 19.0%) as the majority of the Group's
profits are earned and taxed in the UK.
10 Tax (continued)
10.1 Tax charged/(credited) to the consolidated income statement (continued)
10.1.3 Factors that may impact the future tax rate
The majority of the Group\u2019s profits are generated in the UK. Taking into account recurring tax adjusting items, the underlying effective
tax rate for equity holders' portion of profits is expected to be marginally higher than the statutory rate in the UK of 25% (effective
from 1 April 2023).
The Group has unused tax losses carried forward of \u00a3548m (2022: \u00a3481m), primarily UK capital losses, on which no deferred tax is
recognised. Should appropriate capital gains arise in future periods it will result in tax benefits thereby reducing the future effective
tax rate in the relevant periods.
During 2023, the UK Government, where the Parent Company is incorporated, enacted the Pillar Two income taxes legislation
effective from 1 January 2024. Under the legislation, the Parent Company will be required to pay top-up tax on profits of its
subsidiaries that are taxed at an effective tax rate of less than 15%. The Group\u2019s taxable profits are predominantly in the UK and given
the mainstream UK corporation tax rate is 25%, it is not expected that any material top-up tax will be required (see 'Independent
auditors' report' for further details of materiality). The Group completed a high-level impact assessment which resulted in an expected
immaterial Pillar Two top up tax. The Group is continuing to assess the impact of the Pillar Two income taxes legislation on its future
financial performance. On 23 May 2023, the IASB issued amendments to IAS 12 \u2018International Tax Reform \u2013 Pillar Two Model Rules\u2019,
which became effective immediately and were approved for adoption by the UK Endorsement Board on 19 July 2023. The Group has
applied the IAS 12 exemption from recognising and disclosing information on associated deferred tax assets and liabilities.
10.1.4 Use of accounting estimates and judgements
The calculation of the Group's tax charge involves a degree of estimation and judgement. The two principal areas of judgement that
could impact the reported tax position are the recognition and measurement of deferred tax assets and the level of provisioning for
uncertain tax positions.
The recognition of a deferred tax asset relies on an assessment of the probability of future taxable profits, future reversals of existing
taxable temporary differences and ongoing tax planning strategies.
Deferred tax assets are reviewed at each reporting date. In considering their recoverability, the Group assesses the likelihood of them
being recovered within the expiry of losses and/or while operating as a going concern. This takes into account the future expected
profit profile and business model of each relevant company or country, and any potential legislative restrictions on use. Short-term
timing differences are generally recognised ahead of losses and other tax attributes as being likely to reverse more quickly.
The provisions for uncertain tax positions cover a wide range of issues, only a fraction of these are expected to be subject to challenge
by a tax authority at any point in time. The Group engages constructively and transparently with tax authorities with a view to early
resolution of uncertain tax matters. Estimated positions are based on the probability of potential challenge within certain jurisdictions
and the possible outcome based on relevant facts and circumstances. The judgments and estimates made to recognise and measure
the effect of uncertain tax positions are reassessed whenever circumstances change or when there is new information that affects
those judgments.
Not withstanding any origination and reversal of temporary differences in the year, the Group does not consider there to be
a\u00a0significant risk of a material adjustment in the next financial year to the deferred and current tax balances from either recognition
and measurement of deferred tax assets or the level of provisioning for uncertain tax positions.
10.1.5 Tax (credited)/charged to other comprehensive income
2023
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
The tax (credit)/charge booked to other comprehensive income, current and deferred tax, comprises:
Actuarial (losses)/gains on defined benefit pension schemes
(28)
7
Total tax (credit)/charge to other comprehensive income
(28)
7
10.1.6 Tax (credited)/charged to equity
2023
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
The tax credit booked to shareholders' equity, current and deferred tax, comprises:
Share-based payments
(7)
(6)
Total tax credit to equity
(7)
(6)
10.2 Deferred tax
10.2.1 Deferred tax assets and liabilities
Under IAS12, deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the
liability settled, based on tax rates (and laws) that have been enacted or are substantively enacted at the end of the reporting
period. Deferred tax assets are recognised as recoverable to the extent that, on the basis of all available evidence, it is regarded as
probable there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be
deducted or tax losses utilised. Deferred tax assets and liabilities are only offset when there is both a legal right to set-off and an
intention to settle on a net basis.
10.2.2 Deferred tax in the statement of financial position
The table below shows movements on deferred tax assets and liabilities during the year. The amounts are different from those
disclosed on the balance sheet as the below amounts presented before offsetting asset and liability balances where there is a legal
right to set-off and an intention to settle on a net basis.
Changes in tax laws and rates may affect recorded deferred tax assets and liabilities. On 10 June 2021, the UK Government\u2019s
proposal to increase the rate of UK corporation tax from 19% to 25% with effect from 1 April 2023 was enacted into UK law. In line
with the changes to the UK rate of corporation tax, the carrying values of our deferred tax assets and liabilities were revalued in
2022, the impact of which was limited primarily due to the majority of the UK deferred tax balances being measured at a
policyholder rate of tax which remains unaffected.
2023
For the year ended
31\u00a0December
Unrealised
gains
/(losses) on
\u00a0investmentsii
Life tax
transitional
adjustments iii
Other short-
term timing
differencesiv
Deferred
acquisition
costs v
Defined
benefit
pensions
Capital
allowances
Tax
losses
carried
forward vi
Share-based
payments and
deferred
compensation
Other
pension
Balances
relating to
insurance
and
investment
contractsvii
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
5
\u2014
163
38
\u2014
28
528
26
\u2014
351
1,139
Liabilities
(825)
\u2014
(37)
(1)
(39)
(15)
\u2014
\u2014
\u2014
(572)
(1,489)
As at 1 January
2023
(820)
\u2014
126
37
(39)
13
528
26
\u2014
(221)
(350)
Income statement
138
\u2014
(8)
(11)
(10)
(5)
(23)
(1)
\u2014
(22)
58
Equity and other
comprehensive
income
\u2014
\u2014
\u2014
\u2014
28
\u2014
\u2014
(2)
\u2014
\u2014
26
Other
movements/
Foreign exchange
9
\u2014
5
\u2014
\u2014
13
\u2014
\u2014
\u2014
\u2014
27
As at 31
December 2023
(673)
\u2014
123
26
(21)
21
505
23
\u2014
(243)
(239)
Assets
2
\u2014
158
27
\u2014
21
505
23
\u2014
263
999
Liabilities
(675)
\u2014
(35)
(1)
(21)
\u2014
\u2014
\u2014
\u2014
(506)
(1,238)
As at 31
December 2023
(673)
\u2014
123
26
(21)
21
505
23
\u2014
(243)
(239)
10 Tax (continued)
10.2 Deferred tax (continued)
10.2.2 Deferred tax in the statement of financial position (continued)
Restatedi
2022
For the year ended
31\u00a0December
Unrealised
gains
/(losses) on
\u00a0investmentsii
Life tax
transitional
adjustments iii
Other short-
term timing
differencesiv
Deferred
acquisition
costs v
Defined
benefit
pensions
Capital
allowances
Tax
losses
carried
forward vi
Share-based
payments and
deferred
compensation
Other
pension
Balances
relating to
insurance
and
investment
contractsvii
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
3
\u2014
162
42
8
25
13
20
\u2014
412
685
Liabilities
(1,410)
(26)
(49)
(3)
(48)
(37)
\u2014
\u2014
\u2014
(716)
(2,289)
As at 1 January
2022
(1,407)
(26)
113
39
(40)
(12)
13
20
\u2014
(304)
(1,604)
Income statement
414
26
27
(2)
8
28
515
1
\u2014
86
1,103
Equity and other
comprehensive
income
\u2014
\u2014
\u2014
\u2014
(7)
\u2014
\u2014
5
\u2014
\u2014
(2)
Other
movements/
foreign exchange
173
\u2014
(14)
\u2014
\u2014
(3)
\u2014
\u2014
\u2014
(3)
153
As at 31
December 2022
(820)
\u2014
126
37
(39)
13
528
26
\u2014
(221)
(350)
Assets
5
\u2014
163
38
\u2014
28
528
26
\u2014
386
1,174
Liabilities
(825)
\u2014
(37)
(1)
(39)
(15)
\u2014
\u2014
\u2014
(607)
(1,524)
As at 31
December 2022
(820)
\u2014
126
37
(39)
13
528
26
\u2014
(221)
(350)
i The comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
ii Deferred tax on unrealised gains/(losses) on investments primarily arise on two key components. The largest component relates to gains/(losses) on
certain investments which are only taxed when realised, ie when an asset is sold. The second component relates to gains/(losses) on certain investments
held by life insurance companies, which for UK corporation tax purposes are deemed to have been disposed of and immediately reacquired at market
value at the end of each accounting period. Any gain/(loss) arising on the deemed disposal is required to be spread over a seven year period.
iii The UK Government made substantial changes to the rules relating to the taxation of life insurance companies which applied from 1 January 2013. A net
deferred tax liability was recognised for the temporary difference that arose on the transition to the new regime. The deferred tax balances were fully
reversed at 31\u00a0December 2022.
iv The closing balance at 31\u00a0December 2023 primarily comprises \u00a377m (2022: \u00a383m) of deferred tax assets on subordinated debt together with a \u00a327m
(2022: \u00a333m) of deferred tax liability in relation to customer related intangible assets arising on acquisitions of MGSA, Sandringham & responsAbility.
The\u00a0remaining balance primarily relates to deferred tax assets on employee related compensation.
v The Group incurs various incremental, directly attributable acquisition costs in obtaining new contracts. For UK corporation tax purposes, acquisition
expenses incurred until 31\u00a0December 2022 in respect of certain life insurance business were required to be spread over a seven year period. A deferred
tax asset was recognised for the expected future tax deductions.
vi The tax losses carried forward at 31 December 2022 relate to \u00a31,970m of UK tax losses (2022: \u00a32,024m) and \u00a352m (2022: \u00a382m) of UK capital losses.
vii Deferred tax recognised in relation to differences arising on accounting for insurance contracts between IFRS17 and FRS103 - Insurance Contracts (used
for the preparation of the statutory accounts of one of the Group\u2019s subsidiaries, The Prudential Assurance Company Limited).
The Group\u2019s net deferred tax liability at 31\u00a0December 2023 of \u00a3239m reduced from the net deferred tax liability at 31\u00a0December
2022 of \u00a3350m representing an overall net movement of \u00a3111m. The movement is predominantly due to a decrease of deferred
tax\u00a0liability (DTL) arising on unrealised losses in the period.
The recognition of a deferred tax asset (DTA) relies on an assessment of the probability of future taxable profits. The Group\u2019s
expectations of future UK taxable profits require management judgement, and take into account the Group\u2019s long-term financial
and strategic plans and projected future shareholder transfers.
The DTA on tax losses carried forward at 31\u00a0December 2023 of \u00a3505m (2022: \u00a3528m) comprises of \u00a3492m in relation to UK income
tax losses (2022: \u00a3508m) and \u00a313m (2022: \u00a320m) in respect of UK capital losses. The DTA on UK income tax losses has been
recognised in full based upon sufficient future taxable profits arising from shareholder transfers. These transfers are considered a
reliable source of profit and are a consistent measure used in the Group\u2019s Business Plans and Solvency II calculations. The DTA on
UK capital losses has been partially recognised and is based upon expected reversal of the taxable temporary differences
recognised on unrealised gains on investments, only a proportion of which are expected to be available for offset against the UK
capital losses.
10 Tax (continued)
10.2 Deferred tax (continued)
10.2.2 Deferred tax in the statement of financial position (continued)
Modelling was undertaken to review the recovery period of the DTA on both the income and capital losses. Under current UK tax
legislation, there is no time limit on utilisation of both the income and capital losses, however, these tax losses can only be used
against 50 per cent of taxable income profits and capital gains in future periods. These restrictions in utilisation mean that the value
of the DTA in respect of income tax losses is only expected to be fully recovered by 2038 in the base case forecast. An impaired
scenario was also modelled which reflected a 10% reduction of forecast shareholder transfer in each period, this extended the
recovery to 2040. The income tax losses arising in 2022 are not expected to be recurring in future periods and given the forecast of
future profitability and the Group\u2019s commitment to the UK market, in management\u2019s judgement it is probable that the value of the
DTA on losses will be recovered by the Group while still operating as a going concern. The modelling of future capital gains arising
on investments show that the recognised DTA on capital losses is expected to be recovered by 2029. It is possible that future tax
law changes could materially affect the timing of recovery and the value of these losses ultimately realised by the Group.
The deferred tax balances arise in the following parts of the Group:
Deferred tax assets
Deferred tax liabilities
2023
Restated i
2022
2023
Restated i
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
UK
430
388
(362)
(480)
Overseas
13
57
(320)
(315)
As at 31 December
443
445
(682)
(795)
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
10.2.3 Unrecognised deferred tax
Tax losses and temporary differences
At the end of the reporting period, the Group's continuing operations have unused tax losses of \u00a3548m (2022: \u00a3481m) for which
no\u00a0deferred tax asset is being recognised. The Group's unused tax losses primarily relate to capital losses in the UK of \u00a3540m
(2022:\u00a0\u00a3472m). No deferred tax asset is recognised on the unused tax losses of \u00a3548m (2022: \u00a3481m) as it is considered not
probable that future taxable UK capital gains or other appropriate profits will be available against which they can be utilised. Under
UK law, capital losses can be carried forward indefinitely.
Group investments in subsidiaries, branches and investments
Retained earnings of overseas subsidiaries are expected to be re-invested indefinitely or remitted to the UK free from further
taxation by virtue of Parent Company exemptions on dividends from subsidiaries and on capital gains on disposal. Consequentially,
the Group does not consider there to be any significant taxable temporary differences associated with investments in subsidiaries,
branches, associates and joint arrangements.
10.3 Current tax assets and liabilities
Movements on corporation tax current tax assets and liabilities were as follows:
2023
Restated i
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
Net corporation tax asset as at 1 January
197
44
Income statement
(498)
(139)
Reserves movement for the period
9
1
Corporation tax paid
250
268
Other movements
12
23
Net corporation tax (liability)/asset as at 31 December
(30)
197
Corporation tax assets:
UK
16
214
Overseas
51
41
Corporation tax liabilities:
UK
(57)
(24)
Overseas
(40)
(34)
Net corporation tax (liability)/asset as at 31 December
(30)
197
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
Net corporation tax (liability)/asset consists of \u00a367m current tax assets (2022: \u00a3255m) and \u00a397m current tax liabilities
(2022:\u00a0\u00a358m). All corporation tax assets and liabilities are expected to be settled within 12 months.
10 Tax (continued)
10.3 Current tax assets and liabilities (continued)
One of the Group\u2019s subsidiaries, The Prudential Assurance Company Limited (PAC), is the lead litigant in a combined group action
against HM Revenue and Customs (HMRC) concerning the correct historical tax treatment applying to dividends received from
overseas portfolio investments of its With-Profits Fund.
In February 2018, the Supreme Court heard HMRC\u2019s appeal against the earlier Court of Appeal decision in PAC\u2019s favour. The
decision of the Supreme Court, released in July 2018, upheld the main point of dispute in PAC\u2019s favour but reversed the decisions
of the lower courts on some practical points of how to apply that principle. The Supreme Court issued its order giving effect to its
decision in October 2019, stating any remaining issues of computation be remitted back to the High Court. PAC and HMRC are
working through the mechanics of implementing the Supreme Court decisions. To date, this work has led to a reduction in the
estimate for policyholder tax credit recoverable, and the associated estimate of interest receivable.
As at 31\u00a0December 2023, PAC has recognised a total policyholder tax credit of \u00a3114m (2022: \u00a3114m) in respect of its claim against
HMRC. Of this amount, \u00a340m (2022: \u00a340m) has been paid by HMRC leaving a tax recoverable balance of \u00a374m (2022: \u00a374m)
recorded as an amount of tax due from HMRC. PAC will be entitled to interest on the tax repaid. As a result of the COVID pandemic
the timing to finalise the issue has been further delayed. It is now expected to be finalised during 2024 at which point PAC expect
to receive full and final payment.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-641": { "value": "
10.2 Deferred tax
10.2.1 Deferred tax assets and liabilities
Under IAS12, deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the
liability settled, based on tax rates (and laws) that have been enacted or are substantively enacted at the end of the reporting
period. Deferred tax assets are recognised as recoverable to the extent that, on the basis of all available evidence, it is regarded as
probable there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be
deducted or tax losses utilised. Deferred tax assets and liabilities are only offset when there is both a legal right to set-off and an
intention to settle on a net basis.
10.2.2 Deferred tax in the statement of financial position
The table below shows movements on deferred tax assets and liabilities during the year. The amounts are different from those
disclosed on the balance sheet as the below amounts presented before offsetting asset and liability balances where there is a legal
right to set-off and an intention to settle on a net basis.
Changes in tax laws and rates may affect recorded deferred tax assets and liabilities. On 10 June 2021, the UK Government\u2019s
proposal to increase the rate of UK corporation tax from 19% to 25% with effect from 1 April 2023 was enacted into UK law. In line
with the changes to the UK rate of corporation tax, the carrying values of our deferred tax assets and liabilities were revalued in
2022, the impact of which was limited primarily due to the majority of the UK deferred tax balances being measured at a
policyholder rate of tax which remains unaffected.
2023
For the year ended
31\u00a0December
Unrealised
gains
/(losses) on
\u00a0investmentsii
Life tax
transitional
adjustments iii
Other short-
term timing
differencesiv
Deferred
acquisition
costs v
Defined
benefit
pensions
Capital
allowances
Tax
losses
carried
forward vi
Share-based
payments and
deferred
compensation
Other
pension
Balances
relating to
insurance
and
investment
contractsvii
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
5
\u2014
163
38
\u2014
28
528
26
\u2014
351
1,139
Liabilities
(825)
\u2014
(37)
(1)
(39)
(15)
\u2014
\u2014
\u2014
(572)
(1,489)
As at 1 January
2023
(820)
\u2014
126
37
(39)
13
528
26
\u2014
(221)
(350)
Income statement
138
\u2014
(8)
(11)
(10)
(5)
(23)
(1)
\u2014
(22)
58
Equity and other
comprehensive
income
\u2014
\u2014
\u2014
\u2014
28
\u2014
\u2014
(2)
\u2014
\u2014
26
Other
movements/
Foreign exchange
9
\u2014
5
\u2014
\u2014
13
\u2014
\u2014
\u2014
\u2014
27
As at 31
December 2023
(673)
\u2014
123
26
(21)
21
505
23
\u2014
(243)
(239)
Assets
2
\u2014
158
27
\u2014
21
505
23
\u2014
263
999
Liabilities
(675)
\u2014
(35)
(1)
(21)
\u2014
\u2014
\u2014
\u2014
(506)
(1,238)
As at 31
December 2023
(673)
\u2014
123
26
(21)
21
505
23
\u2014
(243)
(239)
10 Tax (continued)
10.2 Deferred tax (continued)
10.2.2 Deferred tax in the statement of financial position (continued)
Restatedi
2022
For the year ended
31\u00a0December
Unrealised
gains
/(losses) on
\u00a0investmentsii
Life tax
transitional
adjustments iii
Other short-
term timing
differencesiv
Deferred
acquisition
costs v
Defined
benefit
pensions
Capital
allowances
Tax
losses
carried
forward vi
Share-based
payments and
deferred
compensation
Other
pension
Balances
relating to
insurance
and
investment
contractsvii
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
3
\u2014
162
42
8
25
13
20
\u2014
412
685
Liabilities
(1,410)
(26)
(49)
(3)
(48)
(37)
\u2014
\u2014
\u2014
(716)
(2,289)
As at 1 January
2022
(1,407)
(26)
113
39
(40)
(12)
13
20
\u2014
(304)
(1,604)
Income statement
414
26
27
(2)
8
28
515
1
\u2014
86
1,103
Equity and other
comprehensive
income
\u2014
\u2014
\u2014
\u2014
(7)
\u2014
\u2014
5
\u2014
\u2014
(2)
Other
movements/
foreign exchange
173
\u2014
(14)
\u2014
\u2014
(3)
\u2014
\u2014
\u2014
(3)
153
As at 31
December 2022
(820)
\u2014
126
37
(39)
13
528
26
\u2014
(221)
(350)
Assets
5
\u2014
163
38
\u2014
28
528
26
\u2014
386
1,174
Liabilities
(825)
\u2014
(37)
(1)
(39)
(15)
\u2014
\u2014
\u2014
(607)
(1,524)
As at 31
December 2022
(820)
\u2014
126
37
(39)
13
528
26
\u2014
(221)
(350)
i The comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
ii Deferred tax on unrealised gains/(losses) on investments primarily arise on two key components. The largest component relates to gains/(losses) on
certain investments which are only taxed when realised, ie when an asset is sold. The second component relates to gains/(losses) on certain investments
held by life insurance companies, which for UK corporation tax purposes are deemed to have been disposed of and immediately reacquired at market
value at the end of each accounting period. Any gain/(loss) arising on the deemed disposal is required to be spread over a seven year period.
iii The UK Government made substantial changes to the rules relating to the taxation of life insurance companies which applied from 1 January 2013. A net
deferred tax liability was recognised for the temporary difference that arose on the transition to the new regime. The deferred tax balances were fully
reversed at 31\u00a0December 2022.
iv The closing balance at 31\u00a0December 2023 primarily comprises \u00a377m (2022: \u00a383m) of deferred tax assets on subordinated debt together with a \u00a327m
(2022: \u00a333m) of deferred tax liability in relation to customer related intangible assets arising on acquisitions of MGSA, Sandringham & responsAbility.
The\u00a0remaining balance primarily relates to deferred tax assets on employee related compensation.
v The Group incurs various incremental, directly attributable acquisition costs in obtaining new contracts. For UK corporation tax purposes, acquisition
expenses incurred until 31\u00a0December 2022 in respect of certain life insurance business were required to be spread over a seven year period. A deferred
tax asset was recognised for the expected future tax deductions.
vi The tax losses carried forward at 31 December 2022 relate to \u00a31,970m of UK tax losses (2022: \u00a32,024m) and \u00a352m (2022: \u00a382m) of UK capital losses.
vii Deferred tax recognised in relation to differences arising on accounting for insurance contracts between IFRS17 and FRS103 - Insurance Contracts (used
for the preparation of the statutory accounts of one of the Group\u2019s subsidiaries, The Prudential Assurance Company Limited).
The Group\u2019s net deferred tax liability at 31\u00a0December 2023 of \u00a3239m reduced from the net deferred tax liability at 31\u00a0December
2022 of \u00a3350m representing an overall net movement of \u00a3111m. The movement is predominantly due to a decrease of deferred
tax\u00a0liability (DTL) arising on unrealised losses in the period.
The recognition of a deferred tax asset (DTA) relies on an assessment of the probability of future taxable profits. The Group\u2019s
expectations of future UK taxable profits require management judgement, and take into account the Group\u2019s long-term financial
and strategic plans and projected future shareholder transfers.
The DTA on tax losses carried forward at 31\u00a0December 2023 of \u00a3505m (2022: \u00a3528m) comprises of \u00a3492m in relation to UK income
tax losses (2022: \u00a3508m) and \u00a313m (2022: \u00a320m) in respect of UK capital losses. The DTA on UK income tax losses has been
recognised in full based upon sufficient future taxable profits arising from shareholder transfers. These transfers are considered a
reliable source of profit and are a consistent measure used in the Group\u2019s Business Plans and Solvency II calculations. The DTA on
UK capital losses has been partially recognised and is based upon expected reversal of the taxable temporary differences
recognised on unrealised gains on investments, only a proportion of which are expected to be available for offset against the UK
capital losses.
10 Tax (continued)
10.2 Deferred tax (continued)
10.2.2 Deferred tax in the statement of financial position (continued)
Modelling was undertaken to review the recovery period of the DTA on both the income and capital losses. Under current UK tax
legislation, there is no time limit on utilisation of both the income and capital losses, however, these tax losses can only be used
against 50 per cent of taxable income profits and capital gains in future periods. These restrictions in utilisation mean that the value
of the DTA in respect of income tax losses is only expected to be fully recovered by 2038 in the base case forecast. An impaired
scenario was also modelled which reflected a 10% reduction of forecast shareholder transfer in each period, this extended the
recovery to 2040. The income tax losses arising in 2022 are not expected to be recurring in future periods and given the forecast of
future profitability and the Group\u2019s commitment to the UK market, in management\u2019s judgement it is probable that the value of the
DTA on losses will be recovered by the Group while still operating as a going concern. The modelling of future capital gains arising
on investments show that the recognised DTA on capital losses is expected to be recovered by 2029. It is possible that future tax
law changes could materially affect the timing of recovery and the value of these losses ultimately realised by the Group.
The deferred tax balances arise in the following parts of the Group:
Deferred tax assets
Deferred tax liabilities
2023
Restated i
2022
2023
Restated i
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
UK
430
388
(362)
(480)
Overseas
13
57
(320)
(315)
As at 31 December
443
445
(682)
(795)
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
10.2.3 Unrecognised deferred tax
Tax losses and temporary differences
At the end of the reporting period, the Group's continuing operations have unused tax losses of \u00a3548m (2022: \u00a3481m) for which
no\u00a0deferred tax asset is being recognised. The Group's unused tax losses primarily relate to capital losses in the UK of \u00a3540m
(2022:\u00a0\u00a3472m). No deferred tax asset is recognised on the unused tax losses of \u00a3548m (2022: \u00a3481m) as it is considered not
probable that future taxable UK capital gains or other appropriate profits will be available against which they can be utilised. Under
UK law, capital losses can be carried forward indefinitely.
Group investments in subsidiaries, branches and investments
Retained earnings of overseas subsidiaries are expected to be re-invested indefinitely or remitted to the UK free from further
taxation by virtue of Parent Company exemptions on dividends from subsidiaries and on capital gains on disposal. Consequentially,
the Group does not consider there to be any significant taxable temporary differences associated with investments in subsidiaries,
branches, associates and joint arrangements.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-642": { "value": "
11 Earnings per share
Basic earnings per share for the year ended 31\u00a0December 2023 was 12.7 p (2022: (83.6p)) and diluted earnings per share was 12.4p
(2022: (83.6p)). Basic earnings per share is based on the weighted average ordinary shares outstanding after deducting treasury
shares and shares held by the employee benefit trust. Diluted EPS is based on the potential future shares outstanding resulting
from exercise of options under the various share-based payment schemes in addition to the weighted average ordinary shares
outstanding.
The following table shows details of basic and diluted earnings per share:
2023
Restated i
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
Profit/(loss) attributable to equity holders of M&G plc
297
(2,068)
2023
2022
For the year ended 31\u00a0December
Millions
Millions
Weighted average number of ordinary shares outstanding
2,350
2,474
Dilutive effect of share options and awards
46
\u2014
Weighted average number of diluted ordinary shares outstanding
2,396
2,474
2023
Restated i
2022
For the year ended 31\u00a0December
Pence
per share
Pence
per share
Basic earnings/(loss) per share
12.7
(83.6)
Diluted earnings/(loss) per share
12.4
(83.6)
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
", "dimensions": { "concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-643": { "value": "
12 Dividends
2023
2022
For the year ended 31\u00a0December
Pence
per share
\u00a3m
Pence
per share
\u00a3m
Dividends relating to reporting period:
First interim dividend - Ordinary
6.5
152
6.2
154
Second interim dividend - Ordinary
13.2
311
13.4
310
Total
19.7
463
19.6
464
Dividends paid in reporting period:
Prior year's interim dividend - Ordinary
13.4
310
12.2
311
First interim dividend - Ordinary
6.5
152
6.2
154
Total
19.9
462
18.4
465
Subsequent to 31\u00a0December 2023, the Board has declared a second interim dividend for 2023 of 13.2 pence per ordinary share
and, an estimated \u00a3311m in total . The dividend is expected to be paid on 9 May 2024 and will be recorded as an appropriation of
retained earnings in the Parent Company's financial statements at the time that it is paid.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDividendsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-644": { "value": "311000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwners", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f-645": { "value": "19.7", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "f-646": { "value": "19.6", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "f-647": { "value": "13.2", "decimals": 2, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersPerShare", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "f-648": { "value": "311000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwners", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f-651": { "value": "
13 Goodwill and intangible\u00a0assets
2023
2022
Goodwill
Other
Intangibles
Total
Goodwill
Other
Intangibles
Total
For the year ended 31\u00a0December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
At 1 January
1,580
490
2,070
1,411
338
1,749
Transfer to held for sale
(1)
(111)
(112)
\u2014
\u2014
\u2014
Additions:
Arising on acquisitions
\u2014
\u2014
\u2014
166
69
235
Internally generated
\u2014
\u2014
\u2014
\u2014
7
7
Other purchases
11
36
47
\u2014
76
76
Disposals and transfers
\u2014
(1)
(1)
(4)
(4)
(8)
Foreign exchange differences
(1)
(17)
(18)
7
4
11
At 31 December
1,589
397
1,986
1,580
490
2,070
Accumulated amortisation and impairment
At 1 January
(45)
(148)
(193)
(20)
(114)
(134)
Transfer to held for sale
\u2014
68
68
\u2014
\u2014
\u2014
Amortisation
\u2014
(33)
(33)
\u2014
(34)
(34)
(Impairment)/reversal of impairment
(24)
8
(16)
(25)
\u2014
(25)
Disposals and transfers
\u2014
1
1
\u2014
4
4
Foreign exchange differences
(1)
3
2
\u2014
(4)
(4)
At 31 December
(70)
(101)
(171)
(45)
(148)
(193)
Net book amount
1,519
296
1,815
1,535
342
1,877
2023
2022
For the year ended 31\u00a0December
Note
\u00a3m
\u00a3m
Goodwill comprises:
Asset Management
1,262
1,287
M&G Wealth Platform
13
13
Other
42
42
Subsidiaries held by the With-Profits Fund
2
202
193
1,519
1,535
13.1 Impairment assessment
Goodwill does not generate cash flows independently of other groups of assets and thus is assigned to a group of cash-generating
units for the purposes of impairment testing.
The group of cash-generating units are based upon how management monitors the business and represent the lowest level to
which goodwill can be allocated on a reasonable basis.
13 Goodwill and intangible\u00a0assets (continued)
13.1 Impairment assessment (continued)
Goodwill is tested annually for impairment, and where there is an indication of impairment, by comparing the carrying amount of
the group of cash-generating units, including any goodwill, with its recoverable amount.
None of the goodwill recognised is expected to be deductible for income tax purposes.
Asset Management cash-generating units
The carrying value of Asset Management goodwill predominantly relates to that arising on the acquisition of M&G Group Limited,
split between the Wholesale Asset Management cash-generating unit (excluding MandG Investments Southern Africa (Pty)
Limited), the Institutional Asset Management cash-generating unit (excluding responsAbility Investments AG), and the Internal
Asset Management cash-generating unit. Goodwill arising on the acquisition of the MandG Investments Southern Africa (Pty)
Limited cash-generating unit and the responsAbility Investments AG cash-generating unit is also recognised.
M&G Group Limited
An impairment assessment has been undertaken, which resulted in no impairment charge being recognised.
The recoverable amount of the group of cash-generating units was determined by calculating the value in use. The value in use
represents the present value of future cash flows based on the business plan to 2026 approved by management, and relevant
assumptions for cash flows for later years.
The future cash flows used in the value in use calculation are based on a set of economic, market and business assumptions.
These\u00a0include the direct and secondary effects of recent developments, such as changes in global equity markets and trends in
fund flows, which are considered by management in arriving at the expectations for the final projections for the business plan.
The\u00a0business plan considers the growth in customer preference for ESG products, including those aimed at managing and
addressing climate risk, and its impact on projected AUMA flows based on our strategy. M&G Group Limited being an asset
manager does not hold material investments on its balance sheet which would directly be impacted by climate risk. Given this is an
emerging area, and given the\u00a0current available data and the sophistication of the models, forecast cash flows may not fully reflect
the potential impact of\u00a0climate\u00a0risk.
Based on the assessment, the value in use of the group of cash-generating units was higher than the carrying value and no
impairment has been recognised as at 31\u00a0December 2023 in respect of goodwill arising on the acquisition of M&G Group Limited.
The value in use is particularly sensitive to a number of key assumptions as follows:
\u2013 The cash flow forecast has been extrapolated beyond the business plan period to incorporate a five-year value in use
assessment, estimating growth rates for 2027 and 2028, tapering the growth expected in 2026 down over the two-year period,
to the long-term growth rate (based on long-term inflation and nominal gross domestic product rates for the UK).
\u2013 The pre-tax discount rate as at 31\u00a0December 2023 was 11% (2022: 11%) and is based on the weighted average cost of capital for
M&G Group Limited derived using an estimated cost of equity, under the capital asset pricing model and cost of debt. A\u00a050bps
increase in the discount rate would result in the value in use decreasing by \u00a3175m (2022: \u00a3187m). This would not result in any
impairment charge being recorded for goodwill.
\u2013 The terminal value was calculated using a standard growth model, using a discount rate of 11% (2022: 11%) as stated above and
a long-term growth rate of 2% (2022: 2%). A 50bps decrease in the long-term growth rate would result in the value in use
decreasing by \u00a3127m (2022: \u00a3122m). This would not result in any impairment charge being recorded for goodwill.
\u2013 That asset management contracts continue on similar terms.
No reasonable change in assumptions stated above that would result in any impairment being recorded. Furthermore, there would
be no impairment recorded even if the individual stresses to assumptions stated above were to apply concurrently which
demonstrates the significant headroom available on the carrying value.
responsAbility Investments AG
During the year to 31\u00a0December 2023 an impairment of \u00a325m (2022: \u00a3nil) has been recognised in respect of the responsAbility
Investments AG cash-generating unit to bring the carrying value down to its recoverable amount which is its value in use of \u00a3132m
(2022: \u00a3186m). The change primarily reflects a revised view of timing of revenue synergies, as anticipated at the date of acquisition,
being delivered or achieved. The responsAbility Investments AG cash generating unit consists of the net assets and goodwill and
other intangibles arising from the acquisition of responsAbility Investments AG in May 2022. All of the impairment has been
allocated against goodwill with the expense recorded in administrative expenses in the consolidated income statement. The key
assumptions in determining the value in use were a discount rate of 10.5% (2022: 10.0%), a long-term growth rate of 1.6% (2022:
2.0%) and a terminal value earnings before interest, taxation, depreciation and amortisation (EBITDA) margin of 31.6% (2022:
27.7%).
13 Goodwill and intangible\u00a0assets (continued)
13.1 Impairment assessment (continued)
Acquisition of subsidiaries held by the With-Profits Fund
Goodwill arising on acquisition of subsidiaries held relates to acquisitions made within consolidated infrastructure private equity
vehicles which are held by the With-Profits Fund. Management have undertaken an impairment assessment by comparing the fair
value of the subsidiaries with their carrying value. As a result of the assessment, no impairment was recognised for the year ended
31\u00a0December 2023 (2022: \u00a3nil).
13.2 Intangible assets
Intangible assets comprise customer relationships acquired through business combinations, software, service concessions,
royalties and licences. All intangibles are amortised on a straight-line basis.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-650": { "value": "
13 Goodwill and intangible\u00a0assets
2023
2022
Goodwill
Other
Intangibles
Total
Goodwill
Other
Intangibles
Total
For the year ended 31\u00a0December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
At 1 January
1,580
490
2,070
1,411
338
1,749
Transfer to held for sale
(1)
(111)
(112)
\u2014
\u2014
\u2014
Additions:
Arising on acquisitions
\u2014
\u2014
\u2014
166
69
235
Internally generated
\u2014
\u2014
\u2014
\u2014
7
7
Other purchases
11
36
47
\u2014
76
76
Disposals and transfers
\u2014
(1)
(1)
(4)
(4)
(8)
Foreign exchange differences
(1)
(17)
(18)
7
4
11
At 31 December
1,589
397
1,986
1,580
490
2,070
Accumulated amortisation and impairment
At 1 January
(45)
(148)
(193)
(20)
(114)
(134)
Transfer to held for sale
\u2014
68
68
\u2014
\u2014
\u2014
Amortisation
\u2014
(33)
(33)
\u2014
(34)
(34)
(Impairment)/reversal of impairment
(24)
8
(16)
(25)
\u2014
(25)
Disposals and transfers
\u2014
1
1
\u2014
4
4
Foreign exchange differences
(1)
3
2
\u2014
(4)
(4)
At 31 December
(70)
(101)
(171)
(45)
(148)
(193)
Net book amount
1,519
296
1,815
1,535
342
1,877
2023
2022
For the year ended 31\u00a0December
Note
\u00a3m
\u00a3m
Goodwill comprises:
Asset Management
1,262
1,287
M&G Wealth Platform
13
13
Other
42
42
Subsidiaries held by the With-Profits Fund
2
202
193
1,519
1,535
13.1 Impairment assessment
Goodwill does not generate cash flows independently of other groups of assets and thus is assigned to a group of cash-generating
units for the purposes of impairment testing.
The group of cash-generating units are based upon how management monitors the business and represent the lowest level to
which goodwill can be allocated on a reasonable basis.
13 Goodwill and intangible\u00a0assets (continued)
13.1 Impairment assessment (continued)
Goodwill is tested annually for impairment, and where there is an indication of impairment, by comparing the carrying amount of
the group of cash-generating units, including any goodwill, with its recoverable amount.
None of the goodwill recognised is expected to be deductible for income tax purposes.
Asset Management cash-generating units
The carrying value of Asset Management goodwill predominantly relates to that arising on the acquisition of M&G Group Limited,
split between the Wholesale Asset Management cash-generating unit (excluding MandG Investments Southern Africa (Pty)
Limited), the Institutional Asset Management cash-generating unit (excluding responsAbility Investments AG), and the Internal
Asset Management cash-generating unit. Goodwill arising on the acquisition of the MandG Investments Southern Africa (Pty)
Limited cash-generating unit and the responsAbility Investments AG cash-generating unit is also recognised.
M&G Group Limited
An impairment assessment has been undertaken, which resulted in no impairment charge being recognised.
The recoverable amount of the group of cash-generating units was determined by calculating the value in use. The value in use
represents the present value of future cash flows based on the business plan to 2026 approved by management, and relevant
assumptions for cash flows for later years.
The future cash flows used in the value in use calculation are based on a set of economic, market and business assumptions.
These\u00a0include the direct and secondary effects of recent developments, such as changes in global equity markets and trends in
fund flows, which are considered by management in arriving at the expectations for the final projections for the business plan.
The\u00a0business plan considers the growth in customer preference for ESG products, including those aimed at managing and
addressing climate risk, and its impact on projected AUMA flows based on our strategy. M&G Group Limited being an asset
manager does not hold material investments on its balance sheet which would directly be impacted by climate risk. Given this is an
emerging area, and given the\u00a0current available data and the sophistication of the models, forecast cash flows may not fully reflect
the potential impact of\u00a0climate\u00a0risk.
Based on the assessment, the value in use of the group of cash-generating units was higher than the carrying value and no
impairment has been recognised as at 31\u00a0December 2023 in respect of goodwill arising on the acquisition of M&G Group Limited.
The value in use is particularly sensitive to a number of key assumptions as follows:
\u2013 The cash flow forecast has been extrapolated beyond the business plan period to incorporate a five-year value in use
assessment, estimating growth rates for 2027 and 2028, tapering the growth expected in 2026 down over the two-year period,
to the long-term growth rate (based on long-term inflation and nominal gross domestic product rates for the UK).
\u2013 The pre-tax discount rate as at 31\u00a0December 2023 was 11% (2022: 11%) and is based on the weighted average cost of capital for
M&G Group Limited derived using an estimated cost of equity, under the capital asset pricing model and cost of debt. A\u00a050bps
increase in the discount rate would result in the value in use decreasing by \u00a3175m (2022: \u00a3187m). This would not result in any
impairment charge being recorded for goodwill.
\u2013 The terminal value was calculated using a standard growth model, using a discount rate of 11% (2022: 11%) as stated above and
a long-term growth rate of 2% (2022: 2%). A 50bps decrease in the long-term growth rate would result in the value in use
decreasing by \u00a3127m (2022: \u00a3122m). This would not result in any impairment charge being recorded for goodwill.
\u2013 That asset management contracts continue on similar terms.
No reasonable change in assumptions stated above that would result in any impairment being recorded. Furthermore, there would
be no impairment recorded even if the individual stresses to assumptions stated above were to apply concurrently which
demonstrates the significant headroom available on the carrying value.
responsAbility Investments AG
During the year to 31\u00a0December 2023 an impairment of \u00a325m (2022: \u00a3nil) has been recognised in respect of the responsAbility
Investments AG cash-generating unit to bring the carrying value down to its recoverable amount which is its value in use of \u00a3132m
(2022: \u00a3186m). The change primarily reflects a revised view of timing of revenue synergies, as anticipated at the date of acquisition,
being delivered or achieved. The responsAbility Investments AG cash generating unit consists of the net assets and goodwill and
other intangibles arising from the acquisition of responsAbility Investments AG in May 2022. All of the impairment has been
allocated against goodwill with the expense recorded in administrative expenses in the consolidated income statement. The key
assumptions in determining the value in use were a discount rate of 10.5% (2022: 10.0%), a long-term growth rate of 1.6% (2022:
2.0%) and a terminal value earnings before interest, taxation, depreciation and amortisation (EBITDA) margin of 31.6% (2022:
27.7%).
13 Goodwill and intangible\u00a0assets (continued)
13.1 Impairment assessment (continued)
Acquisition of subsidiaries held by the With-Profits Fund
Goodwill arising on acquisition of subsidiaries held relates to acquisitions made within consolidated infrastructure private equity
vehicles which are held by the With-Profits Fund. Management have undertaken an impairment assessment by comparing the fair
value of the subsidiaries with their carrying value. As a result of the assessment, no impairment was recognised for the year ended
31\u00a0December 2023 (2022: \u00a3nil).
13.2 Intangible assets
Intangible assets comprise customer relationships acquired through business combinations, software, service concessions,
royalties and licences. All intangibles are amortised on a straight-line basis.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-649": { "value": "
13 Goodwill and intangible\u00a0assets
2023
2022
Goodwill
Other
Intangibles
Total
Goodwill
Other
Intangibles
Total
For the year ended 31\u00a0December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
At 1 January
1,580
490
2,070
1,411
338
1,749
Transfer to held for sale
(1)
(111)
(112)
\u2014
\u2014
\u2014
Additions:
Arising on acquisitions
\u2014
\u2014
\u2014
166
69
235
Internally generated
\u2014
\u2014
\u2014
\u2014
7
7
Other purchases
11
36
47
\u2014
76
76
Disposals and transfers
\u2014
(1)
(1)
(4)
(4)
(8)
Foreign exchange differences
(1)
(17)
(18)
7
4
11
At 31 December
1,589
397
1,986
1,580
490
2,070
Accumulated amortisation and impairment
At 1 January
(45)
(148)
(193)
(20)
(114)
(134)
Transfer to held for sale
\u2014
68
68
\u2014
\u2014
\u2014
Amortisation
\u2014
(33)
(33)
\u2014
(34)
(34)
(Impairment)/reversal of impairment
(24)
8
(16)
(25)
\u2014
(25)
Disposals and transfers
\u2014
1
1
\u2014
4
4
Foreign exchange differences
(1)
3
2
\u2014
(4)
(4)
At 31 December
(70)
(101)
(171)
(45)
(148)
(193)
Net book amount
1,519
296
1,815
1,535
342
1,877
2023
2022
For the year ended 31\u00a0December
Note
\u00a3m
\u00a3m
Goodwill comprises:
Asset Management
1,262
1,287
M&G Wealth Platform
13
13
Other
42
42
Subsidiaries held by the With-Profits Fund
2
202
193
1,519
1,535
13.1 Impairment assessment
Goodwill does not generate cash flows independently of other groups of assets and thus is assigned to a group of cash-generating
units for the purposes of impairment testing.
The group of cash-generating units are based upon how management monitors the business and represent the lowest level to
which goodwill can be allocated on a reasonable basis.
13 Goodwill and intangible\u00a0assets (continued)
13.1 Impairment assessment (continued)
Goodwill is tested annually for impairment, and where there is an indication of impairment, by comparing the carrying amount of
the group of cash-generating units, including any goodwill, with its recoverable amount.
None of the goodwill recognised is expected to be deductible for income tax purposes.
Asset Management cash-generating units
The carrying value of Asset Management goodwill predominantly relates to that arising on the acquisition of M&G Group Limited,
split between the Wholesale Asset Management cash-generating unit (excluding MandG Investments Southern Africa (Pty)
Limited), the Institutional Asset Management cash-generating unit (excluding responsAbility Investments AG), and the Internal
Asset Management cash-generating unit. Goodwill arising on the acquisition of the MandG Investments Southern Africa (Pty)
Limited cash-generating unit and the responsAbility Investments AG cash-generating unit is also recognised.
M&G Group Limited
An impairment assessment has been undertaken, which resulted in no impairment charge being recognised.
The recoverable amount of the group of cash-generating units was determined by calculating the value in use. The value in use
represents the present value of future cash flows based on the business plan to 2026 approved by management, and relevant
assumptions for cash flows for later years.
The future cash flows used in the value in use calculation are based on a set of economic, market and business assumptions.
These\u00a0include the direct and secondary effects of recent developments, such as changes in global equity markets and trends in
fund flows, which are considered by management in arriving at the expectations for the final projections for the business plan.
The\u00a0business plan considers the growth in customer preference for ESG products, including those aimed at managing and
addressing climate risk, and its impact on projected AUMA flows based on our strategy. M&G Group Limited being an asset
manager does not hold material investments on its balance sheet which would directly be impacted by climate risk. Given this is an
emerging area, and given the\u00a0current available data and the sophistication of the models, forecast cash flows may not fully reflect
the potential impact of\u00a0climate\u00a0risk.
Based on the assessment, the value in use of the group of cash-generating units was higher than the carrying value and no
impairment has been recognised as at 31\u00a0December 2023 in respect of goodwill arising on the acquisition of M&G Group Limited.
The value in use is particularly sensitive to a number of key assumptions as follows:
\u2013 The cash flow forecast has been extrapolated beyond the business plan period to incorporate a five-year value in use
assessment, estimating growth rates for 2027 and 2028, tapering the growth expected in 2026 down over the two-year period,
to the long-term growth rate (based on long-term inflation and nominal gross domestic product rates for the UK).
\u2013 The pre-tax discount rate as at 31\u00a0December 2023 was 11% (2022: 11%) and is based on the weighted average cost of capital for
M&G Group Limited derived using an estimated cost of equity, under the capital asset pricing model and cost of debt. A\u00a050bps
increase in the discount rate would result in the value in use decreasing by \u00a3175m (2022: \u00a3187m). This would not result in any
impairment charge being recorded for goodwill.
\u2013 The terminal value was calculated using a standard growth model, using a discount rate of 11% (2022: 11%) as stated above and
a long-term growth rate of 2% (2022: 2%). A 50bps decrease in the long-term growth rate would result in the value in use
decreasing by \u00a3127m (2022: \u00a3122m). This would not result in any impairment charge being recorded for goodwill.
\u2013 That asset management contracts continue on similar terms.
No reasonable change in assumptions stated above that would result in any impairment being recorded. Furthermore, there would
be no impairment recorded even if the individual stresses to assumptions stated above were to apply concurrently which
demonstrates the significant headroom available on the carrying value.
responsAbility Investments AG
During the year to 31\u00a0December 2023 an impairment of \u00a325m (2022: \u00a3nil) has been recognised in respect of the responsAbility
Investments AG cash-generating unit to bring the carrying value down to its recoverable amount which is its value in use of \u00a3132m
(2022: \u00a3186m). The change primarily reflects a revised view of timing of revenue synergies, as anticipated at the date of acquisition,
being delivered or achieved. The responsAbility Investments AG cash generating unit consists of the net assets and goodwill and
other intangibles arising from the acquisition of responsAbility Investments AG in May 2022. All of the impairment has been
allocated against goodwill with the expense recorded in administrative expenses in the consolidated income statement. The key
assumptions in determining the value in use were a discount rate of 10.5% (2022: 10.0%), a long-term growth rate of 1.6% (2022:
2.0%) and a terminal value earnings before interest, taxation, depreciation and amortisation (EBITDA) margin of 31.6% (2022:
27.7%).
13 Goodwill and intangible\u00a0assets (continued)
13.1 Impairment assessment (continued)
Acquisition of subsidiaries held by the With-Profits Fund
Goodwill arising on acquisition of subsidiaries held relates to acquisitions made within consolidated infrastructure private equity
vehicles which are held by the With-Profits Fund. Management have undertaken an impairment assessment by comparing the fair
value of the subsidiaries with their carrying value. As a result of the assessment, no impairment was recognised for the year ended
31\u00a0December 2023 (2022: \u00a3nil).
13.2 Intangible assets
Intangible assets comprise customer relationships acquired through business combinations, software, service concessions,
royalties and licences. All intangibles are amortised on a straight-line basis.
", "dimensions": { "concept": "ifrs-full:DisclosureOfGoodwillExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-654": { "value": "
14 Investments in joint ventures and associates
14.1 Investments in joint ventures and associates accounted for using the equity method
2023
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
Interests in joint ventures
265
413
Interests in associates
22
\u2014
Investments in joint ventures and associates accounted for using the equity method
287
413
A controlling stake was acquired in two joint ventures held in the With-Profits Fund. As a result they are no longer accounted for as
investments in joint ventures are are now fully consolidated.
2023
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
Share of profit from joint ventures
23
38
Share of profit from associates
\u2014
\u2014
Share of profit from joint ventures and associates accounted for using the equity method
23
38
There is no share of other comprehensive income from joint ventures or associates.
14.1.1 Investment in joint ventures accounted for using the equity method
All of the Group\u2019s investments in joint ventures which are accounted for using the equity method are property vehicles held in the
With-Profits Fund. The results of the Group\u2019s joint ventures therefore do not affect shareholders\u2019 results.
No joint ventures are considered to be material individually or in aggregate to the Group for the years ended 31\u00a0December 2023
and 31\u00a0December 2022. None of the Group\u2019s joint ventures are listed and financial information of these investments covering
the\u00a0same reporting period as that of the Group has been used for accounting for these investments using the equity method.
14.1.2 Investment in associates accounted for using the equity method
The Group has investments in associates which are accounted for using the equity method in the consolidated
financial\u00a0statements. All of the Group\u2019s associates which are accounted for using the equity method are held by the shareholder-
backed business. No associates are considered to be material individually or in aggregate to the Group for the years ended
31\u00a0December 2023 and 31\u00a0December 2022. None of the Group\u2019s equity-accounted associates are listed, and the reporting date
and\u00a0reporting period of the Group\u2019s associates accounted for using the equity method are the same as the Group.
On 8 March 2023, the Group acquired an initial stake in Continuum. Further details are set out in Note 2.2.
14.2 Interests in joint ventures and associates accounted for at fair value through profit or loss (FVTPL)
The Group has investments in OEICs, unit trusts, property unit trusts and venture capital investments of the With-Profits Fund
where the Group has significant influence or joint control. These investments are accounted for on a FVTPL basis and are included
within equity securities and pooled investment funds in the consolidated statement of financial position.
14.2.1 Associates accounted for at FVTPL
During the year ended 31\u00a0December 2022, M&G European Property Fund (MEP) was deconsolidated from the Group and is now
accounted for as an associate on a FVTPL basis. As at 31\u00a0December 2023, the Group held 29.4% of MEP (2022: 29.8%) with a fair
value of \u00a31,008m (2022: \u00a31,143m). No other associates accounted for at FVTPL are considered individually material to the Group for
the years ended 31\u00a0December 2023 and 31\u00a0December 2022.
The aggregate fair value of associates accounted for at FVTPL, including MEP, at 31\u00a0December 2023 was \u00a32,004m
(2022:\u00a0\u00a31,850m).
14.2.2 Joint ventures accounted for at FVTPL
The aggregate fair value of joint ventures accounted for at FVTPL at 31\u00a0December 2023 was \u00a3209m (2022: \u00a3190m). None of the
joint ventures accounted for at FVTPL are considered individually material to the Group for the years ended 31\u00a0December 2023
and\u00a031\u00a0December 2022.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInAssociatesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-653": { "value": "
14 Investments in joint ventures and associates
14.1 Investments in joint ventures and associates accounted for using the equity method
2023
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
Interests in joint ventures
265
413
Interests in associates
22
\u2014
Investments in joint ventures and associates accounted for using the equity method
287
413
A controlling stake was acquired in two joint ventures held in the With-Profits Fund. As a result they are no longer accounted for as
investments in joint ventures are are now fully consolidated.
2023
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
Share of profit from joint ventures
23
38
Share of profit from associates
\u2014
\u2014
Share of profit from joint ventures and associates accounted for using the equity method
23
38
There is no share of other comprehensive income from joint ventures or associates.
14.1.1 Investment in joint ventures accounted for using the equity method
All of the Group\u2019s investments in joint ventures which are accounted for using the equity method are property vehicles held in the
With-Profits Fund. The results of the Group\u2019s joint ventures therefore do not affect shareholders\u2019 results.
No joint ventures are considered to be material individually or in aggregate to the Group for the years ended 31\u00a0December 2023
and 31\u00a0December 2022. None of the Group\u2019s joint ventures are listed and financial information of these investments covering
the\u00a0same reporting period as that of the Group has been used for accounting for these investments using the equity method.
14.1.2 Investment in associates accounted for using the equity method
The Group has investments in associates which are accounted for using the equity method in the consolidated
financial\u00a0statements. All of the Group\u2019s associates which are accounted for using the equity method are held by the shareholder-
backed business. No associates are considered to be material individually or in aggregate to the Group for the years ended
31\u00a0December 2023 and 31\u00a0December 2022. None of the Group\u2019s equity-accounted associates are listed, and the reporting date
and\u00a0reporting period of the Group\u2019s associates accounted for using the equity method are the same as the Group.
On 8 March 2023, the Group acquired an initial stake in Continuum. Further details are set out in Note 2.2.
14.2 Interests in joint ventures and associates accounted for at fair value through profit or loss (FVTPL)
The Group has investments in OEICs, unit trusts, property unit trusts and venture capital investments of the With-Profits Fund
where the Group has significant influence or joint control. These investments are accounted for on a FVTPL basis and are included
within equity securities and pooled investment funds in the consolidated statement of financial position.
14.2.1 Associates accounted for at FVTPL
During the year ended 31\u00a0December 2022, M&G European Property Fund (MEP) was deconsolidated from the Group and is now
accounted for as an associate on a FVTPL basis. As at 31\u00a0December 2023, the Group held 29.4% of MEP (2022: 29.8%) with a fair
value of \u00a31,008m (2022: \u00a31,143m). No other associates accounted for at FVTPL are considered individually material to the Group for
the years ended 31\u00a0December 2023 and 31\u00a0December 2022.
The aggregate fair value of associates accounted for at FVTPL, including MEP, at 31\u00a0December 2023 was \u00a32,004m
(2022:\u00a0\u00a31,850m).
14.2.2 Joint ventures accounted for at FVTPL
The aggregate fair value of joint ventures accounted for at FVTPL at 31\u00a0December 2023 was \u00a3209m (2022: \u00a3190m). None of the
joint ventures accounted for at FVTPL are considered individually material to the Group for the years ended 31\u00a0December 2023
and\u00a031\u00a0December 2022.
", "dimensions": { "concept": "ifrs-full:DisclosureOfJointVenturesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-652": { "value": "
14 Investments in joint ventures and associates
14.1 Investments in joint ventures and associates accounted for using the equity method
2023
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
Interests in joint ventures
265
413
Interests in associates
22
\u2014
Investments in joint ventures and associates accounted for using the equity method
287
413
A controlling stake was acquired in two joint ventures held in the With-Profits Fund. As a result they are no longer accounted for as
investments in joint ventures are are now fully consolidated.
2023
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
Share of profit from joint ventures
23
38
Share of profit from associates
\u2014
\u2014
Share of profit from joint ventures and associates accounted for using the equity method
23
38
There is no share of other comprehensive income from joint ventures or associates.
14.1.1 Investment in joint ventures accounted for using the equity method
All of the Group\u2019s investments in joint ventures which are accounted for using the equity method are property vehicles held in the
With-Profits Fund. The results of the Group\u2019s joint ventures therefore do not affect shareholders\u2019 results.
No joint ventures are considered to be material individually or in aggregate to the Group for the years ended 31\u00a0December 2023
and 31\u00a0December 2022. None of the Group\u2019s joint ventures are listed and financial information of these investments covering
the\u00a0same reporting period as that of the Group has been used for accounting for these investments using the equity method.
14.1.2 Investment in associates accounted for using the equity method
The Group has investments in associates which are accounted for using the equity method in the consolidated
financial\u00a0statements. All of the Group\u2019s associates which are accounted for using the equity method are held by the shareholder-
backed business. No associates are considered to be material individually or in aggregate to the Group for the years ended
31\u00a0December 2023 and 31\u00a0December 2022. None of the Group\u2019s equity-accounted associates are listed, and the reporting date
and\u00a0reporting period of the Group\u2019s associates accounted for using the equity method are the same as the Group.
On 8 March 2023, the Group acquired an initial stake in Continuum. Further details are set out in Note 2.2.
14.2 Interests in joint ventures and associates accounted for at fair value through profit or loss (FVTPL)
The Group has investments in OEICs, unit trusts, property unit trusts and venture capital investments of the With-Profits Fund
where the Group has significant influence or joint control. These investments are accounted for on a FVTPL basis and are included
within equity securities and pooled investment funds in the consolidated statement of financial position.
14.2.1 Associates accounted for at FVTPL
During the year ended 31\u00a0December 2022, M&G European Property Fund (MEP) was deconsolidated from the Group and is now
accounted for as an associate on a FVTPL basis. As at 31\u00a0December 2023, the Group held 29.4% of MEP (2022: 29.8%) with a fair
value of \u00a31,008m (2022: \u00a31,143m). No other associates accounted for at FVTPL are considered individually material to the Group for
the years ended 31\u00a0December 2023 and 31\u00a0December 2022.
The aggregate fair value of associates accounted for at FVTPL, including MEP, at 31\u00a0December 2023 was \u00a32,004m
(2022:\u00a0\u00a31,850m).
14.2.2 Joint ventures accounted for at FVTPL
The aggregate fair value of joint ventures accounted for at FVTPL at 31\u00a0December 2023 was \u00a3209m (2022: \u00a3190m). None of the
joint ventures accounted for at FVTPL are considered individually material to the Group for the years ended 31\u00a0December 2023
and\u00a031\u00a0December 2022.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-656": { "value": "
15 Property, plant and\u00a0equipment
Property, plant and equipment (PPE) comprises right of use assets, properties and land occupied by the Group and other tangible
assets. A reconciliation of the carrying amount of these items from the beginning to the end of the year is as follows:
2023
2022
Right of use
assets
Group
occupied
property
Other
tangible
assets
Total
Right of use
assets
Group
occupied
property
Other
tangible
assets
Total
For the year ended 31\u00a0December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
At 1 January
346
106
2,140
2,592
306
106
2,695
3,107
Transfer to held for sale
(11)
(102)
(73)
(186)
(7)
(1)
(196)
(204)
Additions
13
8
488
509
32
\u2014
573
605
Arising on acquisition of subsidiaries
\u2014
\u2014
\u2014
\u2014
16
\u2014
5
21
Disposals and transfers
(53)
\u2014
(13)
(66)
(4)
(1)
(1,088)
(1,093)
Foreign exchange differences
(1)
\u2014
3
2
3
2
151
156
At 31 December
294
12
2,545
2,851
346
106
2,140
2,592
Accumulated depreciation and
impairment
At 1 January
(105)
(23)
(511)
(639)
(88)
(19)
(464)
(571)
Transfer to held for sale
2
25
17
44
1
\u2014
39
40
Depreciation charge for the year
(24)
(2)
(117)
(143)
(24)
(3)
(115)
(142)
Arising on acquisition of subsidiaries
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(2)
(2)
Impairment
(4)
\u2014
(61)
(65)
6
\u2014
(9)
(3)
Disposals and transfers
6
\u2014
11
17
1
\u2014
52
53
Foreign exchange differences
1
\u2014
(1)
\u2014
(1)
(1)
(12)
(14)
At 31 December
(124)
\u2014
(662)
(786)
(105)
(23)
(511)
(639)
Net book amount
170
12
1,883
2,065
241
83
1,629
1,953
Consideration was given to potential impacts on PPE related estimates and judgements arising from the climate scenario
modelling on infrastructure assets within our TCFD disclosures (starting on page 69). The assessment concluded that no
impairment indicator is present and no adjustments would be required for useful lives and residual values for the current reporting
year.
15.1 Right of use assets
The Group recognises right of use assets for leases of land and buildings which are used as office space across various locations.
Some leases include lease break options that are exercisable at the option of the Group.
As at 31\u00a0December 2023, \u00a323m (2022: \u00a329m) of right of use assets were held by the With-Profits Fund.
15.2 Other tangible assets
As at 31\u00a0December 2023, other tangible assets with a net book value of \u00a31,784m (2022: \u00a31,513m) were held by the With-Profits
Fund, of which \u00a3174m (2022: \u00a3217m) are assets under construction. The other tangible assets within the With-Profits Fund are held
by the Group's infrastructure capital private equity vehicles.
During the year \u00a354m (2022: \u00a39m) of impairments, net of reversals, were recognised in respect of tangible assets held by the
Group's infrastructure capital private equity vehicles.
", "dimensions": { "concept": "ifrs-full:DisclosureOfQuantitativeInformationAboutRightofuseAssetsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-655": { "value": "
15 Property, plant and\u00a0equipment
Property, plant and equipment (PPE) comprises right of use assets, properties and land occupied by the Group and other tangible
assets. A reconciliation of the carrying amount of these items from the beginning to the end of the year is as follows:
2023
2022
Right of use
assets
Group
occupied
property
Other
tangible
assets
Total
Right of use
assets
Group
occupied
property
Other
tangible
assets
Total
For the year ended 31\u00a0December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
At 1 January
346
106
2,140
2,592
306
106
2,695
3,107
Transfer to held for sale
(11)
(102)
(73)
(186)
(7)
(1)
(196)
(204)
Additions
13
8
488
509
32
\u2014
573
605
Arising on acquisition of subsidiaries
\u2014
\u2014
\u2014
\u2014
16
\u2014
5
21
Disposals and transfers
(53)
\u2014
(13)
(66)
(4)
(1)
(1,088)
(1,093)
Foreign exchange differences
(1)
\u2014
3
2
3
2
151
156
At 31 December
294
12
2,545
2,851
346
106
2,140
2,592
Accumulated depreciation and
impairment
At 1 January
(105)
(23)
(511)
(639)
(88)
(19)
(464)
(571)
Transfer to held for sale
2
25
17
44
1
\u2014
39
40
Depreciation charge for the year
(24)
(2)
(117)
(143)
(24)
(3)
(115)
(142)
Arising on acquisition of subsidiaries
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(2)
(2)
Impairment
(4)
\u2014
(61)
(65)
6
\u2014
(9)
(3)
Disposals and transfers
6
\u2014
11
17
1
\u2014
52
53
Foreign exchange differences
1
\u2014
(1)
\u2014
(1)
(1)
(12)
(14)
At 31 December
(124)
\u2014
(662)
(786)
(105)
(23)
(511)
(639)
Net book amount
170
12
1,883
2,065
241
83
1,629
1,953
Consideration was given to potential impacts on PPE related estimates and judgements arising from the climate scenario
modelling on infrastructure assets within our TCFD disclosures (starting on page 69). The assessment concluded that no
impairment indicator is present and no adjustments would be required for useful lives and residual values for the current reporting
year.
15.1 Right of use assets
The Group recognises right of use assets for leases of land and buildings which are used as office space across various locations.
Some leases include lease break options that are exercisable at the option of the Group.
As at 31\u00a0December 2023, \u00a323m (2022: \u00a329m) of right of use assets were held by the With-Profits Fund.
15.2 Other tangible assets
As at 31\u00a0December 2023, other tangible assets with a net book value of \u00a31,784m (2022: \u00a31,513m) were held by the With-Profits
Fund, of which \u00a3174m (2022: \u00a3217m) are assets under construction. The other tangible assets within the With-Profits Fund are held
by the Group's infrastructure capital private equity vehicles.
During the year \u00a354m (2022: \u00a39m) of impairments, net of reversals, were recognised in respect of tangible assets held by the
Group's infrastructure capital private equity vehicles.
", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-657": { "value": "
16 Investment property
Investment property is primarily held by the With-Profits Fund and is carried at fair value. A reconciliation of the carrying amount of
investment property from the beginning of the year to the end of the year is set out below:
2023
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
At 1 January
16,505
19,698
Transfer (to)/from held for sale
(172)
24
Additions:
Resulting from property acquisitions
746
2,279
Resulting from expenditure capitalised
215
420
Arising on acquisition of subsidiaries
76
\u2014
Disposals and other
(530)
(4,643)
Net fair value losses
(1,053)
(1,477)
Foreign exchange differences
(365)
204
At 31 December
15,422
16,505
For the year ended 31\u00a0December 2023 rental income from investment property was \u00a3956m (2022: \u00a3884m). Direct operating
expenses, including repairs and maintenance arising from these properties for the year ended 31\u00a0December 2023 were
\u00a3191m\u00a0(2022: \u00a3154m). Direct operating expenses on investment property not generating rental income for the year ended
31\u00a0December 2023 was \u00a39m (2022: \u00a313m).
The Group\u2019s policy is to let investment property to tenants through operating leases. The leases typically include clauses to enable
periodic rent reviews according to prevailing market conditions. In some agreements, the rents might be variable and linked
to\u00a0an\u00a0index. Certain leases contain options to break before the end of the lease term by either party.
Minimum future rental income to be received on non-cancellable leases of the Group\u2019s freehold and leasehold investment property
are receivable in the following periods:
2023
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
Less than 1 year
461
468
After 1 year to 2 years
407
419
After 2 years to 3 years
375
384
After 3 years to 4 years
332
353
After 4 years to 5 years
298
321
Over 5 years
2,100
2,085
Total minimum future rental income
3,973
4,030
", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentPropertyExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-658": { "value": "
17.1 Background and summary economic and IAS 19 financial positions
The Group operates three defined benefit pension schemes, which historically have been funded by the Group. The largest defined
benefit scheme as at 31\u00a0December 2023 is the Prudential Staff Pension Scheme (PSPS), which accounts for 83% (2022: 82%) of
the present value of the defined benefit pension obligation.
The Group also operates two smaller defined benefit pension schemes that were originally established by the M&G Group Limited
(M&GGPS) and Scottish Amicable (SASPS) businesses.
On 18 September 2023, M&GGPS Trustees executed a buy-in transaction with PAC covering all deferred and pensioner member
liabilities. A premium of \u00a3329m was transferred to PAC as part of the transaction. The assets transferred to PAC as premium are
recognised in the relevant line within financial assets in the consolidated statement of financial position. As a result of the buy-in
the relevant plan assets transferred were replaced with a single line insurance policy reimbursement right asset which is
eliminated on consolidation. This reimbursement right asset, although available to the Scheme does not constitute a plan asset
under IAS 19. The value of this insurance policy at 31 December 2023 was \u00a3298.1m.
In addition, on 30 September 2023, M&GGPS agreed to transfer the liability related to all active members to the PSPS scheme.
This\u00a0resulted in a premium of \u00a350.4m and related liability \u00a329.0m being transferred to PSPS. This is accounted for as a\u00a0settlement
and accordingly, M&GGPS record a loss of \u00a321.4m on derecognition and PSPS record a corresponding gain which\u00a0is\u00a0eliminated on
consolidation.
Under IAS 19: Employee Benefits and IFRIC 14: IAS 19 \u2013 The Limit on a Defined Benefit Asset, Minimum Funding Requirements
and\u00a0their Interaction, the Group can only recognise a surplus to the extent that it is able to access the surplus either through an
unconditional right of refund or through reduced future contributions relating to ongoing service of active members. The Group has
no unconditional right of refund to any surplus in PSPS. Accordingly, PSPS\u2019s net economic pension surplus is restricted up to the
present value of the Group\u2019s economic benefit, which is calculated as the difference between the estimated future cost of service
for active members and the estimated future ongoing contributions. The level of the restriction is set out in the table below.
Subsequent to the transfer of active members from M&GGPS to PSPS, a portion (23% as at 31 December 2023) of the net
economic pension surplus of PSPS is attributable to M&G FA Limited and reflected in M&G FA Limited\u2019s financial statements. The
remainder is then attributed 70% to the With-Profits Fund and 30% to the Group\u2019s shareholders. The remaining policyholder and
shareholder allocation of PSPS is reflected in the financial statements of PAC and M&G Corporate Services Limited respectively.
In contrast, the Group is able to access the surplus of SASPS and M&GGPS through an unconditional right of refund. Therefore, the
surplus resulting from the schemes (if any) would be recognised in full. As at 31\u00a0December 2023 the SASPS scheme is in surplus
and the M&GGPS schemes is in deficit based on the IAS 19 valuation.
M&GGPS is in a net economic surplus position but in deficit on an IAS 19 basis as a result of the elimination of the reimbursement right
asset recognised in respect of the buy-in of the Scheme by PAC as explained below. The Scheme also has investments in insurance
policies issued by Prudential Pensions Limited (PPL), a subsidiary of the Group, through which it invests in certain pooled funds. Under IAS
19, non-transferable insurance policies issued by a related party do not qualify as plan assets and these are eliminated.
The gross economic position of M&GGPS which includes the PPL policies and reimbursement is reflected in the financial
statements of M&G FA Limited.
The SASPS net economic pension deficit is attributed 40% to the With-Profits Fund and 60% to the Group\u2019s shareholders. Both
the policyholder and shareholder allocation of SASPS is reflected in the financial statements of PAC.
We recognise climate change has potential to affect the value of investments within the Schemes. Both PSPS and M&GGPS
incorporate climate-related factors when executing their strategic objectives.
The pension assets and liabilities for the defined benefit pension schemes are as follows:
2023
PSPS
SASPS
M&GGPS
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fair value of plan assets
4,611
583
314
5,508
Present value of defined benefit obligation
(4,260)
(576)
(298)
(5,134)
Effect of restriction on surplus
(339)
\u2014
\u2014
(339)
Net economic pension surplus i
12
7
16
35
Non-qualifying insurance policies
\u2014
\u2014
(12)
(12)
Eliminate of reimbursement right asset on consolidation
\u2014
\u2014
(298)
(298)
Net total pension surplus/(deficit)
12
7
(294)
(275)
17 Defined benefit pension\u00a0schemes (continued)
17.1 Background and summary economic and IAS 19 financial positions (continued)
2023
PSPS
SASPS
M&GGPS
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Attributable to:
Shareholder\u2011backed business
6
4
(294)
(284)
With-Profits Fund
6
3
\u2014
9
Net total pension surplus/(deficit)
12
7
(294)
(275)
2022
PSPS
SASPS
M&GGPS
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fair value of plan assets
4,641
582
442
5,665
Present value of defined benefit obligation
(4,050)
(566)
(313)
(4,929)
Effect of restriction on surplus
(581)
\u2014
\u2014
(581)
Net economic pension surplus i
10
16
129
155
Non-qualifying insurance policies
\u2014
\u2014
\u2014
\u2014
Net pension surplus attributable to the Group
10
16
129
155
i The economic basis reflects the position of the defined benefit schemes from the perspective of the pension schemes, adjusted for the effect of IFRIC 14
for the derecognition of PSPS\u2019s unrecognisable surplus and before adjusting for any non-qualifying assets.
2022
PSPS
SASPS
M&GGPS
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Attributable to:
Shareholder\u2011backed business
3
10
129
142
With\u2011Profits Fund
7
6
\u2014
13
Net total pension surplus
10
16
129
155
17.1.1 Triennial actuarial valuations
A full actuarial valuation is required for defined benefit pension schemes every three years in order to assess the appropriate level
of funding for schemes in relation to their commitments. These valuations include assessments of the likely rate of return on the
assets held within the separate trustee administered funds. The actuarial valuation differs from the IAS 19 accounting basis
valuation in a number of respects, including the discount rate assumption where IAS 19 prescribes a rate based on high-quality
corporate bonds while a more prudent assumption is typically used for the actuarial valuation.
Summary information on the latest completed actuarial valuation for each of the schemes, as at 31\u00a0December 2023, is shown
in\u00a0the\u00a0table below.
17 Defined benefit pension\u00a0schemes (continued)
17.1 Background and summary economic and IAS 19 financial positions (continued)
17.1.1 Triennial actuarial valuations (continued)
PSPS
SASPS
M&GGPS
Last completed actuarial
valuation date
05 April 2020
31 March 2020
31 December 2020
Funding level at the last
valuation
108%
85%
116%
Deficit funding arrangement
agreed with the Trustees
based on the last completed
valuation
No deficit funding required
Deficit funding of \u00a326m per
annum from 1 April 2020 until
31\u00a0December 2025, or earlier if
the scheme\u2019s funding level
reaches 100% before date. The
deficit funding will be reviewed
every three years at subsequent
valuations
No deficit funding required
Current level of employer
contributions for active
members
Are at the minimum level
required under the scheme
rules (approximately \u00a33m per
annum)i
Approximately \u00a34.5m per annum
Zero contribution:
no\u00a0active\u00a0members remaining
post-buy-in
Contributions to cover
ongoing administration
and\u00a0other expenses
Approximately \u00a37m per
annum until April 2023, then
falling to approximately
\u00a36.25m per annum
Approximately \u00a31.8m per annum
Approximately \u00a31.5m
per\u00a0annum
iNote that this includes the estimate amount in respect of PSPS members at the last triennial valuation plus the expected contribution at the minimum level
in respect of members transferred from M&GGPS.
The contributions detailed above broadly represent the Group's current expectation of amounts that will be paid to each respective
plan in the next annual reporting period.
The triennial valuations of the schemes are currently being progressed but have not been completed as at 31 December 2023.
17.1.2 Risks to which the defined benefit schemes expose the Group
The plans are subject to the statutory funding objective requirements of the Pensions Act 2004, which require that plans be funded
to at least the level of their technical provisions (an actuarial estimate of the assets needed to provide for the benefits already built
up under the plan). Where there is a deficit, the employers of the schemes would agree a deficit recovery plan. Accordingly, the
pension schemes expose the Group to a number of risks, the most significant of which are interest rate risk, equity risk, inflation
risk, credit risk and mortality risk.
17.1.3 Corporate governance
The Group\u2019s pension schemes are established under trust and are subject to UK legal requirements; this includes being subject to
regulation by the Pensions Regulator in accordance with the Pensions Act 2021. Each scheme has a corporate trustee to which
some Directors are appointed by Group employers with the remaining Directors nominated by members in accordance with UK
legal requirements. The Trustees have the ultimate responsibility to ensure that each scheme is managed in accordance with its
Trust Deed and Rules. The Trustees act in the best interests of the schemes\u2019 beneficiaries; this includes taking appropriate account
of each employer's legal obligation and financial ability to support the schemes when setting investment strategy and when
agreeing funding with the employers. The employers\u2019 contribution commitments are formally updated at each triennial valuation;
between valuations funding levels and employer strength continue to be monitored, with the Trustees being able to bring forward
the next triennial valuation if they consider it appropriate to do so.
All of the Group\u2019s defined benefit pension schemes are final salary schemes, which are closed to new entrants. The pensionable
salaries for most members are capped at the levels as at 30 September 2019. The Trustee of each scheme sets the general
investment policy and specifies any restrictions on types of investment and the degrees of divergence permitted from the
benchmark, but delegates the responsibility for selection and realisation of specific investments to the investment managers.
The\u00a0Trustees consult with the principal employer for each scheme on the investment principles, but the ultimate responsibility for
the investment of the assets of the schemes lies with the Trustees.
17 Defined benefit pension\u00a0schemes (continued)
17.1 Background and summary economic and IAS 19 financial positions (continued)
17.1.3 Corporate governance (continued)
The Trustees of each of the schemes manage the investment strategy of the scheme to achieve an acceptable balance between
investing in the assets that most closely match the expected benefit payments and assets that are expected to achieve a greater
return in the hope of reducing the contributions required or providing additional benefits to members. For all three schemes, and
especially PSPS and SASPS, a significant portion of the scheme assets are invested in liability matching assets such as bonds and
gilts, including index-linked gilts, to partially hedge against inflation. In addition, the schemes maintain portfolios of interest rate and
inflation swaps to match more closely the duration and inflation profiles of their assets to their liabilities.
As noted above, the Trustees of M&GGPS executed a buy-in transaction with PAC, whereby the longevity and investment risk in
respect of all deferred and pensioner members was transferred to PAC. Furthermore, liabilities relating to all active members of the
scheme were transferred to PSPS during the year which further de-risks the scheme.
All three schemes have invested in a mix of both return-seeking assets, such as equities and property, and matching assets,
including leveraged liability-driven investment portfolios to reflect the liability profile of the scheme. They manage the risks of the
return-seeking exposure by investing in a diversified mix of investments.
During 2020 PSPS entered into a longevity swap transaction with Pacific Life Re Limited. This arrangement provides long-term
protection for PSPS against costs that could result from unexpected increases in life expectancy relating to the pensions that were
in payment on 6 April 2019, excluding any future discretionary increases. As at 31\u00a0December 2023, the longevity swap covered
\u00a32.0bn (2022: \u00a32.0bn) of current pensioner scheme liabilities, on an IAS 19 basis.
17.2 Assumptions
17.2.1 Demographic assumptions
Post-retirement mortality
The calculation of the defined benefit obligation for the Group's schemes requires assumptions to be set for both current mortality
and the allowance for future mortality improvements. The table below sets out the mortality tables and mortality improvement
model used for the Group\u2019s schemes, along with the associated life expectancies.
As at
Scheme
Mortality tables (with scaling factors applied
to\u00a0reflect experience)
Mortality
improvements modeli
Expectation of life from retirement at aged 60
Male
currently
aged 60
Male
currently
aged 40
Female
currently
aged 60
Female
currently
aged 40
31 December 2023
PSPS
S2PMA/S2PFA for males/females
CMI 2021
26.5
28.6
28.3
30.3
SASPS
S1PMA/S1PFA for males/females
CMI 2021
27.4
29.4
29.9
31.8
M&GGPS
SAPS2 Light
CMI 2021
28.5
30.6
30.4
32.4
31 December 2022
PSPS
S3PMA/S3PFA for males/females
CMI 2020
26.7
29.1
28.4
30.6
SASPS
S3PMA/S3PFA for males/females
CMI 2020
27.5
29.7
30.0
32.1
M&GGPS
S3PMA/S3PFA Light for males/females
CMI 2020
28.4
30.5
30.2
32.3
i The mortality assumptions are adjusted to make allowance for future improvements in longevity. As at 31\u00a0December 2023, this allowance was based on
t he CMI 2021 mortality improvements model with improvement factors of 1.60% for males (Sk = 7.25 and A parameter varies by age) and 1.60% for
females (Sk = 7.75 and A parameter varies by age) (2022: this allowance was based on the CMI 2020 model with improvement factors of 1.60% for males
(Sk = 7.25) and 1.60% for females (Sk = 7.75)).
17 Defined benefit pension\u00a0schemes (continued)
17.2 Assumptions (continued)
17.2.2 Economic assumptions
The actuarial assumptions used in determining defined benefit obligations and the net periodic benefit costs for each of the
Group's defined benefit pension schemes are as follows:
2023
2022
For the year ended 31\u00a0December
PSPS
SASPS
M&GGPS
PSPS
SASPS
M&GGPS
Discount ratei
4.6%
4.6%
4.6%
4.9%
4.8%
4.8%
Salary inflationii
3.4%
3.2%
N/A
4.0%
3.2%
3.2%
Retail prices index (RPI)
3.0%
2.9%
2.9%
3.3%
3.2%
3.2%
Consumer prices index (CPI)
2.7%
2.7%
2.7%
3.0%
3.0%
3.0%
Rate of increase of pensions in payment for inflation iii
CPI (maximum 5%)
2.8%
N/A
N/A
3.0%
N/A
N/A
CPI (maximum 2.5%)
2.5%
N/A
N/A
2.5%
N/A
N/A
Discretionary
2.9%
N/A
N/A
2.5%
N/A
N/A
RPI (maximum 5%)
N/A
2.9%
2.9%
N/A
3.2%
2.9%
RPI (maximum 2.5%)
N/A
2.5%
2.5%
N/A
2.5%
2.5%
i The discount rate has been determined using a cash flow matching approach based on an 'AA' corporate bond index. The single equivalent rates in the
table above are illustrative as the full yield curve is used in the calculation of the liability.
ii Due to the scheme changes during 2019, a cap to future pensionable salary increase came into effect and, as a result, salary growth inflation is only applied
for certain levels of pensionable salary which represent a very small proportion of the total liability.
iii The long-term margin between RPI and CPI reflects expected changes in RPI from 2030 as a result of the UK Statistics Authority stated intention to align
RPI with CPI including owner occupiers\u2019 housing costs (CPIH). The rate of inflation used reflects the long-term assumption for UK RPI or CPI, depending on
the particular tranche of scheme benefits, with caps and floors applied in accordance with the scheme rules. Certain tranches of scheme benefits within
PSPS have statutory pension increases in line with the higher of CPI up to a maximum level, or a discretionary level determined by the employer. Other
tranches are not guaranteed and determined by the employer on a discretionary basis. The single equivalent rates in the table above are illustrative as the
full yield curve is used in the calculation of the liability.
17.2.3 Other assumptions
In October 2018, the High Court ruled that pension schemes are required to equalise benefits for the effect of guaranteed minimum
pensions (GMPs). GMPs are a minimum benefit that schemes that were contracted-out on a salary-related basis between 1978 and
1997 are required to provide. There was a further Court ruling in November 2020 which required benefits in respect of past
transfers out of the schemes to also be equalised. In light of these Court rulings, at 31\u00a0December 2023 and 31\u00a0December 2022, the
Group has recognised an estimated allowance for GMP equalisation within the IAS 19 valuation for all the UK schemes - comprising
\u00a332m for PSPS, \u00a311m for SASPS, and \u00a33m for M&GGPS as at 31\u00a0December 2023 (2022: \u00a331m for PSPS, \u00a311m for SASPS and \u00a33m
for M&GGPS).
17.2.4 Sensitivity of the pension scheme liabilities to key variables
The sensitivity information below is based on the core scheme liabilities and assumptions at the balance sheet date.
The\u00a0sensitivities are calculated based on a change in one assumption with all other assumptions being held constant. As such,
interdependencies between the assumptions are excluded. The impact of the rate of inflation assumption sensitivity includes the
impact of inflation on the rate of increase in salaries, where applicable, and on the rate of increase of pensions in payment.
The sensitivities of the underlying pension scheme liabilities as shown below do not directly equate to the impact on the Group's
comprehensive income due to the effect of restriction on surplus for PSPS and the allocation of a share of the interest in the
financial position of PSPS and SASPS to the With-Profits Fund as described above. In addition, the sensitivities shown do not
include the impact on assets, which for all schemes would significantly offset the impact of the discount rate and inflation
sensitivities on the IAS 19 surplus or deficit. For the PSPS scheme, the mortality rate sensitivity impact would also be partially
mitigated by the longevity swap asset held.
17 Defined benefit pension\u00a0schemes (continued)
17.2 Assumptions (continued)
17.2.4 Sensitivity of the pension scheme liabilities to key variables (continued)
2023
Increase/(decrease) in the present value
of\u00a0the\u00a0scheme's defined benefit obligation
PSPS
SASPS
M&GGPS
Total
As at 31 December
Sensitivity of the change in assumptions
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Base position
N/A
4,260
576
298
5,134
Discount rate
Decrease by 0.2%
100
20
10
130
Increase by 0.2%
(97)
(19)
(10)
(126)
Rate of inflation with consequent reduction
in salary increases (where applicable)
Decrease by 0.2% (with consequent
reduction in salary increases)
(55)
(9)
(7)
(71)
Mortality rate
Increase in life expectancy by 1 year
146
15
7
168
2022
Increase/(decrease) in the present value
of\u00a0the\u00a0scheme's\u00a0defined benefit obligation
PSPS
SASPS
M&GGPS
Total
As at 31 December
Sensitivity of the change in assumptions
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Base position
N/A
4,050
566
313
4,929
Discount rate
Decrease by 0.2%
98
20
12
130
Increase by 0.2%
(94)
(19)
(11)
(124)
Rate of inflation with consequent reduction
in salary increases (where applicable)
Decrease by 0.2% (with consequent
reduction in salary increases)
(34)
(13)
(6)
(53)
Mortality rate
Increase in life expectancy by 1 year
142
16
8
166
17.3 Plan assets and other assets of the scheme
2023
2022
PSPS
Other
schemes
Total
PSPS
Other
schemes
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
%
\u00a3m
\u00a3m
\u00a3m
%
Equities:
UK
29
\u2014
29
1%
47
1
48
1%
Overseas
10
37
47
1%
8
70
78
1%
Bonds:i
Government
3,124
559
3,683
67%
3,188
848
4,036
71%
Corporate
1,145
3
1,148
21%
1,165
4
1,169
21%
Asset-backed securities
344
81
425
8%
346
66
412
7%
Derivativesii
(526)
(202)
(728)
(13)%
(552)
(168)
(720)
(12)%
Properties
238
118
356
6%
263
138
401
7%
Other assets
247
3
250
4%
176
65
241
4%
Reimbursement right assetiii
\u2014
298
298
5%
\u2014
\u2014
\u2014
\u2014%
Total value of assets
4,611
897
5,508
100%
4,641
1,024
5,665
100%
i As at 31\u00a0December 2023 90 % of the bonds were investment grade (2022: 88%).
ii Included within derivatives is a \u00a33 m liability in respect of the longevity swap transaction with Pacific Life Re Limited (2022: \u00a310m), valued at fair value as per
IAS19 and based on the principles of IFRS13.
iii Although available to the scheme, under IAS 19 the reimbursement right asset does not constitute part of the plan assets.
17 Defined benefit pension\u00a0schemes (continued)
17.3 Plan assets and other assets of the scheme (continued)
2023
2022
Quoted in an
active market
Other
Total
Quoted in an
active market
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
%
\u00a3m
\u00a3m
\u00a3m
%
Equities:
UK
\u2014
29
29
1%
\u2014
48
48
1%
Overseas
\u2014
47
47
1%
\u2014
78
78
1%
Bonds:
Government
3,678
5
3,683
67%
4,030
6
4,036
71%
Corporate
889
259
1,148
21%
903
266
1,169
21%
Asset-backed securities
315
110
425
8%
372
40
412
7%
Derivatives
(720)
(8)
(728)
(13)%
(699)
(21)
(720)
(12)%
Properties
\u2014
356
356
6%
\u2014
401
401
7%
Other assets
60
190
250
4%
83
158
241
4%
Reimbursement right asset
\u2014
298
298
5%
\u2014
\u2014
\u2014
\u2014%
Total value of assets
4,222
1,286
5,508
100%
4,689
976
5,665
100%
As at 31\u00a0December 2023 81% of the total value of the scheme assets, excluding the reimbursement asset, were derived from
quoted prices in an active market (2022: 84%), while the value of the remaining assets is derived from the use of various
observable and unobservable inputs. None of the scheme assets included property occupied by the Group. The IAS 19 basis plan
assets as at 31\u00a0December 2023 of \u00a35,496m is different from the economic basis plan assets of \u00a35,508m as shown above due to the
exclusion of investment in Group insurance policies by M&GGPS as described in 17.1. Due to the disinvestment in non-qualifying
insurance policies by M&GGPS as at 31\u00a0December 2022 the economic basis plan assets is the same as the IAS 19 basis plan assets.
17.4 Reconciliation in movement of schemes\u2019 surplus/deficit
Economic basis
Fair value
of plan
and other
assets
Present value
of benefit
obligation
Effect of
asset
ceiling
Net
economic
pension
surplus/
(deficit)
Other
adjustments
Net pension
surplus/
(deficit)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Net defined benefit pension asset/(liability) at 1 January 2023
5,665
(4,929)
(581)
155
\u2014
155
Total expense recognised in the income statement:
Current service cost
\u2014
(8)
\u2014
(8)
\u2014
(8)
Past service costs
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net interest income/(expense)
267
(233)
(28)
6
\u2014
6
Administration expenses
(11)
\u2014
\u2014
(11)
\u2014
(11)
Total expense recognised in the income statement i
256
(241)
(28)
(13)
\u2014
(13)
Remeasurement (losses)/gains:
Return on the scheme assets less amount included in interest
income
(185)
\u2014
\u2014
(185)
26
(159)
Gains on changes in demographic assumptions
\u2014
27
\u2014
27
\u2014
27
Losses on changes in financial assumptions
\u2014
(233)
\u2014
(233)
\u2014
(233)
Losses on scheme liabilities
\u2014
(29)
\u2014
(29)
\u2014
(29)
Unrecognisable surplus
\u2014
\u2014
270
270
\u2014
270
Remeasurement (losses)/gains ii
(185)
(235)
270
(150)
26
(124)
Benefit payments
(271)
271
\u2014
\u2014
\u2014
\u2014
Employers\u2019 contributions
43
\u2014
\u2014
43
\u2014
43
Disinvestment from non-qualifying insurance policies
\u2014
\u2014
\u2014
\u2014
(11)
(11)
Reimbursement right asset iii
\u2014
\u2014
\u2014
\u2014
(325)
(325)
Net defined benefit pension asset/(liability) at 31 December 2023
5,508
(5,134)
(339)
35
(310)
(275)
i An expense of \u00a311m is included in the total amount recognised in the consolidated income statement attributable to the Group for the year ended
31\u00a0December 2023 relating to the With-Profits Fund (2022: credit of \u00a313m).
17 Defined benefit pension\u00a0schemes (continued)
17.4 Reconciliation in movement of schemes\u2019 surplus/deficit (continued)
iiIncluded in the share of remeasurement gains and losses for the year ended 31\u00a0December 2023 are losses relating to shareholders totalling \u00a3109m (2022:
gains of \u00a331m) which are recognised in other comprehensive income. The amounts attributable to the With-Profits Fund for the year ended 31\u00a0December
2023 amount to losses of \u00a315m (2022: losses of \u00a32m) are recognised in other comprehensive income.
iiiAs noted above, M&GGPS executed a buy-in transaction with PAC (a Group entity). The reimbursement right asset resulting from the transaction is
eliminated on consolidation. However, due to different measurement bases applied for determining the value of this asset and the related liability by PAC
for accounting purposes, the premium paid by the scheme exceeded the valuation of the scheme asset recognised by \u00a378.6m. In the table above, this has
been recognised as a loss in the actual return on assets.
Economic basis
Fair value
of plan
and other
assets
Present value
of benefit
obligation
Effect of
asset
ceiling
Net
economic
pension
surplus/
(deficit)
Other
adjustments
Net pension
surplus/
(deficit)
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Net defined benefit pension asset/(liability) at 1 January 2022
9,141
(8,084)
(896)
161
(207)
(46)
Total expense recognised in the income statement:
Current service cost
\u2014
(16)
\u2014
(16)
\u2014
(16)
Past service costs
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net interest
164
(145)
(16)
3
(3)
\u2014
Administration expenses
(9)
\u2014
\u2014
(9)
\u2014
(9)
Total expense recognised in the income statement i
155
(161)
(16)
(22)
(3)
(25)
Remeasurement (losses)/gains:
Return on the scheme assets less amount included in interest
income
(3,348)
\u2014
\u2014
(3,348)
58
(3,290)
Gains on changes in demographic assumptions
\u2014
262
\u2014
262
\u2014
262
Gains on changes in financial assumptions
\u2014
2,848
\u2014
2,848
\u2014
2,848
Experience losses on scheme liabilities
\u2014
(122)
\u2014
(122)
\u2014
(122)
Unrecognisable surplus
\u2014
331
331
\u2014
331
Remeasurements gains and (losses) ii
(3,348)
2,988
331
(29)
58
29
Benefit payments
(328)
328
\u2014
\u2014
\u2014
\u2014
Employers\u2019 contributions
45
\u2014
\u2014
45
\u2014
45
Disinvestment from the Group's insurance policies
\u2014
\u2014
\u2014
\u2014
152
152
Net defined benefit pension asset/(liability) at 31 December 2022
5,665
(4,929)
(581)
155
\u2014
155
17.5 Maturity analysis of benefit obligations
The following table provides an expected maturity analysis of the undiscounted defined benefit obligations:
All schemes
1 year or less
After 1 year
to 5 years
After 5 years
to 10 years
After 10
years to 15
years
After 15
years to 20
years
Over 20
years
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
As at 31 December 2023
281
1,163
1,538
1,519
1,412
4,531
10,444
As at 31 December 2022
269
1,154
1,529
1,515
1,493
4,838
10,798
The weighted average duration of each scheme's defined benefit obligations (in years) are as follows:
PSPS
SASPS
M&GGPS
As at 31 December 2023
12
17
17
As at 31 December 2022
12
17
18
", "dimensions": { "concept": "ifrs-full:DisclosureOfDefinedBenefitPlansExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-662": { "value": "
18 Classification of financial\u00a0instruments
18.1 Financial assets
2023
Fair value through
profit\u00a0or\u00a0loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Equity securities and pooled investment funds
31
\u2014
66,248
\u2014
66,248
Loans ii
\u2014
3,908
\u2014
3,908
Debt securities
31
\u2014
70,683
\u2014
70,683
Derivative assets
31
\u2014
1,693
\u2014
1,693
Deposits
32
\u2014
\u2014
16,324
16,324
Accrued investment income and other debtors
19
\u2014
\u2014
2,536
2,536
Cash and cash equivalents
20
\u2014
\u2014
5,590
5,590
Total financial assets
\u2014
142,532
24,450
166,982
Restated i 2022
Fair value through
profit\u00a0or\u00a0loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Equity securities and pooled investment funds
31
\u2014
70,127
\u2014
70,127
Loans ii
\u2014
3,234
\u2014
3,234
Debt securities
31
\u2014
62,821
\u2014
62,821
Derivative assets
31
\u2014
2,850
\u2014
2,850
Deposits
32
\u2014
\u2014
21,399
21,399
Accrued investment income and other debtors
19
\u2014
\u2014
2,404
2,404
Cash and cash equivalents
20
\u2014
\u2014
4,884
4,884
Total financial assets
\u2014
139,032
28,687
167,719
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
iiLoans consist of Mortgage loans of \u00a31,861m (2022: \u00a31,896m), Policy loans of \u00a31m (2022: \u00a32m) and Other loans of \u00a32,046m (2022: \u00a31,336m).
As at 31\u00a0December 2023, 74% of the \u00a31,258m (2022: 71% of \u00a31,307m) of mortgage loans held by the shareholder-backed business
related to lifetime (equity release) mortgage business which had an average loan to property value of 39% (2022: 35%). The equity
release mortgages are carried at fair value through profit or loss. Sensitivities in relation to the valuation of the equity release
mortgages are provided in Note 31.8.
Other loans mainly comprise syndicated and bridge commercial loans.
Financial assets expected to be recovered after one year as at 31\u00a0December 2023 are \u00a372,033m (2022: \u00a362,811m).
18 Classification of financial\u00a0instruments
18.2 Financial liabilities
2023
Fair value through
profit\u00a0or loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment contract liabilities without DPF
25
12,535
\u2014
\u2014
12,535
Third party interest in consolidated funds
31
9,893
\u2014
\u2014
9,893
Subordinated liabilities and other borrowings
26
\u2014
\u2014
8,089
8,089
Derivative liabilities
31
\u2014
2,910
\u2014
2,910
Other financial liabilities
\u2014
\u2014
1,186
1,186
Accruals, deferred income and other liabilities
239
\u2014
5,844
6,083
Total financial liabilities
22,667
2,910
15,119
40,696
Restated i 2022
Fair value through
profit\u00a0or\u00a0loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment contract liabilities without DPF
25
11,937
\u2014
\u2014
11,937
Third party interest in consolidated funds
31
10,389
\u2014
\u2014
10,389
Subordinated liabilities and other borrowings
26
\u2014
\u2014
7,537
7,537
Derivative liabilities
31
\u2014
4,185
\u2014
4,185
Other financial liabilities
\u2014
\u2014
2,172
2,172
Accruals, deferred income and other liabilities
246
\u2014
6,403
6,649
Total financial liabilities
22,572
4,185
16,112
42,869
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
Other financial liabilities relate to obligations under funding, securities lending and sale and repurchase agreements. Accruals,
deferred income and other liabilities exclude items which do not meet the definition of a financial liability.
Financial liabilities expected to be settled in more than one year as at 31\u00a0December 2023 were \u00a311,689m (2022: \u00a310,044m).
For financial liabilities designated at FVTPL there was no material impact from movement in credit risk in 2023 and 2022.
18.3 Fair value of underlying items for contracts measured under VFA
The fair value of the assets held by the With-Profits Fund for contracts measured under VFA are as follows:
2023
2022
With-Profits Fund
With-Profits Fund
As at 31 December
\u00a3m
\u00a3m
Investment properties
5,664
5,897
Equity securities and pooled investment funds
80,996
74,870
Loans
568
1,030
Debt securities
42,322
48,904
Derivative assets
1,169
2,232
Derivative liabilities
(1,058)
(2,136)
Cash and cash equivalents
1,309
2,285
Total assets
130,970
133,082
Non-profit business in the With-Profits Fund
(6,856)
(7,290)
Other liabilities
(7,032)
(8,097)
Total fair value of VFA underlying items
117,082
117,695
In addition to the participating business underlying items detailed above, there are \u00a34,081m of underlying items (unit-linked fund
assets) for unit-linked insurance contracts measured under VFA (2022: \u00a34,291m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-661": { "value": "
18 Classification of financial\u00a0instruments
18.1 Financial assets
2023
Fair value through
profit\u00a0or\u00a0loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Equity securities and pooled investment funds
31
\u2014
66,248
\u2014
66,248
Loans ii
\u2014
3,908
\u2014
3,908
Debt securities
31
\u2014
70,683
\u2014
70,683
Derivative assets
31
\u2014
1,693
\u2014
1,693
Deposits
32
\u2014
\u2014
16,324
16,324
Accrued investment income and other debtors
19
\u2014
\u2014
2,536
2,536
Cash and cash equivalents
20
\u2014
\u2014
5,590
5,590
Total financial assets
\u2014
142,532
24,450
166,982
Restated i 2022
Fair value through
profit\u00a0or\u00a0loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Equity securities and pooled investment funds
31
\u2014
70,127
\u2014
70,127
Loans ii
\u2014
3,234
\u2014
3,234
Debt securities
31
\u2014
62,821
\u2014
62,821
Derivative assets
31
\u2014
2,850
\u2014
2,850
Deposits
32
\u2014
\u2014
21,399
21,399
Accrued investment income and other debtors
19
\u2014
\u2014
2,404
2,404
Cash and cash equivalents
20
\u2014
\u2014
4,884
4,884
Total financial assets
\u2014
139,032
28,687
167,719
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
iiLoans consist of Mortgage loans of \u00a31,861m (2022: \u00a31,896m), Policy loans of \u00a31m (2022: \u00a32m) and Other loans of \u00a32,046m (2022: \u00a31,336m).
As at 31\u00a0December 2023, 74% of the \u00a31,258m (2022: 71% of \u00a31,307m) of mortgage loans held by the shareholder-backed business
related to lifetime (equity release) mortgage business which had an average loan to property value of 39% (2022: 35%). The equity
release mortgages are carried at fair value through profit or loss. Sensitivities in relation to the valuation of the equity release
mortgages are provided in Note 31.8.
Other loans mainly comprise syndicated and bridge commercial loans.
Financial assets expected to be recovered after one year as at 31\u00a0December 2023 are \u00a372,033m (2022: \u00a362,811m).
18 Classification of financial\u00a0instruments
18.2 Financial liabilities
2023
Fair value through
profit\u00a0or loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment contract liabilities without DPF
25
12,535
\u2014
\u2014
12,535
Third party interest in consolidated funds
31
9,893
\u2014
\u2014
9,893
Subordinated liabilities and other borrowings
26
\u2014
\u2014
8,089
8,089
Derivative liabilities
31
\u2014
2,910
\u2014
2,910
Other financial liabilities
\u2014
\u2014
1,186
1,186
Accruals, deferred income and other liabilities
239
\u2014
5,844
6,083
Total financial liabilities
22,667
2,910
15,119
40,696
Restated i 2022
Fair value through
profit\u00a0or\u00a0loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment contract liabilities without DPF
25
11,937
\u2014
\u2014
11,937
Third party interest in consolidated funds
31
10,389
\u2014
\u2014
10,389
Subordinated liabilities and other borrowings
26
\u2014
\u2014
7,537
7,537
Derivative liabilities
31
\u2014
4,185
\u2014
4,185
Other financial liabilities
\u2014
\u2014
2,172
2,172
Accruals, deferred income and other liabilities
246
\u2014
6,403
6,649
Total financial liabilities
22,572
4,185
16,112
42,869
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
Other financial liabilities relate to obligations under funding, securities lending and sale and repurchase agreements. Accruals,
deferred income and other liabilities exclude items which do not meet the definition of a financial liability.
Financial liabilities expected to be settled in more than one year as at 31\u00a0December 2023 were \u00a311,689m (2022: \u00a310,044m).
For financial liabilities designated at FVTPL there was no material impact from movement in credit risk in 2023 and 2022.
18.3 Fair value of underlying items for contracts measured under VFA
The fair value of the assets held by the With-Profits Fund for contracts measured under VFA are as follows:
2023
2022
With-Profits Fund
With-Profits Fund
As at 31 December
\u00a3m
\u00a3m
Investment properties
5,664
5,897
Equity securities and pooled investment funds
80,996
74,870
Loans
568
1,030
Debt securities
42,322
48,904
Derivative assets
1,169
2,232
Derivative liabilities
(1,058)
(2,136)
Cash and cash equivalents
1,309
2,285
Total assets
130,970
133,082
Non-profit business in the With-Profits Fund
(6,856)
(7,290)
Other liabilities
(7,032)
(8,097)
Total fair value of VFA underlying items
117,082
117,695
In addition to the participating business underlying items detailed above, there are \u00a34,081m of underlying items (unit-linked fund
assets) for unit-linked insurance contracts measured under VFA (2022: \u00a34,291m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsDesignatedAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-660": { "value": "
18 Classification of financial\u00a0instruments
18.1 Financial assets
2023
Fair value through
profit\u00a0or\u00a0loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Equity securities and pooled investment funds
31
\u2014
66,248
\u2014
66,248
Loans ii
\u2014
3,908
\u2014
3,908
Debt securities
31
\u2014
70,683
\u2014
70,683
Derivative assets
31
\u2014
1,693
\u2014
1,693
Deposits
32
\u2014
\u2014
16,324
16,324
Accrued investment income and other debtors
19
\u2014
\u2014
2,536
2,536
Cash and cash equivalents
20
\u2014
\u2014
5,590
5,590
Total financial assets
\u2014
142,532
24,450
166,982
Restated i 2022
Fair value through
profit\u00a0or\u00a0loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Equity securities and pooled investment funds
31
\u2014
70,127
\u2014
70,127
Loans ii
\u2014
3,234
\u2014
3,234
Debt securities
31
\u2014
62,821
\u2014
62,821
Derivative assets
31
\u2014
2,850
\u2014
2,850
Deposits
32
\u2014
\u2014
21,399
21,399
Accrued investment income and other debtors
19
\u2014
\u2014
2,404
2,404
Cash and cash equivalents
20
\u2014
\u2014
4,884
4,884
Total financial assets
\u2014
139,032
28,687
167,719
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
iiLoans consist of Mortgage loans of \u00a31,861m (2022: \u00a31,896m), Policy loans of \u00a31m (2022: \u00a32m) and Other loans of \u00a32,046m (2022: \u00a31,336m).
As at 31\u00a0December 2023, 74% of the \u00a31,258m (2022: 71% of \u00a31,307m) of mortgage loans held by the shareholder-backed business
related to lifetime (equity release) mortgage business which had an average loan to property value of 39% (2022: 35%). The equity
release mortgages are carried at fair value through profit or loss. Sensitivities in relation to the valuation of the equity release
mortgages are provided in Note 31.8.
Other loans mainly comprise syndicated and bridge commercial loans.
Financial assets expected to be recovered after one year as at 31\u00a0December 2023 are \u00a372,033m (2022: \u00a362,811m).
18 Classification of financial\u00a0instruments
18.2 Financial liabilities
2023
Fair value through
profit\u00a0or loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment contract liabilities without DPF
25
12,535
\u2014
\u2014
12,535
Third party interest in consolidated funds
31
9,893
\u2014
\u2014
9,893
Subordinated liabilities and other borrowings
26
\u2014
\u2014
8,089
8,089
Derivative liabilities
31
\u2014
2,910
\u2014
2,910
Other financial liabilities
\u2014
\u2014
1,186
1,186
Accruals, deferred income and other liabilities
239
\u2014
5,844
6,083
Total financial liabilities
22,667
2,910
15,119
40,696
Restated i 2022
Fair value through
profit\u00a0or\u00a0loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment contract liabilities without DPF
25
11,937
\u2014
\u2014
11,937
Third party interest in consolidated funds
31
10,389
\u2014
\u2014
10,389
Subordinated liabilities and other borrowings
26
\u2014
\u2014
7,537
7,537
Derivative liabilities
31
\u2014
4,185
\u2014
4,185
Other financial liabilities
\u2014
\u2014
2,172
2,172
Accruals, deferred income and other liabilities
246
\u2014
6,403
6,649
Total financial liabilities
22,572
4,185
16,112
42,869
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
Other financial liabilities relate to obligations under funding, securities lending and sale and repurchase agreements. Accruals,
deferred income and other liabilities exclude items which do not meet the definition of a financial liability.
Financial liabilities expected to be settled in more than one year as at 31\u00a0December 2023 were \u00a311,689m (2022: \u00a310,044m).
For financial liabilities designated at FVTPL there was no material impact from movement in credit risk in 2023 and 2022.
18.3 Fair value of underlying items for contracts measured under VFA
The fair value of the assets held by the With-Profits Fund for contracts measured under VFA are as follows:
2023
2022
With-Profits Fund
With-Profits Fund
As at 31 December
\u00a3m
\u00a3m
Investment properties
5,664
5,897
Equity securities and pooled investment funds
80,996
74,870
Loans
568
1,030
Debt securities
42,322
48,904
Derivative assets
1,169
2,232
Derivative liabilities
(1,058)
(2,136)
Cash and cash equivalents
1,309
2,285
Total assets
130,970
133,082
Non-profit business in the With-Profits Fund
(6,856)
(7,290)
Other liabilities
(7,032)
(8,097)
Total fair value of VFA underlying items
117,082
117,695
In addition to the participating business underlying items detailed above, there are \u00a34,081m of underlying items (unit-linked fund
assets) for unit-linked insurance contracts measured under VFA (2022: \u00a34,291m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsHeldForTradingExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-659": { "value": "
18 Classification of financial\u00a0instruments
18.1 Financial assets
2023
Fair value through
profit\u00a0or\u00a0loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Equity securities and pooled investment funds
31
\u2014
66,248
\u2014
66,248
Loans ii
\u2014
3,908
\u2014
3,908
Debt securities
31
\u2014
70,683
\u2014
70,683
Derivative assets
31
\u2014
1,693
\u2014
1,693
Deposits
32
\u2014
\u2014
16,324
16,324
Accrued investment income and other debtors
19
\u2014
\u2014
2,536
2,536
Cash and cash equivalents
20
\u2014
\u2014
5,590
5,590
Total financial assets
\u2014
142,532
24,450
166,982
Restated i 2022
Fair value through
profit\u00a0or\u00a0loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Equity securities and pooled investment funds
31
\u2014
70,127
\u2014
70,127
Loans ii
\u2014
3,234
\u2014
3,234
Debt securities
31
\u2014
62,821
\u2014
62,821
Derivative assets
31
\u2014
2,850
\u2014
2,850
Deposits
32
\u2014
\u2014
21,399
21,399
Accrued investment income and other debtors
19
\u2014
\u2014
2,404
2,404
Cash and cash equivalents
20
\u2014
\u2014
4,884
4,884
Total financial assets
\u2014
139,032
28,687
167,719
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
iiLoans consist of Mortgage loans of \u00a31,861m (2022: \u00a31,896m), Policy loans of \u00a31m (2022: \u00a32m) and Other loans of \u00a32,046m (2022: \u00a31,336m).
As at 31\u00a0December 2023, 74% of the \u00a31,258m (2022: 71% of \u00a31,307m) of mortgage loans held by the shareholder-backed business
related to lifetime (equity release) mortgage business which had an average loan to property value of 39% (2022: 35%). The equity
release mortgages are carried at fair value through profit or loss. Sensitivities in relation to the valuation of the equity release
mortgages are provided in Note 31.8.
Other loans mainly comprise syndicated and bridge commercial loans.
Financial assets expected to be recovered after one year as at 31\u00a0December 2023 are \u00a372,033m (2022: \u00a362,811m).
18 Classification of financial\u00a0instruments
18.2 Financial liabilities
2023
Fair value through
profit\u00a0or loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment contract liabilities without DPF
25
12,535
\u2014
\u2014
12,535
Third party interest in consolidated funds
31
9,893
\u2014
\u2014
9,893
Subordinated liabilities and other borrowings
26
\u2014
\u2014
8,089
8,089
Derivative liabilities
31
\u2014
2,910
\u2014
2,910
Other financial liabilities
\u2014
\u2014
1,186
1,186
Accruals, deferred income and other liabilities
239
\u2014
5,844
6,083
Total financial liabilities
22,667
2,910
15,119
40,696
Restated i 2022
Fair value through
profit\u00a0or\u00a0loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment contract liabilities without DPF
25
11,937
\u2014
\u2014
11,937
Third party interest in consolidated funds
31
10,389
\u2014
\u2014
10,389
Subordinated liabilities and other borrowings
26
\u2014
\u2014
7,537
7,537
Derivative liabilities
31
\u2014
4,185
\u2014
4,185
Other financial liabilities
\u2014
\u2014
2,172
2,172
Accruals, deferred income and other liabilities
246
\u2014
6,403
6,649
Total financial liabilities
22,572
4,185
16,112
42,869
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
Other financial liabilities relate to obligations under funding, securities lending and sale and repurchase agreements. Accruals,
deferred income and other liabilities exclude items which do not meet the definition of a financial liability.
Financial liabilities expected to be settled in more than one year as at 31\u00a0December 2023 were \u00a311,689m (2022: \u00a310,044m).
For financial liabilities designated at FVTPL there was no material impact from movement in credit risk in 2023 and 2022.
18.3 Fair value of underlying items for contracts measured under VFA
The fair value of the assets held by the With-Profits Fund for contracts measured under VFA are as follows:
2023
2022
With-Profits Fund
With-Profits Fund
As at 31 December
\u00a3m
\u00a3m
Investment properties
5,664
5,897
Equity securities and pooled investment funds
80,996
74,870
Loans
568
1,030
Debt securities
42,322
48,904
Derivative assets
1,169
2,232
Derivative liabilities
(1,058)
(2,136)
Cash and cash equivalents
1,309
2,285
Total assets
130,970
133,082
Non-profit business in the With-Profits Fund
(6,856)
(7,290)
Other liabilities
(7,032)
(8,097)
Total fair value of VFA underlying items
117,082
117,695
In addition to the participating business underlying items detailed above, there are \u00a34,081m of underlying items (unit-linked fund
assets) for unit-linked insurance contracts measured under VFA (2022: \u00a34,291m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-663": { "value": "
The fair value of the assets held by the With-Profits Fund for contracts measured under VFA are as follows:
2023
2022
With-Profits Fund
With-Profits Fund
As at 31 December
\u00a3m
\u00a3m
Investment properties
5,664
5,897
Equity securities and pooled investment funds
80,996
74,870
Loans
568
1,030
Debt securities
42,322
48,904
Derivative assets
1,169
2,232
Derivative liabilities
(1,058)
(2,136)
Cash and cash equivalents
1,309
2,285
Total assets
130,970
133,082
Non-profit business in the With-Profits Fund
(6,856)
(7,290)
Other liabilities
(7,032)
(8,097)
Total fair value of VFA underlying items
117,082
117,695
", "dimensions": { "concept": "mgplc:DisclosureOfLoansTextBlock", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-664": { "value": "
19 Accrued investment income and other debtors
2023
Restated i
2022
As at 31 December
\u00a3m
\u00a3m
Interest receivable
893
810
Other accrued investment income and prepayments ii
376
442
Total interest receivable, accrued investment income and prepayments
1,269
1,252
Other debtors:
Outstanding sales of investment securities
170
149
Investment management fee debtors
127
148
Property related debtors ii
272
290
Cancellation of units awaiting settlement
19
25
Finance leases
176
73
Other
503
467
Total accrued investment income and other debtors
2,536
2,404
Analysed as:
Expected to be settled within one year
2,303
2,167
Expected to be settled after one year
233
237
Total accrued investment income and other debtors
2,536
2,404
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
iiThe comparative amounts have been restated by \u00a3164m as rent smoothing balances have reclassified between Other accrued investment income and
prepayments and Property related debtors.
Income from subleasing right-of-use assets amounted to \u00a33m (2022: \u00a31m). Finance income from the net investment in the leases
amounted to \u00a38m (2022: \u00a363m).
The table below presents a maturity analysis of undiscounted lease receipts due on these leases:
2023
2022
For the year ended 31\u00a0December
\u00a3m
\u00a3m
Less than 1 year
9
4
After 1 year to 2 years
12
4
After 2 years to 3 years
17
5
After 3 years to 4 years
17
5
After 4 years to 5 years
18
5
Over 5 years
502
397
575
420
Unearned finance income
(399)
(347)
Net investment in finance leases
176
73
", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-665": { "value": "
20 Cash and cash equivalents
2023
2022
As at 31 December
\u00a3m
\u00a3m
Cash
4,084
4,148
Cash equivalents
1,506
736
Total cash and cash equivalents
5,590
4,884
Cash equivalents consist of short-term, highly liquid investments that are readily convertible into known amounts of cash subject to
insignificant risk of changes in value.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-667": { "value": "
21 Issued share capital and\u00a0share premium
2023
2022
Issued shares of 5p fully paid
Number of
ordinary shares
Share capital
Share premium
Number of
ordinary shares
Share capital
Share premium
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
2,374,712,121
119
370
2,599,906,866
130
370
Shares cancelled following
buy-back
\u2014
\u2014
\u2014
(225,194,745)
(11)
\u2014
Shares issued to settle employee
share option schemes
7,345,996
\u2014
9
\u2014
\u2014
\u2014
At 31 December
2,382,058,117
119
379
2,374,712,121
119
370
Amounts recorded in share capital represent the nominal value of shares issued with any difference between proceeds received
on issue of shares, net of issue costs, and the nominal value of shares issued being credited to the share premium account.
In 2023, 2,253,878 treasury shares and 7,345,996 newly issued shares were used to satisfy obligations under the SAYE scheme.
Further details are outlined in Note 37.2. The newly issued shares resulted in an increase in share capital of \u00a30.4m and share
premium of \u00a39.1m.
In March 2022, the Group commenced a share buy-back programme to purchase ordinary shares of 5 pence each up to a
maximum consideration of \u00a3500m, and the programme concluded on 27 October 2022 for a total consideration, including
expenses and stamp duty, of \u00a3503m. Shares with a nominal value of \u00a311m were cancelled, with the recognition of an \u00a311m capital
redemption reserve. Further details can be found in Note 22.2.
22 Shares held by employee\u00a0benefit trusts and\u00a0other\u00a0treasury\u00a0shares
The Group buys and sells its own shares in relation to its employee share schemes, via transactions undertaken by authorised
investment funds that the Group is deemed to control and through the share buy-back programme. These authorised investment
funds undertake transactions in the Group's shares as part of their investment decisions. The cost of own shares of \u00a347m as at
31\u00a0December 2023 (2022: \u00a3117m) is deducted from equity.
22.1 Shares held by employee benefit trust
The M&G Employee Share Trust (the Trust) was created on 20 September 2019 to facilitate the procurement, holding and
distribution of M&G plc shares under the various employee incentive schemes in operation. The Trust is funded by M&G plc. In
addition, there is a separate trust that holds shares in respect of Share Incentive Plan (SIP) schemes.
The movement in the M&G plc shares held in employee benefit trusts are detailed below:
2023
2022 (Restated)i
For the year ended 31 December
Number of shares
Number of shares
At 1 January
46,767,653
58,333,111
Shares acquired and transferred from treasury shares during the period
16,635,485
2,815,549
Shares awarded during the period
(41,906,547)
(14,381,007)
At 31 December
21,496,591
46,767,653
i Restated to include all SIP shares.
The Trust holds 12,016,528 shares at 31\u00a0December 2023 (2022: 38,480,430) while a further 9,480,063 shares are held by the
trustee of the SIP scheme at 31\u00a0December 2023 (2022 restated: 8,287,223).
The cost of shares held in the employee benefit trusts own shares of \u00a326m as at 31\u00a0December 2023 (2022: \u00a370m) is deducted from
equity.
22.2 Other treasury shares
In March 2022, the Group commenced a share buy-back programme to purchase ordinary shares of 5 pence each up to a
maximum consideration of \u00a3500m. As at 31 December 2022, ordinary shares bought back but not cancelled were 26,867,908 with
a carrying value of \u00a347m. During 2023, 2,253,878 shares with a carrying value of \u00a34m have been distributed in relation to employee
share schemes. An additional 11,200,000 shares with a carrying value of \u00a322m were transferred to the employee benefit trust. As
at 31\u00a0December 2023, the remaining 13,414,030 treasury shares with a carrying value of \u00a321m are disclosed as a deduction to
Shareholders equity within the Treasury shares reserve.
All share transactions were made on an exchange.
23 Other reserves
Equity-settled
share-based
payment reserve
Merger reserve
Foreign currency
translation
reserve
Capital
redemption
reserve
Total Other
reserves
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
As at 1 January 2023
101
(11,732)
7
11
(11,613)
Exchange movements arising on foreign
operations
\u2014
\u2014
(8)
\u2014
(8)
Total items recognised in comprehensive income
\u2014
\u2014
(8)
\u2014
(8)
Vested employee share-based payments
(42)
\u2014
\u2014
\u2014
(42)
Expense recognised in respect of share-based
payments
32
\u2014
\u2014
\u2014
32
Tax effect of items recognised directly in equity
(2)
\u2014
\u2014
\u2014
(2)
Shares purchased in buy-back
\u2014
\u2014
\u2014
\u2014
\u2014
Net decrease in equity
(12)
\u2014
(8)
\u2014
(20)
As at 31 December 2023
89
(11,732)
(1)
11
(11,633)
Equity-settled
share-based
payment reserve
Merger reserve
Foreign currency
translation reserve
Capital
redemption
reserve
Total other
reserves
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
As at 1 January 2022
85
(11,732)
(13)
\u2014
(11,660)
Exchange movements arising on foreign
operations
\u2014
\u2014
20
\u2014
20
Total items recognised in comprehensive income
\u2014
\u2014
20
\u2014
20
Vested employee share-based payments
(23)
\u2014
\u2014
\u2014
(23)
Expense recognised in respect of share-based
payments
34
\u2014
\u2014
\u2014
34
Tax effect of items recognised directly in equity
5
\u2014
\u2014
\u2014
5
Shares purchased in buy-back
\u2014
\u2014
\u2014
11
11
Net increase in equity
16
\u2014
20
11
47
As at 31 December 2022
101
(11,732)
7
11
(11,613)
The merger reserve arises from the application of merger accounting principles to the acquisition of entities under common
control. It represents the difference between the aggregate capital reserves and the value of the entities acquired. On disposal of
the relevant entity, the related merger reserve is released directly to retained earnings.
", "dimensions": { "concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-666": { "value": "
21 Issued share capital and\u00a0share premium
2023
2022
Issued shares of 5p fully paid
Number of
ordinary shares
Share capital
Share premium
Number of
ordinary shares
Share capital
Share premium
\u00a3m
\u00a3m
\u00a3m
\u00a3m
At 1 January
2,374,712,121
119
370
2,599,906,866
130
370
Shares cancelled following
buy-back
\u2014
\u2014
\u2014
(225,194,745)
(11)
\u2014
Shares issued to settle employee
share option schemes
7,345,996
\u2014
9
\u2014
\u2014
\u2014
At 31 December
2,382,058,117
119
379
2,374,712,121
119
370
Amounts recorded in share capital represent the nominal value of shares issued with any difference between proceeds received
on issue of shares, net of issue costs, and the nominal value of shares issued being credited to the share premium account.
In 2023, 2,253,878 treasury shares and 7,345,996 newly issued shares were used to satisfy obligations under the SAYE scheme.
Further details are outlined in Note 37.2. The newly issued shares resulted in an increase in share capital of \u00a30.4m and share
premium of \u00a39.1m.
In March 2022, the Group commenced a share buy-back programme to purchase ordinary shares of 5 pence each up to a
maximum consideration of \u00a3500m, and the programme concluded on 27 October 2022 for a total consideration, including
expenses and stamp duty, of \u00a3503m. Shares with a nominal value of \u00a311m were cancelled, with the recognition of an \u00a311m capital
redemption reserve. Further details can be found in Note 22.2.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-668": { "value": "
22 Shares held by employee\u00a0benefit trusts and\u00a0other\u00a0treasury\u00a0shares
The Group buys and sells its own shares in relation to its employee share schemes, via transactions undertaken by authorised
investment funds that the Group is deemed to control and through the share buy-back programme. These authorised investment
funds undertake transactions in the Group's shares as part of their investment decisions. The cost of own shares of \u00a347m as at
31\u00a0December 2023 (2022: \u00a3117m) is deducted from equity.
22.1 Shares held by employee benefit trust
The M&G Employee Share Trust (the Trust) was created on 20 September 2019 to facilitate the procurement, holding and
distribution of M&G plc shares under the various employee incentive schemes in operation. The Trust is funded by M&G plc. In
addition, there is a separate trust that holds shares in respect of Share Incentive Plan (SIP) schemes.
The movement in the M&G plc shares held in employee benefit trusts are detailed below:
2023
2022 (Restated)i
For the year ended 31 December
Number of shares
Number of shares
At 1 January
46,767,653
58,333,111
Shares acquired and transferred from treasury shares during the period
16,635,485
2,815,549
Shares awarded during the period
(41,906,547)
(14,381,007)
At 31 December
21,496,591
46,767,653
i Restated to include all SIP shares.
The Trust holds 12,016,528 shares at 31\u00a0December 2023 (2022: 38,480,430) while a further 9,480,063 shares are held by the
trustee of the SIP scheme at 31\u00a0December 2023 (2022 restated: 8,287,223).
The cost of shares held in the employee benefit trusts own shares of \u00a326m as at 31\u00a0December 2023 (2022: \u00a370m) is deducted from
equity.
22.2 Other treasury shares
In March 2022, the Group commenced a share buy-back programme to purchase ordinary shares of 5 pence each up to a
maximum consideration of \u00a3500m. As at 31 December 2022, ordinary shares bought back but not cancelled were 26,867,908 with
a carrying value of \u00a347m. During 2023, 2,253,878 shares with a carrying value of \u00a34m have been distributed in relation to employee
share schemes. An additional 11,200,000 shares with a carrying value of \u00a322m were transferred to the employee benefit trust. As
at 31\u00a0December 2023, the remaining 13,414,030 treasury shares with a carrying value of \u00a321m are disclosed as a deduction to
Shareholders equity within the Treasury shares reserve.
All share transactions were made on an exchange.", "dimensions": { "concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-669": { "value": "
23 Other reserves
Equity-settled
share-based
payment reserve
Merger reserve
Foreign currency
translation
reserve
Capital
redemption
reserve
Total Other
reserves
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
As at 1 January 2023
101
(11,732)
7
11
(11,613)
Exchange movements arising on foreign
operations
\u2014
\u2014
(8)
\u2014
(8)
Total items recognised in comprehensive income
\u2014
\u2014
(8)
\u2014
(8)
Vested employee share-based payments
(42)
\u2014
\u2014
\u2014
(42)
Expense recognised in respect of share-based
payments
32
\u2014
\u2014
\u2014
32
Tax effect of items recognised directly in equity
(2)
\u2014
\u2014
\u2014
(2)
Shares purchased in buy-back
\u2014
\u2014
\u2014
\u2014
\u2014
Net decrease in equity
(12)
\u2014
(8)
\u2014
(20)
As at 31 December 2023
89
(11,732)
(1)
11
(11,633)
Equity-settled
share-based
payment reserve
Merger reserve
Foreign currency
translation reserve
Capital
redemption
reserve
Total other
reserves
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
As at 1 January 2022
85
(11,732)
(13)
\u2014
(11,660)
Exchange movements arising on foreign
operations
\u2014
\u2014
20
\u2014
20
Total items recognised in comprehensive income
\u2014
\u2014
20
\u2014
20
Vested employee share-based payments
(23)
\u2014
\u2014
\u2014
(23)
Expense recognised in respect of share-based
payments
34
\u2014
\u2014
\u2014
34
Tax effect of items recognised directly in equity
5
\u2014
\u2014
\u2014
5
Shares purchased in buy-back
\u2014
\u2014
\u2014
11
11
Net increase in equity
16
\u2014
20
11
47
As at 31 December 2022
101
(11,732)
7
11
(11,613)
The merger reserve arises from the application of merger accounting principles to the acquisition of entities under common
control. It represents the difference between the aggregate capital reserves and the value of the entities acquired. On disposal of
the relevant entity, the related merger reserve is released directly to retained earnings.
", "dimensions": { "concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-671": { "value": "
24 Insurance liabilities
24.1 Determination of insurance, investment with DPF and reinsurance contract balances for different components of business
Note 2.3 describes the different types of insurance and investment contracts across the business. A description relating to the
determination of the policyholder and reinsurance contract balances with the key assumptions for each component of business is
set out in the notes below. The sensitivity of IFRS profit after tax to the key economic and non-economic assumptions is shown in
Note 32.7.
24.1.1 Discount rates
Cash flows relating to insurance and reinsurance contracts issued and reinsurance contracts held are discounted using risk-free
yield curves adjusted to reflect the liquidity characteristics of the contracts. As described in Note 1.5, the Group determines the
adjustment for illiquidity using either a top-down approach (for non-profit annuity contracts) or a bottom-up approach (for all other
contracts, including with-profits).
For with-profits contracts, the illiquidity premium is determined at each reporting date by applying a weighting of 75% to the
illiquidity premium for the reference portfolio of fixed interest assets. The illiquidity premium included in the discount rate as at
31\u00a0December 2023 was 47bps (2022: 55bps). The assumed investment returns are consistent with the discount rates applied to the
cash flows. The volatility of investment returns is set with reference to implied volatility data on traded market instruments, where
available, or on a best estimate basis where not.
The unit-linked contracts are considered to be highly liquid as they can be surrendered at any time by the policyholder for a
surrender value which is the value of the units less any surrender charge. Therefore the cash flows are discounted using rates
derived from the risk-free yield curve without addition of an illiquidity premium. The assumed unit fund growth rates are consistent
with the discount rates applied to the cash flows.
For non-profit annuity contracts, the illiquidity premium is derived from the yield of a reference portfolio of assets which is adjusted
to eliminate any factors that are not relevant to the annuity contracts. It is not required to adjust the yield curve for any differences
in the liquidity characteristics of the insurance contracts and the reference portfolio. The reference portfolios chosen for in-force
annuities are the assigned portfolios used to determine the SII matching adjustment. These are considered to be suitable as
reference portfolios for IFRS 17 reporting because their objective is to closely match the liability cash flows and there is strong
governance around their management. The discount rates at the inception of each contract are based on the yields within a
reference portfolio of assets which the Group expects to acquire to back the portfolio of new insurance contracts (the 'target
portfolio'). A weighted average of these discount rate curves is determined for the purpose of locking-in and calculating
movements in the CSM relating to each group of contracts. The point of sale discount rate curves are weighted by the premiums in
each group. On subsequent measurement of the fulfilment cash flows the yield at the valuation date on the reference portfolio is
adjusted, where necessary, in respect of new contracts incepting in the period to allow for a period of transition from the actual
asset holdings to the target portfolio. Typically, this period of transition can be up to 12 months but may be dependent on the
volume of new business.
The largest adjustment made to reference portfolio yield is in relation to credit risk. IFRS 17 is not prescriptive as to how the
adjustment for credit risk should be determined other than that it should reflect market risk premiums for credit risk. The Group
continues to calculate the credit risk adjustment using the same approach previously used for IFRS 4 reporting. This methodology
is considered appropriate for IFRS 17 reporting as it incorporates allowances for expected and unexpected credit events, including
internal and external views on the outlook for credit risk, and considers the relationship between credit risk and yield spreads. The
credit risk allowance comprises an amount for long-term best estimate defaults and downgrades, a provision for credit risk
premium and, where appropriate, an additional short-term overlay to reflect the prospective outlook for experience over the
coming period, including uncertainty in the outlook. The allowance for credit risk within the discount rate for shareholder-backed
annuities as at 31\u00a0December 2023 was 56bps (2022: 50bps). The allowance for credit risk within the discount rate for annuities in
the With-Profits Fund as at 31\u00a0December 2023 was 57bps (2022: 50bps). Due to the uncertainty of credit outlook in the UK and
given that the credit spreads have widened, primarily during the first half of 2023, the short-term overlay has been increased for
reporting as at 31 December 2023.
The derivation of the discount rates includes the impact of the UK Government consultation on residential ground rents (further
explained in note 31.8.1) and the resulting impact on the portfolio yield and the credit risk allowances.
The tables below show the discount rates used as at 31\u00a0December 2023 and 31\u00a0December 2022.
24 Insurance liabilities (continued)
24.1 Determination of insurance, investment with DPF and reinsurance contract balances for different components of business
(continued)
24.1.1 Discount rates (continued)
Discount rates as at 31 December 2023
1 year
5 years
10 years
15 years
20 years
25 years
30 years
With-profits contracts
5.20%
3.82%
3.75%
3.86%
3.90%
3.88%
3.82%
Unit-linked contracts
4.74%
3.35%
3.28%
3.40%
3.43%
3.41%
3.35%
Annuities \u2013 shareholder-backed
6.41%
5.03%
4.96%
5.08%
5.11%
5.09%
5.03%
Annuities \u2013 in the With-Profits Fund
6.34%
4.96%
4.89%
5.00%
5.04%
5.02%
4.96%
Discount rates as at 31 December 2022
1 year
5 years
10 years
15 years
20 years
25 years
30 years
With-profits contracts
5.01%
4.61%
4.26%
4.17%
4.08%
4.00%
3.90%
Unit-linked contracts
4.46%
4.06%
3.71%
3.62%
3.54%
3.45%
3.35%
Annuities \u2013 shareholder-backed
6.16%
5.76%
5.41%
5.32%
5.24%
5.15%
5.05%
Annuities \u2013 in the With-Profits Fund
5.91%
5.51%
5.16%
5.07%
4.98%
4.90%
4.80%
The tables below show the credit risk allowances for annuity business as at 31 December 2023 and 31 December 2022.
Credit risk allowances as at 31 December 2023
Shareholder-backed annuities
Annuities in the With-Profits Fund
Credit risk allowance
56 bps
57 bps
Credit risk allowance as proportion of spread over swaps
24.57%
24.73%
Net of reinsurance credit reserve (\u00a3m)i
516
199
Credit risk allowances as at 31 December 2022
Shareholder-backed annuities
Annuities in the With-Profits Fund
Credit risk allowance
50 bps
50 bps
Credit risk allowance as proportion of spread over swaps
22.10%
23.60%
Net of reinsurance credit reserve (\u00a3m)
450
193
24.1.2 Persistency and expense assumptions
The table below summarises the range of lapse rate assumptions used as at 31\u00a0December 2023 and 31\u00a0December 2022.
These\u00a0exclude assumptions related to retirement rates for pension contracts, which may be as high as 100% at certain ages.
Lapse rate assumptions
31 December 2023
31 December 2022
With-profits contracts
0% - 30%
0% - 45%
Unit-linked contracts
0% - 16%
0% - 20%
Annuities - shareholder-backed
N/A
N/A
Annuities - in the With-Profits Fund
N/A
N/A
The table below summarises the range of maintenance expense assumptions used as at 31\u00a0December 2023 and
31\u00a0December 2022, before allowance for future inflationary increases:
Maintenance expense assumptions (per policy)
31 December 2023
31 December 2022
\u00a3 p.a.
\u00a3 p.a.
With-profits contracts
7 - 239
7 - 200
Unit-linked contracts
43 - 239
45 - 200
Annuities - shareholder-backed
35 - 57
35
Annuities - in the With-Profits Fund
36
36
24 Insurance liabilities
24.1 Determination of insurance, investment with DPF and reinsurance contract balances for different components of business
(continued)
24.1.3 With-profits business
The With-Profits Fund mainly contains with-profits contracts but also contains some non-profit business (annuities, unit-linked,
and term assurances).
The with-profits contracts are a combination of insurance contracts, investment contracts with discretionary participation features
(DPF) and investment contracts without DPF. The investment contracts without DPF are within the scope of IFRS 9 and are
presented in Note 25.
For the with-profits contracts the insurance contract liability is the sum of the liability for incurred claims and the liability for
remaining coverage, which comprises:
\u2013 the fair value of the underlying items for in-force contracts, ie the value of the asset shares and the expected future additions to
asset shares, plus the present value of future costs less charges;
\u2013 the allowance for 'mutualisation' on in-force business;
\u2013 the risk adjustment for non-financial risk;
\u2013 the CSM; and
\u2013 the historical allowance for 'mutualisation' (based on the underlying items for the additional amounts expected to be paid to
current or future policyholders).
These items are described further below.
Future costs less charges
The future costs include a market-consistent valuation of the costs of guarantees, options and smoothing and this amount is
determined using stochastic modelling techniques. The main assumptions used to value the future costs less charges are listed
below:
\u2013 Assumptions relating to persistency (see Note 24.1.2) and the take-up of options offered on certain with-profits contracts are set
based on the results of the most recent experience analysis looking at the experience over recent years of the relevant business,
and supplemented by expert judgement within the business. In line with legislative changes, including pension freedoms, the
Group expects all policyholders of pension contracts to choose alternative post-vesting options;
\u2013 Management actions under which the Fund is managed in different scenarios;
\u2013 Maintenance and, for some classes of business, termination expense assumptions are expressed as per policy amounts (see
Note 24.1.2). They are set based on forecast expense levels, including an allowance for ongoing investment management
expenses, and are allocated between entities and product groups in accordance with the Group\u2019s internal cost allocation model.
They reflect the costs incurred by the Group which may differ from the internal charges to companies within the Group;
\u2013 Expense inflation assumptions are set consistent with the economic basis and based on the inflation swap spot curve;
\u2013 The contract liabilities for with-profits business also require assumptions for mortality. These are set based on the results of
recent experience analysis. Mortality experience over 2020 and 2021 was significantly higher than previous years as a result of
the COVID-19 pandemic. In line with broader industry approach, no weight has been given to pandemic experience; and
\u2013 Future investment return assumptions and discount rates are set at a risk-free yield curve plus an illiquidity premium (as set out
in Notes 1.5 and 24.1.1).
Allowances for mutualisation
The allowance for mutualisation on in-force business is the policyholders\u2019 share, which is assumed to be 90% (consistent with the
division of profits permitted by the Articles of Association), of the expected future surpluses arising from with-profits contracts,
which are determined as:
\u2013 the discounted value of the amounts that will be charged to policies;
\u2013 less: the discounted value of future shareholder transfers, gross of tax;
\u2013 less: the discounted value of other costs directly attributable to the group of insurance contracts; and
\u2013 less: the amount of any additional tax attributable to the above items.
The allowance for mutualisation on in-force business is included in the liabilities of the groups of insurance contracts.
24 Insurance liabilities (continued)
24.1 Determination of insurance, investment with DPF and reinsurance contract balances for different components of business
(continued)
24.1.3 With-profits business (continued)
Allowances for mutualisation (continued)
The historical allowance for mutualisation is the policyholders\u2019 share of the surpluses that have arisen in the past, which are
determined as the policyholders\u2019 share of the fair value of the underlying items for the additional amounts expected to be paid to
current or future policyholders less, if required, an allowance for any further tax balances that should be apportioned between
policyholders and shareholders. The policyholders\u2019 share is assessed on a prospective basis and is assumed to be 90%, consistent
with the division of profits permitted by the Articles of Association. The fair value of the underlying items reflects inter alia the fair
value of the annuity contracts in the With-Profits Fund, which is determined using the fair value methodology outlined in Note 1.2.1
but using current estimates of the expected cash flows and discount rate.
The historical allowance for mutualisation is separate from the liabilities of the groups of insurance contracts (in accordance with
IFRS 17 paragraph B71) and the Group has chosen to present this as part of the liability for remaining coverage.
With-profits options and guarantees
Certain policies written in the Group\u2019s With-Profits Fund give potentially valuable guarantees to policyholders, or options to change
policy benefits which can be exercised at the policyholders\u2019 discretion.
Most with-profits contracts give a guaranteed minimum payment on a specified date or range of dates or on death if before that
date or dates. For pensions products, the specified date is the policyholder\u2019s chosen retirement date or a range of dates around
that date. For endowment contracts, guarantees apply at the maturity date of the contract. For with-profits bonds it is often a
specified anniversary of commencement, in some cases with further dates thereafter.
The main types of options and guarantees offered for with-profits contracts are as follows:
\u2013 For conventional with-profits contracts, including endowment assurance contracts and whole of-life assurance contracts,
payouts are guaranteed at the sum assured together with any declared regular bonus;
\u2013 Conventional with-profits deferred annuity contracts have a basic annuity per annum to which bonuses are added. At maturity,
the cash claim value will reflect the current cost of providing the deferred annuity. Regular bonuses when added to with-profits
contracts usually increase the guaranteed amount;
\u2013 For unitised with-profits contracts and cash accumulation contracts the guaranteed payout is the initial investment (adjusted for
any withdrawals, where appropriate), less charges, plus any regular bonuses declared. If benefits are taken at a date other than
when the guarantee applies, a market value reduction may be applied to reflect the difference between the accumulated value of
the units and the market value of the underlying assets;
\u2013 For certain unitised with-profits contracts and cash accumulation contracts, policyholders have the option to defer their
retirement date when they reach maturity, and the terminal bonus granted at that point is guaranteed;
\u2013 For with-profits annuity contracts, there is a guaranteed minimum annuity payment below which benefit payments cannot fall
over the lifetime of the policies; and
\u2013 Certain pensions products have guaranteed annuity options at retirement, where the policyholder has the option to take the
benefit in the form of an annuity at a guaranteed conversion rate.
Risk adjustment for non-financial risk
The table below shows the confidence level used to determine the risk adjustment for with-profits contracts:
As at 31 December
2023
2022
Confidence level (percentile of the Group\u2019s one year risk distributions)
75th
75th
Confidence level (percentile of the risk distributions over the remaining lifetime)
60th
60th
CSM
The VFA is used to measure the CSM for with-profits business.
For contracts that provide both insurance coverage and investment-related services the amount of the services provided in any
given period is measured as the greater of the asset shares and the amounts payable on death during that period.
24 Insurance liabilities
24.1 Determination of insurance, investment with DPF and reinsurance contract balances for different components of business
(continued)
24.1.4 Unit-linked business
Only unit-linked contracts that transfer significant insurance risk are within the scope of IFRS 17. For these contracts the insurance
contract liability is the sum of the liability for incurred claims and the liability for remaining coverage, which comprises:
\u2013 the fair value of the underlying items, ie the value of the unit funds, plus the present value of future costs less charges;
\u2013 the risk adjustment for non-financial risk; and
\u2013 the CSM.
Future cash flows
The present value of future costs less charges is determined using best estimate assumptions for the non-financial risks of
mortality, on a basis that is appropriate for the policyholder profile, expenses and persistency (see Note 24.1.2). The assumed unit
fund growth rates are consistent with the discount rates applied to the cash flows (see Note 24.1.1).
Certain parts of the unit-linked business are reinsured externally by way of fund reinsurance. Where this is the case, the fair value
of the underlying asset and liability is equal to the unit value obligation.
Risk adjustment for non-financial risk
The table below shows the confidence level used to determine the risk adjustment for unit-linked contracts:
As at 31 December
2023
2022
Confidence level (percentile of the Group\u2019s one year risk distributions)
75th
75th
Confidence level (percentile of the risk distributions over the remaining lifetime)
60th
60th
CSM
The VFA is used to measure the CSM for unit-linked business.
The amount of the services provided in any given period is measured as the greater of the unit funds and the amounts payable on
death during that period.
24.1.5 Annuities and other long-term business
The majority of the policyholder liabilities in the \u2018annuities and other long-term business\u2019 component relate to annuity contracts.
The annuity insurance contract liabilities are calculated as the sum of the liability for incurred claims and the liability for remaining
coverage, which comprises:
\u2013 the expected value of future annuity payments and expenses;
\u2013 the risk adjustment for non-financial risk; and
\u2013 the CSM.
Future cash flows
The key assumptions used to value the future cash flows for annuity contracts, both insurance contracts issued and reinsurance
contracts held, are described below.
Mortality
Mortality assumptions for annuity business are set in light of recent population and internal experience, with an allowance for
expected future mortality improvements. Given the long-term nature of annuity business, annuitant mortality remains a significant
assumption in determining insurance liabilities. The assumptions used reference recent England & Wales population mortality data,
consistent with the CMI mortality projections model with specific risk factors applied on a per policy basis to reflect the features of
the Group\u2019s portfolio.
An increase in mortality rates was observed over 2020 and 2021 due to the COVID-19 pandemic. Higher mortality experience may
be expected to continue to some extent over the short-term, with significant excess deaths observed in the population over 2022.
However, there is significant uncertainty and the longer-term implications for mortality rates among the annuitant population are
unknown at this stage. In line with broader industry approach, zero weight has been given to pandemic experience. This is an area
that will continue to be monitored by the Group.
No changes have been made to best-estimate assumptions for current mortality in the year ended 31\u00a0December 2023. The 2023
mortality improvements assumption is expressed in terms of the CMI 2021 model, updated from the CMI 2020 used in 2022 while
the parameters of the model have been maintained. A full review of the best estimate assumptions was carried out in 2022
including a bottom-up review of the mortality improvements assumption following the COVID-19 pandemic.
24 Insurance liabilities (continued)
24.1 Determination of insurance, investment with DPF and reinsurance contract balances for different components of business
(continued)
24.1.5 Annuities and other long-term business (continued)
The mortality improvement assumptions used are summarised in the table below, with all other assumptions reflecting the core
CMI projection:
Period ended
Model versioni
Long-term improvement rateii
Smoothing parameter (Sk)ii
31 December 2023
CMI 2021
For males: 1.60% pa
For females: 1.60% pa
For males: 7.25
For females: 7.75
31 December 2022
CMI 2020
For males: 1.60% pa
For females: 1.60% pa
For males: 7.25
For females: 7.75
i A parameter in the model to reflect socio-economic differences between the portfolio and population experience is also utilised. This adjusts initial
mortality improvement rates, varying by age and gender. This is unchanged at all ages relative to 31\u00a0December 2022.
ii The tapering of improvements to zero is set to occur between ages 90-110 at 31\u00a0December 2023 which is unchanged from 31\u00a0December 2022.
iii The smoothing parameter controls the amount of smoothing by calendar year when determining the level of initial mortality improvements.
The mortality assumptions for in-force vested annuities also cover annuities in deferment.
Valuation interest rates
See Note 24.1.1. The same approach is also used to derive the discount rates applied to reinsurance cash flows.
Expenses
Maintenance expense assumptions are expressed as per policy amounts (see Note 24.1.2). They are set based on forecast expense
levels, including an allowance for ongoing investment management expenses and are allocated between entities and product
groups in accordance with the Group\u2019s internal cost allocation model. They reflect the costs incurred by the Group which may differ
from the internal charges to companies within the Group. Expense inflation assumptions are set consistent with the economic
basis and based on the inflation swap spot curve. These assumptions therefore take recent increases in inflation into account, and
allow for the market-driven long-term view of future inflation. Increases in costs that are expected to follow an inflation index are
considered by the Group to relate to financial risk.
Risk adjustment for non-financial risk
The table below shows the confidence level used to determine the risk adjustment for annuities and other long-term business:
As at 31 December
2023
2022
Confidence level (percentile of the Group\u2019s one year risk distributions)
75th
75th
Confidence level (percentile of the risk distributions over the remaining lifetime)
60th
60th
CSM
The General Measurement Model is used to measure the CSM for annuities and other long-term business. For annuities in
payment the amount of the services provided in any given period is the annualised amount of income.
24.2 Movements in insurance, investment with DPF and reinsurance contract balances
The breakdown of groups of insurance, investment with DPF and reinsurance contracts issued, and reinsurance contracts held,
that are in an asset position and those in a liability position is set out in the table below:
As at 31 December
2023
Shareholder-backed funds and subsidiaries
With-profits
sub-fundsi
Unit-linked liabilities
Annuity and other
long-term business
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Insurance contract liabilities
Insurance contract liabilities
31,017
4,404
13,892
49,313
Investment contracts with DPF liabilities
92,579
\u2014
243
92,822
123,596
4,404
14,135
142,135
Insurance contract assets
Insurance contract assets
\u2014
\u2014
44
44
\u2014
\u2014
44
44
Reinsurance contracts
Reinsurance contract assets
11
7
1,081
1,099
Reinsurance contract liabilities
1
21
335
357
24 Insurance liabilities
As at 31 December
Restatedii
2022
Shareholder-backed funds and subsidiaries
With-profits
sub-fundsi
Unit-linked liabilities
Annuity and other
long-term business
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Insurance contract liabilities
Insurance contract liabilities
31,911
4,598
13,967
50,476
Investment contracts with DPF liabilities
91,266
\u2014
234
91,500
123,177
4,598
14,201
141,976
Insurance contract assets
Insurance contract assets
\u2014
\u2014
39
39
\u2014
\u2014
39
39
Reinsurance contracts
Reinsurance contract assets
8
5
1,069
1,082
Reinsurance contract liabilities
1
22
325
348
i Includes the With-Profits Sub-Fund and the Defined Charge Participating Sub-Fund, including the non-profit business written within these funds.
ii The comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
The following table sets out the carrying amounts of insurance, investment with DPF and reinsurance contracts expected to be
recovered or settled more than 12 months after the reporting date.
2023
2022
As at 31 December
\u00a3m
\u00a3m
Insurance contract assets
50
44
Insurance contract liabilities
(44,056)
(43,715)
Investment contracts with DPF liabilities
(83,488)
(82,218)
Reinsurance contract assets
1,053
1,048
Reinsurance contract liabilities
(371)
(365)
The following reconciliations show how the net carrying amounts of insurance, investment with DPF and reinsurance contracts in
each group of insurance contracts issued, and reinsurance contracts held, changed during the year as a result of cash flows and
amounts recognised in the statement of profit or loss.
For insurance contracts issued and reinsurance contracts held, tables are presented that analyse changes in the estimates of
the\u00a0present value of future cash flows, the risk adjustment for non-financial risk and the CSM and separate tables that analyse
movements in the liabilities for remaining coverage and liabilities for incurred claims, reconciling these movements to the line items
in the statement of profit or loss.
For insurance contracts issued, these analysis tables are then presented for each line of business. For reinsurance contracts held
98% (2022: 99%) relates to annuity and other long-term business contracts and so separate tables for each line of business are not
presented.
24 Insurance liabilities
24.2.1 Total insurance contract liabilities
Insurance contracts
Analysis by remaining coverage and incurred claims
2023
2022
Liabilities for remaining
coverage
Liabilities for remaining
coverage
Excluding
loss
component
Loss
component
Liabilities
for incurred
claims
Total
Excluding
loss
component
Loss
component
Liabilities
for incurred
claims
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
140,841
106
1,029
141,976
159,729
143
949
160,821
Opening insurance contract assets
(43)
\u2014
4
(39)
(31)
\u2014
3
(28)
Net opening balance
140,798
106
1,033
141,937
159,698
143
952
160,793
Insurance revenue
Contracts under the modified
retrospective transition approach
(337)
\u2014
\u2014
(337)
(25)
\u2014
\u2014
(25)
Contracts under the fair value transition
approach
(3,239)
\u2014
\u2014
(3,239)
(3,118)
\u2014
\u2014
(3,118)
New contracts and contracts under the
fully retrospective transition approach
(311)
\u2014
\u2014
(311)
(182)
\u2014
\u2014
(182)
(3,887)
\u2014
\u2014
(3,887)
(3,325)
\u2014
\u2014
(3,325)
Insurance service expenses
Incurred claims and other insurance
service expenses
\u2014
(7)
2,859
2,852
\u2014
(7)
2,910
2,903
Amortisation of insurance acquisition
cash flows
56
\u2014
\u2014
56
26
\u2014
\u2014
26
Adjustments to liability for incurred
claims
\u2014
\u2014
(54)
(54)
\u2014
\u2014
3
3
Losses and reversals of losses on
onerous contracts
\u2014
(20)
\u2014
(20)
\u2014
17
\u2014
17
56
(27)
2,805
2,834
26
10
2,913
2,949
Insurance service result
(3,831)
(27)
2,805
(1,053)
(3,299)
10
2,913
(376)
Finance expense/(income) from
insurance contracts issued
7,329
1
(12)
7,318
(11,774)
(47)
(2)
(11,823)
Total changes in income statement
3,498
(26)
2,793
6,265
(15,073)
(37)
2,911
(12,199)
Investment components and premium
refunds
(10,924)
\u2014
10,924
\u2014
(10,287)
\u2014
10,287
\u2014
Cash flows
Premiums received
7,748
\u2014
\u2014
7,748
6,622
\u2014
\u2014
6,622
Incurred claims paid and other
insurance service expenses paid
including investment component
\u2014
\u2014
(13,696)
(13,696)
\u2014
\u2014
(13,117)
(13,117)
Insurance acquisition cash flows
(163)
\u2014
\u2014
(163)
(162)
\u2014
\u2014
(162)
Total cash flows
7,585
\u2014
(13,696)
(6,111)
6,460
\u2014
(13,117)
(6,657)
Net closing balance
140,957
80
1,054
142,091
140,798
106
1,033
141,937
Closing insurance contract liabilities
141,007
80
1,048
142,135
140,841
106
1,029
141,976
Closing insurance contract assets
(50)
\u2014
6
(44)
(43)
\u2014
4
(39)
Net closing balance
140,957
80
1,054
142,091
140,798
106
1,033
141,937
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.1 Total insurance contract liabilities (continued)
Insurance contracts
Analysis by measurement component
2023
Contractual service margin
Estimates
of present
value of
future cash
flows
Risk
adjustment
for non-
financial
risk
Contracts
under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total
CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
135,373
624
2,041
3,694
244
5,979
141,976
Opening insurance contract assets
(76)
3
\u2014
11
23
34
(39)
Net opening balance
135,297
627
2,041
3,705
267
6,013
141,937
Changes that relate to current services
CSM recognised in profit or loss for the services
provided
\u2014
\u2014
(221)
(383)
(45)
(649)
(649)
Change in the risk adjustment for non-financial risk for
the risk expired
\u2014
(57)
\u2014
\u2014
\u2014
\u2014
(57)
Expense recognised for incurred policyholder tax
(255)
\u2014
\u2014
\u2014
\u2014
\u2014
(255)
Experience adjustments
(18)
\u2014
\u2014
\u2014
\u2014
\u2014
(18)
(273)
(57)
(221)
(383)
(45)
(649)
(979)
Changes that relate to future services
Contracts initially recognised in the period
(181)
16
\u2014
\u2014
165
165
\u2014
Changes in estimates reflected in the CSM
46
31
(194)
93
24
(77)
\u2014
Changes in estimates that result in onerous contract
losses or reversal of those losses
(20)
\u2014
\u2014
\u2014
\u2014
\u2014
(20)
(155)
47
(194)
93
189
88
(20)
Changes that relate to past services
Adjustments to liabilities for incurred claims
(54)
\u2014
\u2014
\u2014
\u2014
\u2014
(54)
(54)
\u2014
\u2014
\u2014
\u2014
\u2014
(54)
Insurance service result
(482)
(10)
(415)
(290)
144
(561)
(1,053)
Finance expense/(income) from insurance contracts
issued
6,941
19
121
206
31
358
7,318
Total changes in income statement
6,459
9
(294)
(84)
175
(203)
6,265
Cash flows
Premiums received
7,748
\u2014
\u2014
\u2014
\u2014
\u2014
7,748
Incurred claims paid and other insurance service
expenses paid including investment component
(13,696)
\u2014
\u2014
\u2014
\u2014
\u2014
(13,696)
Insurance acquisition cash flows
(163)
\u2014
\u2014
\u2014
\u2014
\u2014
(163)
Total cash flows
(6,111)
\u2014
\u2014
\u2014
\u2014
\u2014
(6,111)
Net closing balance
135,645
636
1,747
3,621
442
5,810
142,091
Closing insurance contract liabilities
135,738
632
1,747
3,609
409
5,765
142,135
Closing insurance contract assets
(93)
4
\u2014
12
33
45
(44)
Net closing balance
135,645
636
1,747
3,621
442
5,810
142,091
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.1 Total insurance contract liabilities (continued)
Insurance contracts (continued)
Analysis by measurement component (continued)
2022
Contractual service margin
Estimates of
present
value of
future cash
flows
Risk
adjustment
for non-
financial risk
Contracts under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
154,698
980
1,696
3,337
110
5,143
160,821
Opening insurance contract assets
(58)
3
\u2014
10
17
27
(28)
Net opening balance
154,640
983
1,696
3,347
127
5,170
160,793
Changes that relate to current services
CSM recognised in profit or loss for the services
provided
\u2014
\u2014
(229)
(411)
(24)
(664)
(664)
Change in the risk adjustment for non-financial risk
for the risk expired
\u2014
(63)
\u2014
\u2014
\u2014
\u2014
(63)
Expense recognised for incurred policyholder taxi
262
\u2014
\u2014
\u2014
\u2014
\u2014
262
Experience adjustments
63
\u2014
\u2014
\u2014
\u2014
\u2014
63
325
(63)
(229)
(411)
(24)
(664)
(402)
Changes that relate to future services
Contracts initially recognised in the period
(80)
3
\u2014
\u2014
78
78
1
Changes in estimates reflected in the CSM
(1,425)
93
556
694
83
1,333
1
Changes in estimates that result in onerous contract
losses or reversal of those losses
16
(1)
\u2014
\u2014
\u2014
\u2014
15
(1,489)
95
556
694
161
1,411
17
Changes that relate to past services
Adjustments to liabilities for incurred claims
9
\u2014
\u2014
\u2014
\u2014
\u2014
9
9
\u2014
\u2014
\u2014
\u2014
\u2014
9
Insurance service result
(1,155)
32
327
283
137
747
(376)
Finance expense/(income) from insurance contracts
issuedi
(11,531)
(388)
18
75
3
96
(11,823)
Total changes in income statement
(12,686)
(356)
345
358
140
843
(12,199)
Cash flows
Premiums received
6,622
\u2014
\u2014
\u2014
\u2014
\u2014
6,622
Incurred claims paid and other insurance service
expenses paid including investment component
(13,117)
\u2014
\u2014
\u2014
\u2014
\u2014
(13,117)
Insurance acquisition cash flows
(162)
\u2014
\u2014
\u2014
\u2014
\u2014
(162)
Total cash flows
(6,657)
\u2014
\u2014
\u2014
\u2014
\u2014
(6,657)
Net closing balance
135,297
627
2,041
3,705
267
6,013
141,937
Closing insurance contract liabilities
135,373
624
2,041
3,694
244
5,979
141,976
Closing insurance contract assets
(76)
3
\u2014
11
23
34
(39)
Net closing balance
135,297
627
2,041
3,705
267
6,013
141,937
i Following a review of the Group's presentation of policyholder tax, comparatives for 31 December 2022 have been restated from those previously reported
in the 2023 interim financial statements.
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.1 Total insurance contract liabilities (continued)
Reinsurance contracts
Analysis by remaining coverage and incurred claims
2023
2022
Assets for remaining
coverage
Assets for remaining
coverage
Excluding
loss recovery
component
Loss
recovery
component
Recoverable
for incurred
claims
Total
Excluding loss
recovery
component
Loss
recovery
component
Recoverable
for incurred
claims
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening reinsurance contract liabilities
363
\u2014
(15)
348
549
\u2014
(3)
546
Opening reinsurance contract assets
(931)
(52)
(99)
(1,082)
(1,519)
(92)
(104)
(1,715)
Net opening balance
(568)
(52)
(114)
(734)
(970)
(92)
(107)
(1,169)
Net expenses from reinsurance
contracts held
Allocation of reinsurance premiums
paid
493
\u2014
\u2014
493
472
\u2014
\u2014
472
Amounts recoverable from
reinsurers
Recoveries of incurred claims and
other insurance service expenses
\u2014
\u2014
(463)
(463)
\u2014
\u2014
(493)
(493)
Recoveries and reversals of recoveries
of losses on onerous underlying
contracts
\u2014
11
\u2014
11
\u2014
40
\u2014
40
Adjustments to assets for incurred
claims
\u2014
\u2014
54
54
\u2014
\u2014
(4)
(4)
\u2014
11
(409)
(398)
\u2014
40
(497)
(457)
Effect of changes in the risk of
reinsurers non-performance
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
493
11
(409)
95
472
40
(497)
15
Finance expenses/(income) from
reinsurance contracts held
(39)
\u2014
\u2014
(39)
472
\u2014
\u2014
472
Total changes in income statement
454
11
(409)
56
944
40
(497)
487
Cash flows
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Premiums and similar expenses paid
(516)
\u2014
\u2014
(516)
(543)
\u2014
\u2014
(543)
Amounts recovered
\u2014
\u2014
452
452
\u2014
\u2014
491
491
Total cash flows
(516)
\u2014
452
(64)
(543)
\u2014
491
(52)
Net closing balance
(630)
(41)
(71)
(742)
(569)
(52)
(113)
(734)
Closing reinsurance contract liabilities
369
\u2014
(12)
357
363
\u2014
(15)
348
Closing reinsurance contract assets
(999)
(41)
(59)
(1,099)
(932)
(52)
(98)
(1,082)
Net closing balance
(630)
(41)
(71)
(742)
(569)
(52)
(113)
(734)
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.1 Total insurance contract liabilities (continued)
Reinsurance contracts (continued)
Analysis by measurement component
2023
Contractual service margin
Estimates
of present
value of
future cash
flows
Risk
adjustment
for non-
financial
risk
Contracts under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening reinsurance contract liabilities
567
(95)
\u2014
(123)
(1)
(124)
348
Opening reinsurance contract assets
(855)
(54)
(6)
(5)
(162)
(173)
(1,082)
Net opening balance
(288)
(149)
(6)
(128)
(163)
(297)
(734)
Changes that relate to current services
CSM recognised in profit or loss for the services
received
\u2014
\u2014
1
11
4
16
16
Change in the risk adjustment for non-financial risk
for the risk expired
\u2014
10
\u2014
\u2014
\u2014
\u2014
10
Experience adjustments
4
\u2014
\u2014
\u2014
\u2014
\u2014
4
4
10
1
11
4
16
30
Changes that relate to future services
Contracts initially recognised in the period
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Changes in estimates reflected in the CSM
44
(4)
\u2014
(17)
(22)
(39)
1
Changes in the fulfilment cash flows that do not
adjust the CSM for the group of underlying contracts
10
\u2014
\u2014
\u2014
\u2014
\u2014
10
54
(4)
\u2014
(17)
(22)
(39)
11
Changes that relate to past services
Asset for incurred claims
54
\u2014
\u2014
\u2014
\u2014
\u2014
54
54
\u2014
\u2014
\u2014
\u2014
\u2014
54
Insurance service result
112
6
1
(6)
(18)
(23)
95
Net finance income from reinsurance contracts
(26)
(6)
\u2014
(3)
(4)
(7)
(39)
Total changes in the income statement
86
\u2014
1
(9)
(22)
(30)
56
Cash flows
Premiums and similar expenses paid
(516)
\u2014
\u2014
\u2014
\u2014
\u2014
(516)
Amounts recovered
452
\u2014
\u2014
\u2014
\u2014
\u2014
452
Total cash flows
(64)
\u2014
\u2014
\u2014
\u2014
\u2014
(64)
Net closing balance
(266)
(149)
(5)
(137)
(185)
(327)
(742)
Closing reinsurance contract liabilities
581
(94)
\u2014
(129)
(1)
(130)
357
Closing reinsurance contract assets
(847)
(55)
(5)
(8)
(184)
(197)
(1,099)
Net closing balance
(266)
(149)
(5)
(137)
(185)
(327)
(742)
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.1 Total insurance contract liabilities (continued)
Reinsurance contracts (continued)
Analysis by measurement component (continued)
2022
Contractual service margin
Estimates of
present
value of
future cash
flows
Risk
adjustment
for non-
financial risk
Contracts under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening reinsurance contract liabilities
748
(161)
\u2014
(41)
\u2014
(41)
546
Opening reinsurance contract assets
(1,488)
(132)
(4)
(3)
(88)
(95)
(1,715)
Net opening balance
(740)
(293)
(4)
(44)
(88)
(136)
(1,169)
Changes that relate to current services
CSM recognised in profit or loss for the services
received
\u2014
\u2014
2
10
2
14
14
Change in the risk adjustment for non-financial risk
for the risk expired
\u2014
16
\u2014
\u2014
\u2014
\u2014
16
Experience adjustments
(17)
\u2014
\u2014
\u2014
\u2014
\u2014
(17)
(17)
16
2
10
2
14
13
Changes that relate to future services
Changes in estimates reflected in the CSM
185
(12)
(4)
(92)
(77)
(173)
\u2014
Changes in the fulfilment cash flows that do not
adjust the CSM for the group of underlying contracts
6
\u2014
\u2014
\u2014
\u2014
\u2014
6
191
(12)
(4)
(92)
(77)
(173)
6
Changes that relate to past services
Asset for incurred claims
(4)
\u2014
\u2014
\u2014
\u2014
\u2014
(4)
(4)
\u2014
\u2014
\u2014
\u2014
\u2014
(4)
Insurance service result
170
4
(2)
(82)
(75)
(159)
15
Net finance income from reinsurance contracts
334
140
\u2014
(2)
\u2014
(2)
472
Total changes in the income statement
504
144
(2)
(84)
(75)
(161)
487
Cash flows
Premiums and similar expenses paid
(543)
\u2014
\u2014
\u2014
\u2014
\u2014
(543)
Amounts recovered
491
\u2014
\u2014
\u2014
\u2014
\u2014
491
Total cash flows
(52)
\u2014
\u2014
\u2014
\u2014
\u2014
(52)
Net closing balance
(288)
(149)
(6)
(128)
(163)
(297)
(734)
Closing reinsurance contract liabilities
567
(95)
\u2014
(123)
(1)
(124)
348
Closing reinsurance contract assets
(855)
(54)
(6)
(5)
(162)
(173)
(1,082)
Net closing balance
(288)
(149)
(6)
(128)
(163)
(297)
(734)
24 Insurance liabilities
24.2.2 With-profits sub-funds
Insurance contracts
Analysis by remaining coverage and incurred claims
2023
2022
Liabilities for remaining
coverage
Liabilities for remaining
coverage
Excluding
loss
component
and liability
for incurred
claims
Loss
component
Liabilities
for incurred
claims
Total
Excluding
loss
component
and liability
for incurred
claims
Loss
component
Liabilities for
incurred
claims
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
122,807
7
363
123,177
135,311
\u2014
349
135,660
Opening insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net opening balance
122,807
7
363
123,177
135,311
\u2014
349
135,660
Insurance revenue
Contracts under the modified
retrospective transition approach
(331)
\u2014
\u2014
(331)
(19)
\u2014
\u2014
(19)
Contracts under the fair value transition
approach
(1,863)
\u2014
\u2014
(1,863)
(1,820)
\u2014
\u2014
(1,820)
New contracts and contracts under the
fully retrospective transition approach
(213)
\u2014
\u2014
(213)
(98)
\u2014
\u2014
(98)
(2,407)
\u2014
\u2014
(2,407)
(1,937)
\u2014
\u2014
(1,937)
Insurance service expenses
Incurred claims and other insurance
service expenses
\u2014
\u2014
1,597
1,597
\u2014
(4)
1,657
1,653
Amortisation of insurance acquisition
cash flows
26
\u2014
\u2014
26
8
\u2014
\u2014
8
Adjustments to liability for incurred
claims
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Losses and reversals of losses on
onerous contracts
\u2014
4
\u2014
4
\u2014
11
\u2014
11
26
4
1,597
1,627
8
7
1,657
1,672
Insurance service result
(2,381)
4
1,597
(780)
(1,929)
7
1,657
(265)
Finance expense/(income) from
insurance contracts issued
6,144
\u2014
(12)
6,132
(6,977)
\u2014
(4)
(6,981)
Total changes in income statement
3,763
4
1,585
5,352
(8,906)
7
1,653
(7,246)
Investment components and premium
refunds
(10,391)
\u2014
10,391
\u2014
(9,790)
\u2014
9,790
\u2014
Cash flows
Premiums received
7,157
\u2014
\u2014
7,157
6,331
\u2014
\u2014
6,331
Incurred claims paid and other
insurance service expenses paid
including investment component
\u2014
\u2014
(11,951)
(11,951)
\u2014
\u2014
(11,429)
(11,429)
Insurance acquisition cash flows
(139)
\u2014
\u2014
(139)
(139)
\u2014
\u2014
(139)
Total cash flows
7,018
\u2014
(11,951)
(4,933)
6,192
\u2014
(11,429)
(5,237)
Net closing balance
123,197
11
388
123,596
122,807
7
363
123,177
Closing insurance contract liabilities
123,197
11
388
123,596
122,807
7
363
123,177
Closing insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net closing balance
123,197
11
388
123,596
122,807
7
363
123,177
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.2 With-profits sub-funds (continued)
Insurance contracts (continued)
Analysis by measurement component
2023
Contractual service margin
Estimates of
present value
of future cash
flows
Risk
adjustment for
non-financial
risk
Contracts
under
modified
retrospective
transition
approach
Contracts
under the fair
value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
118,740
221
2,041
1,986
189
4,216
123,177
Opening insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net opening balance
118,740
221
2,041
1,986
189
4,216
123,177
Changes that relate to current services
CSM recognised in profit or loss for the
services provided
\u2014
\u2014
(221)
(244)
(34)
(499)
(499)
Change in the risk adjustment for non-
financial risk for the risk expired
\u2014
(24)
\u2014
\u2014
\u2014
\u2014
(24)
Revenue recognised for incurred
policyholder tax
(249)
\u2014
\u2014
\u2014
\u2014
\u2014
(249)
Experience adjustments
(12)
\u2014
\u2014
\u2014
\u2014
\u2014
(12)
(261)
(24)
(221)
(244)
(34)
(499)
(784)
Changes that relate to future services
Contracts initially recognised in the period
(124)
5
\u2014
\u2014
119
119
\u2014
Changes in estimates reflected in the CSM
177
19
(194)
(19)
17
(196)
\u2014
Changes in estimates that result in
onerous contract losses or reversal of
those losses
4
\u2014
\u2014
\u2014
\u2014
\u2014
4
57
24
(194)
(19)
136
(77)
4
Changes that relate to past services
Adjustments to liabilities for incurred
claims
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Insurance service result
(204)
\u2014
(415)
(263)
102
(576)
(780)
Finance expense/(income) from insurance
contracts issued
5,832
1
121
154
24
299
6,132
Total changes in income statement
5,628
1
(294)
(109)
126
(277)
5,352
Cash flows
Premiums received
7,157
\u2014
\u2014
\u2014
\u2014
\u2014
7,157
Incurred claims paid and other insurance
service expenses paid including
investment component
(11,951)
\u2014
\u2014
\u2014
\u2014
\u2014
(11,951)
Insurance acquisition cash flows
(139)
\u2014
\u2014
\u2014
\u2014
\u2014
(139)
Total cash flows
(4,933)
\u2014
\u2014
\u2014
\u2014
\u2014
(4,933)
Net closing balance
119,435
222
1,747
1,877
315
3,939
123,596
Closing insurance contract liabilities
119,435
222
1,747
1,877
315
3,939
123,596
Closing insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net closing balance
119,435
222
1,747
1,877
315
3,939
123,596
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.2 With-profits sub-funds (continued)
Insurance contracts (continued)
Analysis by measurement component (continued)
2022
Contractual service margin
Estimates of
present value
of future cash
flows
Risk
adjustment for
non-financial
risk
Contracts
under modified
retrospective
transition
approach
Contracts
under the fair
value transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
131,811
274
1,694
1,792
89
3,575
135,660
Opening insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net opening balance
131,811
274
1,694
1,792
89
3,575
135,660
Changes that relate to current services
CSM recognised in profit or loss for the
services provided
\u2014
\u2014
(229)
(279)
(18)
(526)
(526)
Change in the risk adjustment for non-
financial risk for the risk expired
\u2014
(22)
\u2014
\u2014
\u2014
\u2014
(22)
Expense recognised for incurred
policyholder tax
243
\u2014
\u2014
\u2014
\u2014
\u2014
243
Experience adjustments
23
\u2014
\u2014
\u2014
\u2014
\u2014
23
266
(22)
(229)
(279)
(18)
(526)
(282)
Changes that relate to future services
Contracts initially recognised in the period
(49)
1
\u2014
\u2014
49
49
1
Changes in estimates reflected in the CSM
(1,109)
56
558
427
68
1,053
\u2014
Changes in estimates that result in onerous
contract losses or reversal of those losses
10
\u2014
\u2014
\u2014
\u2014
\u2014
10
(1,148)
57
558
427
117
1,102
11
Changes that relate to past services
Adjustments to liabilities for incurred
claims
6
\u2014
\u2014
\u2014
\u2014
\u2014
6
6
\u2014
\u2014
\u2014
\u2014
\u2014
6
Insurance service result
(876)
35
329
148
99
576
(265)
Finance expense/(income) from insurance
contracts issued
(6,958)
(88)
18
46
1
65
(6,981)
Total changes in income statement
(7,834)
(53)
347
194
100
641
(7,246)
Cash flows
Premiums received
6,331
\u2014
\u2014
\u2014
\u2014
\u2014
6,331
Incurred claims paid and other
insurance service expenses paid
including investment component
(11,429)
\u2014
\u2014
\u2014
\u2014
\u2014
(11,429)
Insurance acquisition cash flows
(139)
\u2014
\u2014
\u2014
\u2014
\u2014
(139)
Total cash flows
(5,237)
\u2014
\u2014
\u2014
\u2014
\u2014
(5,237)
Net closing balance
118,740
221
2,041
1,986
189
4,216
123,177
Closing insurance contract liabilities
118,740
221
2,041
1,986
189
4,216
123,177
Closing insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net closing balance
118,740
221
2,041
1,986
189
4,216
123,177
24 Insurance liabilities
24.2.3 Unit-linked liabilities
Insurance contracts
Analysis by remaining coverage and incurred claims
2023
2022
Liabilities for remaining
coverage
Liabilities for remaining
coverage
Excluding
loss
component
Loss
component
Liabilities
for incurred
claims
Total
Excluding
loss
component
Loss
component
Liabilities for
incurred
claims
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
4,139
13
446
4,598
4,941
\u2014
377
5,318
Opening insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net opening balance
4,139
13
446
4,598
4,941
\u2014
377
5,318
Insurance revenue
Contracts under the modified
retrospective transition approach
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Contracts under the fair value
transition approach
(52)
\u2014
\u2014
(52)
(28)
\u2014
\u2014
(28)
New contracts and contracts
under the fully retrospective
transition approach
\u2014
\u2014
\u2014
\u2014
(1)
\u2014
\u2014
(1)
(52)
\u2014
\u2014
(52)
(29)
\u2014
\u2014
(29)
Insurance service expenses
Incurred claims and other
insurance service expenses
\u2014
(2)
66
64
\u2014
\u2014
62
62
Amortisation of insurance
acquisition cash flows
1
\u2014
\u2014
1
(6)
\u2014
\u2014
(6)
Adjustments to liability for
incurred claims
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Losses and reversals of losses on
onerous contracts
\u2014
(11)
\u2014
(11)
\u2014
13
\u2014
13
1
(13)
66
54
(6)
13
62
69
Insurance service result
(51)
(13)
66
2
(35)
13
62
40
Finance expense/(income) from
insurance contracts issued
239
\u2014
\u2014
239
(360)
\u2014
2
(358)
Total changes in income
statement
188
(13)
66
241
(395)
13
64
(318)
Investment components and
premium refunds
(456)
\u2014
456
\u2014
(420)
\u2014
420
\u2014
Cash flows
Premiums received
38
\u2014
\u2014
38
13
\u2014
\u2014
13
Incurred claims paid and other
insurance service expenses paid
including investment component
\u2014
\u2014
(473)
(473)
\u2014
\u2014
(415)
(415)
Insurance acquisition cash flows
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Total cash flows
38
\u2014
(473)
(435)
13
\u2014
(415)
(402)
Net closing balance
3,909
\u2014
495
4,404
4,139
13
446
4,598
Closing insurance contract liabilities
3,909
\u2014
495
4,404
4,139
13
446
4,598
Closing insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net closing balance
3,909
\u2014
495
4,404
4,139
13
446
4,598
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.3 Unit-linked liabilities (continued)
Insurance contracts (continued)
Analysis by measurement component
2023
Contractual service margin
Estimates of
present value
of future cash
flows
Risk
adjustment
for non-
financial risk
Contracts
under
modified
retrospective
transition
approach
Contracts
under the fair
value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
4,557
6
\u2014
35
\u2014
35
4,598
Opening insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net opening balance
4,557
6
\u2014
35
\u2014
35
4,598
Changes that relate to current
services
CSM recognised in profit or loss for
the services provided
\u2014
\u2014
\u2014
(9)
\u2014
(9)
(9)
Change in the risk adjustment for non-
financial risk for the risk expired
\u2014
(1)
\u2014
\u2014
\u2014
\u2014
(1)
Revenue recognised for incurred
policyholder tax
(6)
\u2014
\u2014
\u2014
\u2014
\u2014
(6)
Experience adjustments
29
\u2014
\u2014
\u2014
\u2014
\u2014
29
23
(1)
\u2014
(9)
\u2014
(9)
13
Changes that relate to future
services
Contracts initially recognised in the
period
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Changes in estimates reflected in the
CSM
(19)
1
\u2014
18
\u2014
18
\u2014
Changes in estimates that result in
onerous contract losses or reversal of
those losses
(11)
\u2014
\u2014
\u2014
\u2014
\u2014
(11)
(30)
1
\u2014
18
\u2014
18
(11)
Changes that relate to past services
Adjustments to liabilities for incurred
claims
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Insurance service result
(7)
\u2014
\u2014
9
\u2014
9
2
Finance expense/(income) from
insurance contracts issued
234
\u2014
\u2014
5
\u2014
5
239
Total changes in income statement
227
\u2014
\u2014
14
\u2014
14
241
Cash flows
Premiums received
38
\u2014
\u2014
\u2014
\u2014
\u2014
38
Incurred claims paid and other
insurance service expenses paid
including investment component
(473)
\u2014
\u2014
\u2014
\u2014
\u2014
(473)
Insurance acquisition cash flows
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Total cash flows
(435)
\u2014
\u2014
\u2014
\u2014
\u2014
(435)
Net closing balance
4,349
6
\u2014
49
\u2014
49
4,404
Closing insurance contract liabilities
4,349
6
\u2014
49
\u2014
49
4,404
Closing insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net closing balance
4,349
6
\u2014
49
\u2014
49
4,404
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.3 Unit-linked liabilities (continued)
Insurance contracts (continued)
Analysis by measurement component (continued)
2022
Contractual service margin
Estimates of
present value
of future cash
flows
Risk
adjustment for
non-financial
risk
Contracts
under
modified
retrospective
transition
approach
Contracts
under the fair
value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
5,274
7
\u2014
37
\u2014
37
5,318
Opening insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net opening balance
5,274
7
\u2014
37
\u2014
37
5,318
Changes that relate to current
services
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
CSM recognised in profit or loss for
the services provided
\u2014
\u2014
\u2014
(11)
\u2014
(11)
(11)
Change in the risk adjustment for non-
financial risk for the risk expired
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Expense recognised for incurred
policyholder tax
19
\u2014
\u2014
\u2014
\u2014
\u2014
19
Experience adjustments
19
\u2014
\u2014
\u2014
\u2014
\u2014
19
38
\u2014
\u2014
(11)
\u2014
(11)
27
Changes that relate to future
services
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Contracts initially recognised in the
period
(2)
\u2014
\u2014
\u2014
2
2
\u2014
Changes in estimates reflected in the
CSM
(6)
(1)
\u2014
9
(2)
7
\u2014
Changes in estimates that result in
onerous contract losses or reversal of
those losses
13
\u2014
\u2014
\u2014
\u2014
\u2014
13
5
(1)
\u2014
9
\u2014
9
13
Changes that relate to past services
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Adjustments to liabilities for incurred
claims
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Insurance service result
43
(1)
\u2014
(2)
\u2014
(2)
40
Finance expense/(income) from
insurance contracts issued
(358)
\u2014
\u2014
\u2014
\u2014
\u2014
(358)
Total changes in income statement
(315)
(1)
\u2014
(2)
\u2014
(2)
(318)
Cash flows
Premiums received
13
\u2014
\u2014
\u2014
\u2014
\u2014
13
Incurred claims paid and other
insurance service expenses paid
including investment component
(415)
\u2014
\u2014
\u2014
\u2014
\u2014
(415)
Insurance acquisition cash flows
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Total cash flows
(402)
\u2014
\u2014
\u2014
\u2014
\u2014
(402)
Net closing balance
4,557
6
\u2014
35
\u2014
35
4,598
Closing insurance contract liabilities
4,557
6
\u2014
35
\u2014
35
4,598
Closing insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net closing balance
4,557
6
\u2014
35
\u2014
35
4,598
24 Insurance liabilities
24.2.4 Annuity and other long-term business
Insurance contracts
Analysis by remaining coverage and incurred claims
2023
2022
Liabilities for remaining
coverage
Liability for remaining
coverage
Excluding
loss
component
Loss
component
Liabilities for
incurred
claims
Total
Excluding
loss
component
Loss
component
Liabilities for
incurred
claims
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
13,895
86
220
14,201
19,477
143
223
19,843
Opening insurance contract assets
(43)
\u2014
4
(39)
(31)
\u2014
3
(28)
Net opening balance
13,852
86
224
14,162
19,446
143
226
19,815
Insurance revenue
Contracts under the modified
retrospective transition approach
(6)
\u2014
\u2014
(6)
(6)
\u2014
\u2014
(6)
Contracts under the fair value
transition approach
(1,324)
\u2014
\u2014
(1,324)
(1,270)
\u2014
\u2014
(1,270)
New contracts and contracts
under the fully retrospective
transition approach
(98)
\u2014
\u2014
(98)
(83)
\u2014
\u2014
(83)
(1,428)
\u2014
\u2014
(1,428)
(1,359)
\u2014
\u2014
(1,359)
Insurance service expenses
Incurred claims and other
insurance service expenses
\u2014
(5)
1,196
1,191
\u2014
(3)
1,191
1,188
Amortisation of insurance
acquisition cash flows
29
\u2014
\u2014
29
24
\u2014
\u2014
24
Adjustments to liability for incurred
claims
\u2014
\u2014
(54)
(54)
\u2014
\u2014
3
3
Losses and reversals of losses on
onerous contracts
\u2014
(13)
\u2014
(13)
\u2014
(7)
\u2014
(7)
29
(18)
1,142
1,153
24
(10)
1,194
1,208
Insurance service result
(1,399)
(18)
1,142
(275)
(1,335)
(10)
1,194
(151)
Finance expense/(income) from
insurance contracts issued
946
1
\u2014
947
(4,437)
(47)
\u2014
(4,484)
Total changes in income
statement
(453)
(17)
1,142
672
(5,772)
(57)
1,194
(4,635)
Investment components and
premium refunds
(77)
\u2014
77
\u2014
(77)
\u2014
77
\u2014
Cash flows
Premiums received
553
\u2014
\u2014
553
278
\u2014
\u2014
278
Incurred claims paid and other
insurance service expenses paid
including investment component
\u2014
\u2014
(1,272)
(1,272)
\u2014
\u2014
(1,273)
(1,273)
Insurance acquisition cash flows
(24)
\u2014
\u2014
(24)
(23)
\u2014
\u2014
(23)
Total cash flows
529
\u2014
(1,272)
(743)
255
\u2014
(1,273)
(1,018)
Net closing balance
13,851
69
171
14,091
13,852
86
224
14,162
Closing insurance contract liabilities
13,901
69
165
14,135
13,895
86
220
14,201
Closing insurance contract assets
(50)
\u2014
6
(44)
(43)
\u2014
4
(39)
Net closing balance
13,851
69
171
14,091
13,852
86
224
14,162
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.4 Annuity and other long-term business (continued)
Insurance contracts (continued)
Analysis by measurement component
2023
Contractual service margin
Estimates
of present
value of
future cash
flows
Risk
adjustment
for non-
financial
risk
Contracts under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
12,076
397
\u2014
1,673
55
1,728
14,201
Opening insurance contract assets
(76)
3
\u2014
11
23
34
(39)
Net opening balance
12,000
400
\u2014
1,684
78
1,762
14,162
Changes that relate to current services
CSM recognised in profit or loss for the services
provided
\u2014
\u2014
\u2014
(130)
(11)
(141)
(141)
Change in the risk adjustment for non-financial risk
for the risk expired
\u2014
(32)
\u2014
\u2014
\u2014
\u2014
(32)
Experience adjustments
(35)
\u2014
\u2014
\u2014
\u2014
\u2014
(35)
(35)
(32)
\u2014
(130)
(11)
(141)
(208)
Changes that relate to future services
Contracts initially recognised in the period
(57)
11
\u2014
\u2014
46
46
\u2014
Changes in estimates reflected in the CSM
(112)
11
\u2014
94
7
101
\u2014
Changes in estimates that result in onerous
contract losses or reversal of those losses
(13)
\u2014
\u2014
\u2014
\u2014
\u2014
(13)
(182)
22
\u2014
94
53
147
(13)
Changes that relate to past services
Adjustments to liabilities for incurred claims
(54)
\u2014
\u2014
\u2014
\u2014
\u2014
(54)
(54)
\u2014
\u2014
\u2014
\u2014
\u2014
(54)
Insurance service result
(271)
(10)
\u2014
(36)
42
6
(275)
Finance expense/(income) from insurance
contracts issued
875
18
\u2014
47
7
54
947
Total changes in income statement
604
8
\u2014
11
49
60
672
Cash flows
Premiums received
553
\u2014
\u2014
\u2014
\u2014
\u2014
553
Incurred claims paid and other insurance service
expenses paid including investment component
(1,272)
\u2014
\u2014
\u2014
\u2014
\u2014
(1,272)
Insurance acquisition cash flows
(24)
\u2014
\u2014
\u2014
\u2014
\u2014
(24)
Total cash flows
(743)
\u2014
\u2014
\u2014
\u2014
\u2014
(743)
Net closing balance
11,861
408
\u2014
1,695
127
1,822
14,091
Closing insurance contract liabilities
11,954
404
\u2014
1,683
94
1,777
14,135
Closing insurance contract assets
(93)
4
\u2014
12
33
45
(44)
Net closing balance
11,861
408
\u2014
1,695
127
1,822
14,091
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.4 Annuity and other long-term business (continued)
Insurance contracts (continued)
Analysis by measurement component (continued)
2022
Contractual service margin
Estimates of
present
value of
future cash
flows
Risk
adjustment
for non-
financial risk
Contracts under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
17,613
699
2
1,508
21
1,531
19,843
Opening insurance contract assets
(58)
3
\u2014
10
17
27
(28)
Net opening balance
17,555
702
2
1,518
38
1,558
19,815
Changes that relate to current services
CSM recognised in profit or loss for the services
provided
\u2014
\u2014
\u2014
(121)
(6)
(127)
(127)
Change in the risk adjustment for non-financial risk
for the risk expired
\u2014
(41)
\u2014
\u2014
\u2014
\u2014
(41)
Experience adjustments
21
\u2014
\u2014
\u2014
\u2014
\u2014
21
21
(41)
\u2014
(121)
(6)
(127)
(147)
Changes that relate to future services
Contracts initially recognised in the period
(29)
2
\u2014
\u2014
27
27
\u2014
Changes in estimates reflected in the CSM
(310)
38
(2)
258
17
273
1
Changes in estimates that result in onerous contract
losses or reversal of those losses
(7)
(1)
\u2014
\u2014
\u2014
\u2014
(8)
(346)
39
(2)
258
44
300
(7)
Changes that relate to past services
Adjustments to liabilities for incurred claims
3
\u2014
\u2014
\u2014
\u2014
\u2014
3
3
\u2014
\u2014
\u2014
\u2014
\u2014
3
Insurance service result
(322)
(2)
(2)
137
38
173
(151)
Finance expense/(income) from insurance contracts
issued
(4,215)
(300)
\u2014
29
2
31
(4,484)
Total changes in income statement
(4,537)
(302)
(2)
166
40
204
(4,635)
Cash flows
Premiums received
278
\u2014
\u2014
\u2014
\u2014
\u2014
278
Incurred claims paid and other insurance service
expenses paid including investment component
(1,273)
\u2014
\u2014
\u2014
\u2014
\u2014
(1,273)
Insurance acquisition cash flows
(23)
\u2014
\u2014
\u2014
\u2014
\u2014
(23)
Total cash flows
(1,018)
\u2014
\u2014
\u2014
\u2014
\u2014
(1,018)
Net closing balance
12,000
400
\u2014
1,684
78
1,762
14,162
Closing insurance contract liabilities
12,076
397
\u2014
1,673
55
1,728
14,201
Closing insurance contract assets
(76)
3
\u2014
11
23
34
(39)
Net closing balance
12,000
400
\u2014
1,684
78
1,762
14,162
24 Insurance liabilities
24.3 Effect of contracts initially recognised in the year
The following tables summarise the effect on the measurement components arising from the initial recognition of insurance
contracts in the year.
2023
2022
Profitable
contracts
Profitable
contracts
Issued
Issued
For the year ended 31 December
\u00a3m
\u00a3m
With-profits sub-funds:
Contracts initially recognised in current year
Claims and other insurance service expenses payable
6,223
5,686
Insurance acquisition cash flows
137
135
Estimates of the present value of future cash outflows
6,360
5,821
Estimates of the present value of future cash inflows
(6,484)
(5,870)
Risk adjustment for non-financial risk
5
1
CSM
119
49
Losses recognised on initial recognition
\u2014
1
Unit-linked liabilities:
Contracts initially recognised in current year
Claims and other insurance service expenses payable
\u2014
21
Insurance acquisition cash flows
\u2014
\u2014
Estimates of the present value of future cash outflows
\u2014
21
Estimates of the present value of future cash inflows
\u2014
(23)
Risk adjustment for non-financial risk
\u2014
\u2014
CSM
\u2014
2
Losses recognised on initial recognition
\u2014
\u2014
Annuity and other long-term business:
Contracts initially recognised in current year
Claims and other insurance service expenses payable
303
75
Insurance acquisition cash flows
25
27
Estimates of the present value of future cash outflows
328
102
Estimates of the present value of future cash inflows
(385)
(131)
Risk adjustment for non-financial risk
11
2
CSM
46
27
Losses recognised on initial recognition
\u2014
\u2014
Total:
Contracts initially recognised in current year
Claims and other insurance service expenses payable
6,526
5,782
Insurance acquisition cash flows
162
162
Estimates of the present value of future cash outflows
6,688
5,944
Estimates of the present value of future cash inflows
(6,869)
(6,024)
Risk adjustment for non-financial risk
16
3
CSM
165
78
Losses recognised on initial recognition
\u2014
1
In the years ended 31\u00a0December 2023 and 31\u00a0December 2022, there were no new reinsurance contracts r24 Insurance liabilities
24.4 Expected recognition of the contractual service margin
2023
2022
Insurance contracts issued
Insurance contracts issued
With-profits
sub-funds
Unit-linked
liabilities
Annuity and
other long-
term
business
Total
With-profits
sub-funds
Unit-linked
liabilities
Annuity and
other long-
term
business
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Number of years until expected to be recognised:
0 to 1 year
428
8
114
550
462
4
102
568
1 to 2 years
379
6
110
495
407
4
100
511
2 to 3 years
343
5
106
454
368
4
98
470
3 to 4 years
309
5
103
417
332
4
95
431
4 to 5 years
279
4
99
382
299
3
92
394
5 to 10 years
1,019
13
435
1,467
1,088
9
415
1,512
10 to 15 years
570
5
331
906
608
4
327
939
15 to 20 years
301
2
227
530
321
2
231
554
20 to 25 years
155
1
138
294
164
1
142
307
Over 25 years
156
\u2014
159
315
167
\u2014
160
327
Total
3,939
49
1,822
5,810
4,216
35
1,762
6,013
The insurance contracts issued represents the run off of the net of insurance assets and insurance liabilities CSM. The amounts
presented in the table represent the current discounted value of the CSM amortisation expected to be recognised in the insurance
service result in future periods. The actual CSM amortisation in future periods will differ from that presented due to the impacts of
future new business, recalibrations of the CSM, changes in estimates reflected in the CSMs and changes in the future coverage
units.
2023
2022
Reinsurance
contracts
held
Reinsurance
contracts
held
As at 31 December
\u00a3m
\u00a3m
Number of years until expected to be recognised:
0 to 1 year
(9)
(8)
1 to 2 years
(9)
(8)
2 to 3 years
(9)
(9)
3 to 4 years
(10)
(9)
4 to 5 years
(10)
(9)
5 to 10 years
(55)
(50)
10 to 15 years
(56)
(50)
15 to 20 years
(50)
(44)
20 to 25 years
(40)
(35)
Over 25 years
(79)
(75)
Total
(327)
(297)
For reinsurance contracts held 98% (2022: 98%) relates to annuity and other long-term business contracts. The reinsurance
contracts held represents the run off of the net of reinsurance assets and reinsurance liabilities CSM.
", "dimensions": { "concept": "ifrs-full:DisclosureOfReinsuranceExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-670": { "value": "
24 Insurance liabilities
24.1 Determination of insurance, investment with DPF and reinsurance contract balances for different components of business
Note 2.3 describes the different types of insurance and investment contracts across the business. A description relating to the
determination of the policyholder and reinsurance contract balances with the key assumptions for each component of business is
set out in the notes below. The sensitivity of IFRS profit after tax to the key economic and non-economic assumptions is shown in
Note 32.7.
24.1.1 Discount rates
Cash flows relating to insurance and reinsurance contracts issued and reinsurance contracts held are discounted using risk-free
yield curves adjusted to reflect the liquidity characteristics of the contracts. As described in Note 1.5, the Group determines the
adjustment for illiquidity using either a top-down approach (for non-profit annuity contracts) or a bottom-up approach (for all other
contracts, including with-profits).
For with-profits contracts, the illiquidity premium is determined at each reporting date by applying a weighting of 75% to the
illiquidity premium for the reference portfolio of fixed interest assets. The illiquidity premium included in the discount rate as at
31\u00a0December 2023 was 47bps (2022: 55bps). The assumed investment returns are consistent with the discount rates applied to the
cash flows. The volatility of investment returns is set with reference to implied volatility data on traded market instruments, where
available, or on a best estimate basis where not.
The unit-linked contracts are considered to be highly liquid as they can be surrendered at any time by the policyholder for a
surrender value which is the value of the units less any surrender charge. Therefore the cash flows are discounted using rates
derived from the risk-free yield curve without addition of an illiquidity premium. The assumed unit fund growth rates are consistent
with the discount rates applied to the cash flows.
For non-profit annuity contracts, the illiquidity premium is derived from the yield of a reference portfolio of assets which is adjusted
to eliminate any factors that are not relevant to the annuity contracts. It is not required to adjust the yield curve for any differences
in the liquidity characteristics of the insurance contracts and the reference portfolio. The reference portfolios chosen for in-force
annuities are the assigned portfolios used to determine the SII matching adjustment. These are considered to be suitable as
reference portfolios for IFRS 17 reporting because their objective is to closely match the liability cash flows and there is strong
governance around their management. The discount rates at the inception of each contract are based on the yields within a
reference portfolio of assets which the Group expects to acquire to back the portfolio of new insurance contracts (the 'target
portfolio'). A weighted average of these discount rate curves is determined for the purpose of locking-in and calculating
movements in the CSM relating to each group of contracts. The point of sale discount rate curves are weighted by the premiums in
each group. On subsequent measurement of the fulfilment cash flows the yield at the valuation date on the reference portfolio is
adjusted, where necessary, in respect of new contracts incepting in the period to allow for a period of transition from the actual
asset holdings to the target portfolio. Typically, this period of transition can be up to 12 months but may be dependent on the
volume of new business.
The largest adjustment made to reference portfolio yield is in relation to credit risk. IFRS 17 is not prescriptive as to how the
adjustment for credit risk should be determined other than that it should reflect market risk premiums for credit risk. The Group
continues to calculate the credit risk adjustment using the same approach previously used for IFRS 4 reporting. This methodology
is considered appropriate for IFRS 17 reporting as it incorporates allowances for expected and unexpected credit events, including
internal and external views on the outlook for credit risk, and considers the relationship between credit risk and yield spreads. The
credit risk allowance comprises an amount for long-term best estimate defaults and downgrades, a provision for credit risk
premium and, where appropriate, an additional short-term overlay to reflect the prospective outlook for experience over the
coming period, including uncertainty in the outlook. The allowance for credit risk within the discount rate for shareholder-backed
annuities as at 31\u00a0December 2023 was 56bps (2022: 50bps). The allowance for credit risk within the discount rate for annuities in
the With-Profits Fund as at 31\u00a0December 2023 was 57bps (2022: 50bps). Due to the uncertainty of credit outlook in the UK and
given that the credit spreads have widened, primarily during the first half of 2023, the short-term overlay has been increased for
reporting as at 31 December 2023.
The derivation of the discount rates includes the impact of the UK Government consultation on residential ground rents (further
explained in note 31.8.1) and the resulting impact on the portfolio yield and the credit risk allowances.
The tables below show the discount rates used as at 31\u00a0December 2023 and 31\u00a0December 2022.
24 Insurance liabilities (continued)
24.1 Determination of insurance, investment with DPF and reinsurance contract balances for different components of business
(continued)
24.1.1 Discount rates (continued)
Discount rates as at 31 December 2023
1 year
5 years
10 years
15 years
20 years
25 years
30 years
With-profits contracts
5.20%
3.82%
3.75%
3.86%
3.90%
3.88%
3.82%
Unit-linked contracts
4.74%
3.35%
3.28%
3.40%
3.43%
3.41%
3.35%
Annuities \u2013 shareholder-backed
6.41%
5.03%
4.96%
5.08%
5.11%
5.09%
5.03%
Annuities \u2013 in the With-Profits Fund
6.34%
4.96%
4.89%
5.00%
5.04%
5.02%
4.96%
Discount rates as at 31 December 2022
1 year
5 years
10 years
15 years
20 years
25 years
30 years
With-profits contracts
5.01%
4.61%
4.26%
4.17%
4.08%
4.00%
3.90%
Unit-linked contracts
4.46%
4.06%
3.71%
3.62%
3.54%
3.45%
3.35%
Annuities \u2013 shareholder-backed
6.16%
5.76%
5.41%
5.32%
5.24%
5.15%
5.05%
Annuities \u2013 in the With-Profits Fund
5.91%
5.51%
5.16%
5.07%
4.98%
4.90%
4.80%
The tables below show the credit risk allowances for annuity business as at 31 December 2023 and 31 December 2022.
Credit risk allowances as at 31 December 2023
Shareholder-backed annuities
Annuities in the With-Profits Fund
Credit risk allowance
56 bps
57 bps
Credit risk allowance as proportion of spread over swaps
24.57%
24.73%
Net of reinsurance credit reserve (\u00a3m)i
516
199
Credit risk allowances as at 31 December 2022
Shareholder-backed annuities
Annuities in the With-Profits Fund
Credit risk allowance
50 bps
50 bps
Credit risk allowance as proportion of spread over swaps
22.10%
23.60%
Net of reinsurance credit reserve (\u00a3m)
450
193
24.1.2 Persistency and expense assumptions
The table below summarises the range of lapse rate assumptions used as at 31\u00a0December 2023 and 31\u00a0December 2022.
These\u00a0exclude assumptions related to retirement rates for pension contracts, which may be as high as 100% at certain ages.
Lapse rate assumptions
31 December 2023
31 December 2022
With-profits contracts
0% - 30%
0% - 45%
Unit-linked contracts
0% - 16%
0% - 20%
Annuities - shareholder-backed
N/A
N/A
Annuities - in the With-Profits Fund
N/A
N/A
The table below summarises the range of maintenance expense assumptions used as at 31\u00a0December 2023 and
31\u00a0December 2022, before allowance for future inflationary increases:
Maintenance expense assumptions (per policy)
31 December 2023
31 December 2022
\u00a3 p.a.
\u00a3 p.a.
With-profits contracts
7 - 239
7 - 200
Unit-linked contracts
43 - 239
45 - 200
Annuities - shareholder-backed
35 - 57
35
Annuities - in the With-Profits Fund
36
36
24 Insurance liabilities
24.1 Determination of insurance, investment with DPF and reinsurance contract balances for different components of business
(continued)
24.1.3 With-profits business
The With-Profits Fund mainly contains with-profits contracts but also contains some non-profit business (annuities, unit-linked,
and term assurances).
The with-profits contracts are a combination of insurance contracts, investment contracts with discretionary participation features
(DPF) and investment contracts without DPF. The investment contracts without DPF are within the scope of IFRS 9 and are
presented in Note 25.
For the with-profits contracts the insurance contract liability is the sum of the liability for incurred claims and the liability for
remaining coverage, which comprises:
\u2013 the fair value of the underlying items for in-force contracts, ie the value of the asset shares and the expected future additions to
asset shares, plus the present value of future costs less charges;
\u2013 the allowance for 'mutualisation' on in-force business;
\u2013 the risk adjustment for non-financial risk;
\u2013 the CSM; and
\u2013 the historical allowance for 'mutualisation' (based on the underlying items for the additional amounts expected to be paid to
current or future policyholders).
These items are described further below.
Future costs less charges
The future costs include a market-consistent valuation of the costs of guarantees, options and smoothing and this amount is
determined using stochastic modelling techniques. The main assumptions used to value the future costs less charges are listed
below:
\u2013 Assumptions relating to persistency (see Note 24.1.2) and the take-up of options offered on certain with-profits contracts are set
based on the results of the most recent experience analysis looking at the experience over recent years of the relevant business,
and supplemented by expert judgement within the business. In line with legislative changes, including pension freedoms, the
Group expects all policyholders of pension contracts to choose alternative post-vesting options;
\u2013 Management actions under which the Fund is managed in different scenarios;
\u2013 Maintenance and, for some classes of business, termination expense assumptions are expressed as per policy amounts (see
Note 24.1.2). They are set based on forecast expense levels, including an allowance for ongoing investment management
expenses, and are allocated between entities and product groups in accordance with the Group\u2019s internal cost allocation model.
They reflect the costs incurred by the Group which may differ from the internal charges to companies within the Group;
\u2013 Expense inflation assumptions are set consistent with the economic basis and based on the inflation swap spot curve;
\u2013 The contract liabilities for with-profits business also require assumptions for mortality. These are set based on the results of
recent experience analysis. Mortality experience over 2020 and 2021 was significantly higher than previous years as a result of
the COVID-19 pandemic. In line with broader industry approach, no weight has been given to pandemic experience; and
\u2013 Future investment return assumptions and discount rates are set at a risk-free yield curve plus an illiquidity premium (as set out
in Notes 1.5 and 24.1.1).
Allowances for mutualisation
The allowance for mutualisation on in-force business is the policyholders\u2019 share, which is assumed to be 90% (consistent with the
division of profits permitted by the Articles of Association), of the expected future surpluses arising from with-profits contracts,
which are determined as:
\u2013 the discounted value of the amounts that will be charged to policies;
\u2013 less: the discounted value of future shareholder transfers, gross of tax;
\u2013 less: the discounted value of other costs directly attributable to the group of insurance contracts; and
\u2013 less: the amount of any additional tax attributable to the above items.
The allowance for mutualisation on in-force business is included in the liabilities of the groups of insurance contracts.
24 Insurance liabilities (continued)
24.1 Determination of insurance, investment with DPF and reinsurance contract balances for different components of business
(continued)
24.1.3 With-profits business (continued)
Allowances for mutualisation (continued)
The historical allowance for mutualisation is the policyholders\u2019 share of the surpluses that have arisen in the past, which are
determined as the policyholders\u2019 share of the fair value of the underlying items for the additional amounts expected to be paid to
current or future policyholders less, if required, an allowance for any further tax balances that should be apportioned between
policyholders and shareholders. The policyholders\u2019 share is assessed on a prospective basis and is assumed to be 90%, consistent
with the division of profits permitted by the Articles of Association. The fair value of the underlying items reflects inter alia the fair
value of the annuity contracts in the With-Profits Fund, which is determined using the fair value methodology outlined in Note 1.2.1
but using current estimates of the expected cash flows and discount rate.
The historical allowance for mutualisation is separate from the liabilities of the groups of insurance contracts (in accordance with
IFRS 17 paragraph B71) and the Group has chosen to present this as part of the liability for remaining coverage.
With-profits options and guarantees
Certain policies written in the Group\u2019s With-Profits Fund give potentially valuable guarantees to policyholders, or options to change
policy benefits which can be exercised at the policyholders\u2019 discretion.
Most with-profits contracts give a guaranteed minimum payment on a specified date or range of dates or on death if before that
date or dates. For pensions products, the specified date is the policyholder\u2019s chosen retirement date or a range of dates around
that date. For endowment contracts, guarantees apply at the maturity date of the contract. For with-profits bonds it is often a
specified anniversary of commencement, in some cases with further dates thereafter.
The main types of options and guarantees offered for with-profits contracts are as follows:
\u2013 For conventional with-profits contracts, including endowment assurance contracts and whole of-life assurance contracts,
payouts are guaranteed at the sum assured together with any declared regular bonus;
\u2013 Conventional with-profits deferred annuity contracts have a basic annuity per annum to which bonuses are added. At maturity,
the cash claim value will reflect the current cost of providing the deferred annuity. Regular bonuses when added to with-profits
contracts usually increase the guaranteed amount;
\u2013 For unitised with-profits contracts and cash accumulation contracts the guaranteed payout is the initial investment (adjusted for
any withdrawals, where appropriate), less charges, plus any regular bonuses declared. If benefits are taken at a date other than
when the guarantee applies, a market value reduction may be applied to reflect the difference between the accumulated value of
the units and the market value of the underlying assets;
\u2013 For certain unitised with-profits contracts and cash accumulation contracts, policyholders have the option to defer their
retirement date when they reach maturity, and the terminal bonus granted at that point is guaranteed;
\u2013 For with-profits annuity contracts, there is a guaranteed minimum annuity payment below which benefit payments cannot fall
over the lifetime of the policies; and
\u2013 Certain pensions products have guaranteed annuity options at retirement, where the policyholder has the option to take the
benefit in the form of an annuity at a guaranteed conversion rate.
Risk adjustment for non-financial risk
The table below shows the confidence level used to determine the risk adjustment for with-profits contracts:
As at 31 December
2023
2022
Confidence level (percentile of the Group\u2019s one year risk distributions)
75th
75th
Confidence level (percentile of the risk distributions over the remaining lifetime)
60th
60th
CSM
The VFA is used to measure the CSM for with-profits business.
For contracts that provide both insurance coverage and investment-related services the amount of the services provided in any
given period is measured as the greater of the asset shares and the amounts payable on death during that period.
24 Insurance liabilities
24.1 Determination of insurance, investment with DPF and reinsurance contract balances for different components of business
(continued)
24.1.4 Unit-linked business
Only unit-linked contracts that transfer significant insurance risk are within the scope of IFRS 17. For these contracts the insurance
contract liability is the sum of the liability for incurred claims and the liability for remaining coverage, which comprises:
\u2013 the fair value of the underlying items, ie the value of the unit funds, plus the present value of future costs less charges;
\u2013 the risk adjustment for non-financial risk; and
\u2013 the CSM.
Future cash flows
The present value of future costs less charges is determined using best estimate assumptions for the non-financial risks of
mortality, on a basis that is appropriate for the policyholder profile, expenses and persistency (see Note 24.1.2). The assumed unit
fund growth rates are consistent with the discount rates applied to the cash flows (see Note 24.1.1).
Certain parts of the unit-linked business are reinsured externally by way of fund reinsurance. Where this is the case, the fair value
of the underlying asset and liability is equal to the unit value obligation.
Risk adjustment for non-financial risk
The table below shows the confidence level used to determine the risk adjustment for unit-linked contracts:
As at 31 December
2023
2022
Confidence level (percentile of the Group\u2019s one year risk distributions)
75th
75th
Confidence level (percentile of the risk distributions over the remaining lifetime)
60th
60th
CSM
The VFA is used to measure the CSM for unit-linked business.
The amount of the services provided in any given period is measured as the greater of the unit funds and the amounts payable on
death during that period.
24.1.5 Annuities and other long-term business
The majority of the policyholder liabilities in the \u2018annuities and other long-term business\u2019 component relate to annuity contracts.
The annuity insurance contract liabilities are calculated as the sum of the liability for incurred claims and the liability for remaining
coverage, which comprises:
\u2013 the expected value of future annuity payments and expenses;
\u2013 the risk adjustment for non-financial risk; and
\u2013 the CSM.
Future cash flows
The key assumptions used to value the future cash flows for annuity contracts, both insurance contracts issued and reinsurance
contracts held, are described below.
Mortality
Mortality assumptions for annuity business are set in light of recent population and internal experience, with an allowance for
expected future mortality improvements. Given the long-term nature of annuity business, annuitant mortality remains a significant
assumption in determining insurance liabilities. The assumptions used reference recent England & Wales population mortality data,
consistent with the CMI mortality projections model with specific risk factors applied on a per policy basis to reflect the features of
the Group\u2019s portfolio.
An increase in mortality rates was observed over 2020 and 2021 due to the COVID-19 pandemic. Higher mortality experience may
be expected to continue to some extent over the short-term, with significant excess deaths observed in the population over 2022.
However, there is significant uncertainty and the longer-term implications for mortality rates among the annuitant population are
unknown at this stage. In line with broader industry approach, zero weight has been given to pandemic experience. This is an area
that will continue to be monitored by the Group.
No changes have been made to best-estimate assumptions for current mortality in the year ended 31\u00a0December 2023. The 2023
mortality improvements assumption is expressed in terms of the CMI 2021 model, updated from the CMI 2020 used in 2022 while
the parameters of the model have been maintained. A full review of the best estimate assumptions was carried out in 2022
including a bottom-up review of the mortality improvements assumption following the COVID-19 pandemic.
24 Insurance liabilities (continued)
24.1 Determination of insurance, investment with DPF and reinsurance contract balances for different components of business
(continued)
24.1.5 Annuities and other long-term business (continued)
The mortality improvement assumptions used are summarised in the table below, with all other assumptions reflecting the core
CMI projection:
Period ended
Model versioni
Long-term improvement rateii
Smoothing parameter (Sk)ii
31 December 2023
CMI 2021
For males: 1.60% pa
For females: 1.60% pa
For males: 7.25
For females: 7.75
31 December 2022
CMI 2020
For males: 1.60% pa
For females: 1.60% pa
For males: 7.25
For females: 7.75
i A parameter in the model to reflect socio-economic differences between the portfolio and population experience is also utilised. This adjusts initial
mortality improvement rates, varying by age and gender. This is unchanged at all ages relative to 31\u00a0December 2022.
ii The tapering of improvements to zero is set to occur between ages 90-110 at 31\u00a0December 2023 which is unchanged from 31\u00a0December 2022.
iii The smoothing parameter controls the amount of smoothing by calendar year when determining the level of initial mortality improvements.
The mortality assumptions for in-force vested annuities also cover annuities in deferment.
Valuation interest rates
See Note 24.1.1. The same approach is also used to derive the discount rates applied to reinsurance cash flows.
Expenses
Maintenance expense assumptions are expressed as per policy amounts (see Note 24.1.2). They are set based on forecast expense
levels, including an allowance for ongoing investment management expenses and are allocated between entities and product
groups in accordance with the Group\u2019s internal cost allocation model. They reflect the costs incurred by the Group which may differ
from the internal charges to companies within the Group. Expense inflation assumptions are set consistent with the economic
basis and based on the inflation swap spot curve. These assumptions therefore take recent increases in inflation into account, and
allow for the market-driven long-term view of future inflation. Increases in costs that are expected to follow an inflation index are
considered by the Group to relate to financial risk.
Risk adjustment for non-financial risk
The table below shows the confidence level used to determine the risk adjustment for annuities and other long-term business:
As at 31 December
2023
2022
Confidence level (percentile of the Group\u2019s one year risk distributions)
75th
75th
Confidence level (percentile of the risk distributions over the remaining lifetime)
60th
60th
CSM
The General Measurement Model is used to measure the CSM for annuities and other long-term business. For annuities in
payment the amount of the services provided in any given period is the annualised amount of income.
24.2 Movements in insurance, investment with DPF and reinsurance contract balances
The breakdown of groups of insurance, investment with DPF and reinsurance contracts issued, and reinsurance contracts held,
that are in an asset position and those in a liability position is set out in the table below:
As at 31 December
2023
Shareholder-backed funds and subsidiaries
With-profits
sub-fundsi
Unit-linked liabilities
Annuity and other
long-term business
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Insurance contract liabilities
Insurance contract liabilities
31,017
4,404
13,892
49,313
Investment contracts with DPF liabilities
92,579
\u2014
243
92,822
123,596
4,404
14,135
142,135
Insurance contract assets
Insurance contract assets
\u2014
\u2014
44
44
\u2014
\u2014
44
44
Reinsurance contracts
Reinsurance contract assets
11
7
1,081
1,099
Reinsurance contract liabilities
1
21
335
357
24 Insurance liabilities
As at 31 December
Restatedii
2022
Shareholder-backed funds and subsidiaries
With-profits
sub-fundsi
Unit-linked liabilities
Annuity and other
long-term business
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Insurance contract liabilities
Insurance contract liabilities
31,911
4,598
13,967
50,476
Investment contracts with DPF liabilities
91,266
\u2014
234
91,500
123,177
4,598
14,201
141,976
Insurance contract assets
Insurance contract assets
\u2014
\u2014
39
39
\u2014
\u2014
39
39
Reinsurance contracts
Reinsurance contract assets
8
5
1,069
1,082
Reinsurance contract liabilities
1
22
325
348
i Includes the With-Profits Sub-Fund and the Defined Charge Participating Sub-Fund, including the non-profit business written within these funds.
ii The comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
The following table sets out the carrying amounts of insurance, investment with DPF and reinsurance contracts expected to be
recovered or settled more than 12 months after the reporting date.
2023
2022
As at 31 December
\u00a3m
\u00a3m
Insurance contract assets
50
44
Insurance contract liabilities
(44,056)
(43,715)
Investment contracts with DPF liabilities
(83,488)
(82,218)
Reinsurance contract assets
1,053
1,048
Reinsurance contract liabilities
(371)
(365)
The following reconciliations show how the net carrying amounts of insurance, investment with DPF and reinsurance contracts in
each group of insurance contracts issued, and reinsurance contracts held, changed during the year as a result of cash flows and
amounts recognised in the statement of profit or loss.
For insurance contracts issued and reinsurance contracts held, tables are presented that analyse changes in the estimates of
the\u00a0present value of future cash flows, the risk adjustment for non-financial risk and the CSM and separate tables that analyse
movements in the liabilities for remaining coverage and liabilities for incurred claims, reconciling these movements to the line items
in the statement of profit or loss.
For insurance contracts issued, these analysis tables are then presented for each line of business. For reinsurance contracts held
98% (2022: 99%) relates to annuity and other long-term business contracts and so separate tables for each line of business are not
presented.
24 Insurance liabilities
24.2.1 Total insurance contract liabilities
Insurance contracts
Analysis by remaining coverage and incurred claims
2023
2022
Liabilities for remaining
coverage
Liabilities for remaining
coverage
Excluding
loss
component
Loss
component
Liabilities
for incurred
claims
Total
Excluding
loss
component
Loss
component
Liabilities
for incurred
claims
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
140,841
106
1,029
141,976
159,729
143
949
160,821
Opening insurance contract assets
(43)
\u2014
4
(39)
(31)
\u2014
3
(28)
Net opening balance
140,798
106
1,033
141,937
159,698
143
952
160,793
Insurance revenue
Contracts under the modified
retrospective transition approach
(337)
\u2014
\u2014
(337)
(25)
\u2014
\u2014
(25)
Contracts under the fair value transition
approach
(3,239)
\u2014
\u2014
(3,239)
(3,118)
\u2014
\u2014
(3,118)
New contracts and contracts under the
fully retrospective transition approach
(311)
\u2014
\u2014
(311)
(182)
\u2014
\u2014
(182)
(3,887)
\u2014
\u2014
(3,887)
(3,325)
\u2014
\u2014
(3,325)
Insurance service expenses
Incurred claims and other insurance
service expenses
\u2014
(7)
2,859
2,852
\u2014
(7)
2,910
2,903
Amortisation of insurance acquisition
cash flows
56
\u2014
\u2014
56
26
\u2014
\u2014
26
Adjustments to liability for incurred
claims
\u2014
\u2014
(54)
(54)
\u2014
\u2014
3
3
Losses and reversals of losses on
onerous contracts
\u2014
(20)
\u2014
(20)
\u2014
17
\u2014
17
56
(27)
2,805
2,834
26
10
2,913
2,949
Insurance service result
(3,831)
(27)
2,805
(1,053)
(3,299)
10
2,913
(376)
Finance expense/(income) from
insurance contracts issued
7,329
1
(12)
7,318
(11,774)
(47)
(2)
(11,823)
Total changes in income statement
3,498
(26)
2,793
6,265
(15,073)
(37)
2,911
(12,199)
Investment components and premium
refunds
(10,924)
\u2014
10,924
\u2014
(10,287)
\u2014
10,287
\u2014
Cash flows
Premiums received
7,748
\u2014
\u2014
7,748
6,622
\u2014
\u2014
6,622
Incurred claims paid and other
insurance service expenses paid
including investment component
\u2014
\u2014
(13,696)
(13,696)
\u2014
\u2014
(13,117)
(13,117)
Insurance acquisition cash flows
(163)
\u2014
\u2014
(163)
(162)
\u2014
\u2014
(162)
Total cash flows
7,585
\u2014
(13,696)
(6,111)
6,460
\u2014
(13,117)
(6,657)
Net closing balance
140,957
80
1,054
142,091
140,798
106
1,033
141,937
Closing insurance contract liabilities
141,007
80
1,048
142,135
140,841
106
1,029
141,976
Closing insurance contract assets
(50)
\u2014
6
(44)
(43)
\u2014
4
(39)
Net closing balance
140,957
80
1,054
142,091
140,798
106
1,033
141,937
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.1 Total insurance contract liabilities (continued)
Insurance contracts
Analysis by measurement component
2023
Contractual service margin
Estimates
of present
value of
future cash
flows
Risk
adjustment
for non-
financial
risk
Contracts
under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total
CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
135,373
624
2,041
3,694
244
5,979
141,976
Opening insurance contract assets
(76)
3
\u2014
11
23
34
(39)
Net opening balance
135,297
627
2,041
3,705
267
6,013
141,937
Changes that relate to current services
CSM recognised in profit or loss for the services
provided
\u2014
\u2014
(221)
(383)
(45)
(649)
(649)
Change in the risk adjustment for non-financial risk for
the risk expired
\u2014
(57)
\u2014
\u2014
\u2014
\u2014
(57)
Expense recognised for incurred policyholder tax
(255)
\u2014
\u2014
\u2014
\u2014
\u2014
(255)
Experience adjustments
(18)
\u2014
\u2014
\u2014
\u2014
\u2014
(18)
(273)
(57)
(221)
(383)
(45)
(649)
(979)
Changes that relate to future services
Contracts initially recognised in the period
(181)
16
\u2014
\u2014
165
165
\u2014
Changes in estimates reflected in the CSM
46
31
(194)
93
24
(77)
\u2014
Changes in estimates that result in onerous contract
losses or reversal of those losses
(20)
\u2014
\u2014
\u2014
\u2014
\u2014
(20)
(155)
47
(194)
93
189
88
(20)
Changes that relate to past services
Adjustments to liabilities for incurred claims
(54)
\u2014
\u2014
\u2014
\u2014
\u2014
(54)
(54)
\u2014
\u2014
\u2014
\u2014
\u2014
(54)
Insurance service result
(482)
(10)
(415)
(290)
144
(561)
(1,053)
Finance expense/(income) from insurance contracts
issued
6,941
19
121
206
31
358
7,318
Total changes in income statement
6,459
9
(294)
(84)
175
(203)
6,265
Cash flows
Premiums received
7,748
\u2014
\u2014
\u2014
\u2014
\u2014
7,748
Incurred claims paid and other insurance service
expenses paid including investment component
(13,696)
\u2014
\u2014
\u2014
\u2014
\u2014
(13,696)
Insurance acquisition cash flows
(163)
\u2014
\u2014
\u2014
\u2014
\u2014
(163)
Total cash flows
(6,111)
\u2014
\u2014
\u2014
\u2014
\u2014
(6,111)
Net closing balance
135,645
636
1,747
3,621
442
5,810
142,091
Closing insurance contract liabilities
135,738
632
1,747
3,609
409
5,765
142,135
Closing insurance contract assets
(93)
4
\u2014
12
33
45
(44)
Net closing balance
135,645
636
1,747
3,621
442
5,810
142,091
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.1 Total insurance contract liabilities (continued)
Insurance contracts (continued)
Analysis by measurement component (continued)
2022
Contractual service margin
Estimates of
present
value of
future cash
flows
Risk
adjustment
for non-
financial risk
Contracts under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
154,698
980
1,696
3,337
110
5,143
160,821
Opening insurance contract assets
(58)
3
\u2014
10
17
27
(28)
Net opening balance
154,640
983
1,696
3,347
127
5,170
160,793
Changes that relate to current services
CSM recognised in profit or loss for the services
provided
\u2014
\u2014
(229)
(411)
(24)
(664)
(664)
Change in the risk adjustment for non-financial risk
for the risk expired
\u2014
(63)
\u2014
\u2014
\u2014
\u2014
(63)
Expense recognised for incurred policyholder taxi
262
\u2014
\u2014
\u2014
\u2014
\u2014
262
Experience adjustments
63
\u2014
\u2014
\u2014
\u2014
\u2014
63
325
(63)
(229)
(411)
(24)
(664)
(402)
Changes that relate to future services
Contracts initially recognised in the period
(80)
3
\u2014
\u2014
78
78
1
Changes in estimates reflected in the CSM
(1,425)
93
556
694
83
1,333
1
Changes in estimates that result in onerous contract
losses or reversal of those losses
16
(1)
\u2014
\u2014
\u2014
\u2014
15
(1,489)
95
556
694
161
1,411
17
Changes that relate to past services
Adjustments to liabilities for incurred claims
9
\u2014
\u2014
\u2014
\u2014
\u2014
9
9
\u2014
\u2014
\u2014
\u2014
\u2014
9
Insurance service result
(1,155)
32
327
283
137
747
(376)
Finance expense/(income) from insurance contracts
issuedi
(11,531)
(388)
18
75
3
96
(11,823)
Total changes in income statement
(12,686)
(356)
345
358
140
843
(12,199)
Cash flows
Premiums received
6,622
\u2014
\u2014
\u2014
\u2014
\u2014
6,622
Incurred claims paid and other insurance service
expenses paid including investment component
(13,117)
\u2014
\u2014
\u2014
\u2014
\u2014
(13,117)
Insurance acquisition cash flows
(162)
\u2014
\u2014
\u2014
\u2014
\u2014
(162)
Total cash flows
(6,657)
\u2014
\u2014
\u2014
\u2014
\u2014
(6,657)
Net closing balance
135,297
627
2,041
3,705
267
6,013
141,937
Closing insurance contract liabilities
135,373
624
2,041
3,694
244
5,979
141,976
Closing insurance contract assets
(76)
3
\u2014
11
23
34
(39)
Net closing balance
135,297
627
2,041
3,705
267
6,013
141,937
i Following a review of the Group's presentation of policyholder tax, comparatives for 31 December 2022 have been restated from those previously reported
in the 2023 interim financial statements.
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.1 Total insurance contract liabilities (continued)
Reinsurance contracts
Analysis by remaining coverage and incurred claims
2023
2022
Assets for remaining
coverage
Assets for remaining
coverage
Excluding
loss recovery
component
Loss
recovery
component
Recoverable
for incurred
claims
Total
Excluding loss
recovery
component
Loss
recovery
component
Recoverable
for incurred
claims
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening reinsurance contract liabilities
363
\u2014
(15)
348
549
\u2014
(3)
546
Opening reinsurance contract assets
(931)
(52)
(99)
(1,082)
(1,519)
(92)
(104)
(1,715)
Net opening balance
(568)
(52)
(114)
(734)
(970)
(92)
(107)
(1,169)
Net expenses from reinsurance
contracts held
Allocation of reinsurance premiums
paid
493
\u2014
\u2014
493
472
\u2014
\u2014
472
Amounts recoverable from
reinsurers
Recoveries of incurred claims and
other insurance service expenses
\u2014
\u2014
(463)
(463)
\u2014
\u2014
(493)
(493)
Recoveries and reversals of recoveries
of losses on onerous underlying
contracts
\u2014
11
\u2014
11
\u2014
40
\u2014
40
Adjustments to assets for incurred
claims
\u2014
\u2014
54
54
\u2014
\u2014
(4)
(4)
\u2014
11
(409)
(398)
\u2014
40
(497)
(457)
Effect of changes in the risk of
reinsurers non-performance
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
493
11
(409)
95
472
40
(497)
15
Finance expenses/(income) from
reinsurance contracts held
(39)
\u2014
\u2014
(39)
472
\u2014
\u2014
472
Total changes in income statement
454
11
(409)
56
944
40
(497)
487
Cash flows
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Premiums and similar expenses paid
(516)
\u2014
\u2014
(516)
(543)
\u2014
\u2014
(543)
Amounts recovered
\u2014
\u2014
452
452
\u2014
\u2014
491
491
Total cash flows
(516)
\u2014
452
(64)
(543)
\u2014
491
(52)
Net closing balance
(630)
(41)
(71)
(742)
(569)
(52)
(113)
(734)
Closing reinsurance contract liabilities
369
\u2014
(12)
357
363
\u2014
(15)
348
Closing reinsurance contract assets
(999)
(41)
(59)
(1,099)
(932)
(52)
(98)
(1,082)
Net closing balance
(630)
(41)
(71)
(742)
(569)
(52)
(113)
(734)
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.1 Total insurance contract liabilities (continued)
Reinsurance contracts (continued)
Analysis by measurement component
2023
Contractual service margin
Estimates
of present
value of
future cash
flows
Risk
adjustment
for non-
financial
risk
Contracts under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening reinsurance contract liabilities
567
(95)
\u2014
(123)
(1)
(124)
348
Opening reinsurance contract assets
(855)
(54)
(6)
(5)
(162)
(173)
(1,082)
Net opening balance
(288)
(149)
(6)
(128)
(163)
(297)
(734)
Changes that relate to current services
CSM recognised in profit or loss for the services
received
\u2014
\u2014
1
11
4
16
16
Change in the risk adjustment for non-financial risk
for the risk expired
\u2014
10
\u2014
\u2014
\u2014
\u2014
10
Experience adjustments
4
\u2014
\u2014
\u2014
\u2014
\u2014
4
4
10
1
11
4
16
30
Changes that relate to future services
Contracts initially recognised in the period
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Changes in estimates reflected in the CSM
44
(4)
\u2014
(17)
(22)
(39)
1
Changes in the fulfilment cash flows that do not
adjust the CSM for the group of underlying contracts
10
\u2014
\u2014
\u2014
\u2014
\u2014
10
54
(4)
\u2014
(17)
(22)
(39)
11
Changes that relate to past services
Asset for incurred claims
54
\u2014
\u2014
\u2014
\u2014
\u2014
54
54
\u2014
\u2014
\u2014
\u2014
\u2014
54
Insurance service result
112
6
1
(6)
(18)
(23)
95
Net finance income from reinsurance contracts
(26)
(6)
\u2014
(3)
(4)
(7)
(39)
Total changes in the income statement
86
\u2014
1
(9)
(22)
(30)
56
Cash flows
Premiums and similar expenses paid
(516)
\u2014
\u2014
\u2014
\u2014
\u2014
(516)
Amounts recovered
452
\u2014
\u2014
\u2014
\u2014
\u2014
452
Total cash flows
(64)
\u2014
\u2014
\u2014
\u2014
\u2014
(64)
Net closing balance
(266)
(149)
(5)
(137)
(185)
(327)
(742)
Closing reinsurance contract liabilities
581
(94)
\u2014
(129)
(1)
(130)
357
Closing reinsurance contract assets
(847)
(55)
(5)
(8)
(184)
(197)
(1,099)
Net closing balance
(266)
(149)
(5)
(137)
(185)
(327)
(742)
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.1 Total insurance contract liabilities (continued)
Reinsurance contracts (continued)
Analysis by measurement component (continued)
2022
Contractual service margin
Estimates of
present
value of
future cash
flows
Risk
adjustment
for non-
financial risk
Contracts under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening reinsurance contract liabilities
748
(161)
\u2014
(41)
\u2014
(41)
546
Opening reinsurance contract assets
(1,488)
(132)
(4)
(3)
(88)
(95)
(1,715)
Net opening balance
(740)
(293)
(4)
(44)
(88)
(136)
(1,169)
Changes that relate to current services
CSM recognised in profit or loss for the services
received
\u2014
\u2014
2
10
2
14
14
Change in the risk adjustment for non-financial risk
for the risk expired
\u2014
16
\u2014
\u2014
\u2014
\u2014
16
Experience adjustments
(17)
\u2014
\u2014
\u2014
\u2014
\u2014
(17)
(17)
16
2
10
2
14
13
Changes that relate to future services
Changes in estimates reflected in the CSM
185
(12)
(4)
(92)
(77)
(173)
\u2014
Changes in the fulfilment cash flows that do not
adjust the CSM for the group of underlying contracts
6
\u2014
\u2014
\u2014
\u2014
\u2014
6
191
(12)
(4)
(92)
(77)
(173)
6
Changes that relate to past services
Asset for incurred claims
(4)
\u2014
\u2014
\u2014
\u2014
\u2014
(4)
(4)
\u2014
\u2014
\u2014
\u2014
\u2014
(4)
Insurance service result
170
4
(2)
(82)
(75)
(159)
15
Net finance income from reinsurance contracts
334
140
\u2014
(2)
\u2014
(2)
472
Total changes in the income statement
504
144
(2)
(84)
(75)
(161)
487
Cash flows
Premiums and similar expenses paid
(543)
\u2014
\u2014
\u2014
\u2014
\u2014
(543)
Amounts recovered
491
\u2014
\u2014
\u2014
\u2014
\u2014
491
Total cash flows
(52)
\u2014
\u2014
\u2014
\u2014
\u2014
(52)
Net closing balance
(288)
(149)
(6)
(128)
(163)
(297)
(734)
Closing reinsurance contract liabilities
567
(95)
\u2014
(123)
(1)
(124)
348
Closing reinsurance contract assets
(855)
(54)
(6)
(5)
(162)
(173)
(1,082)
Net closing balance
(288)
(149)
(6)
(128)
(163)
(297)
(734)
24 Insurance liabilities
24.2.2 With-profits sub-funds
Insurance contracts
Analysis by remaining coverage and incurred claims
2023
2022
Liabilities for remaining
coverage
Liabilities for remaining
coverage
Excluding
loss
component
and liability
for incurred
claims
Loss
component
Liabilities
for incurred
claims
Total
Excluding
loss
component
and liability
for incurred
claims
Loss
component
Liabilities for
incurred
claims
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
122,807
7
363
123,177
135,311
\u2014
349
135,660
Opening insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net opening balance
122,807
7
363
123,177
135,311
\u2014
349
135,660
Insurance revenue
Contracts under the modified
retrospective transition approach
(331)
\u2014
\u2014
(331)
(19)
\u2014
\u2014
(19)
Contracts under the fair value transition
approach
(1,863)
\u2014
\u2014
(1,863)
(1,820)
\u2014
\u2014
(1,820)
New contracts and contracts under the
fully retrospective transition approach
(213)
\u2014
\u2014
(213)
(98)
\u2014
\u2014
(98)
(2,407)
\u2014
\u2014
(2,407)
(1,937)
\u2014
\u2014
(1,937)
Insurance service expenses
Incurred claims and other insurance
service expenses
\u2014
\u2014
1,597
1,597
\u2014
(4)
1,657
1,653
Amortisation of insurance acquisition
cash flows
26
\u2014
\u2014
26
8
\u2014
\u2014
8
Adjustments to liability for incurred
claims
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Losses and reversals of losses on
onerous contracts
\u2014
4
\u2014
4
\u2014
11
\u2014
11
26
4
1,597
1,627
8
7
1,657
1,672
Insurance service result
(2,381)
4
1,597
(780)
(1,929)
7
1,657
(265)
Finance expense/(income) from
insurance contracts issued
6,144
\u2014
(12)
6,132
(6,977)
\u2014
(4)
(6,981)
Total changes in income statement
3,763
4
1,585
5,352
(8,906)
7
1,653
(7,246)
Investment components and premium
refunds
(10,391)
\u2014
10,391
\u2014
(9,790)
\u2014
9,790
\u2014
Cash flows
Premiums received
7,157
\u2014
\u2014
7,157
6,331
\u2014
\u2014
6,331
Incurred claims paid and other
insurance service expenses paid
including investment component
\u2014
\u2014
(11,951)
(11,951)
\u2014
\u2014
(11,429)
(11,429)
Insurance acquisition cash flows
(139)
\u2014
\u2014
(139)
(139)
\u2014
\u2014
(139)
Total cash flows
7,018
\u2014
(11,951)
(4,933)
6,192
\u2014
(11,429)
(5,237)
Net closing balance
123,197
11
388
123,596
122,807
7
363
123,177
Closing insurance contract liabilities
123,197
11
388
123,596
122,807
7
363
123,177
Closing insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net closing balance
123,197
11
388
123,596
122,807
7
363
123,177
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.2 With-profits sub-funds (continued)
Insurance contracts (continued)
Analysis by measurement component
2023
Contractual service margin
Estimates of
present value
of future cash
flows
Risk
adjustment for
non-financial
risk
Contracts
under
modified
retrospective
transition
approach
Contracts
under the fair
value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
118,740
221
2,041
1,986
189
4,216
123,177
Opening insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net opening balance
118,740
221
2,041
1,986
189
4,216
123,177
Changes that relate to current services
CSM recognised in profit or loss for the
services provided
\u2014
\u2014
(221)
(244)
(34)
(499)
(499)
Change in the risk adjustment for non-
financial risk for the risk expired
\u2014
(24)
\u2014
\u2014
\u2014
\u2014
(24)
Revenue recognised for incurred
policyholder tax
(249)
\u2014
\u2014
\u2014
\u2014
\u2014
(249)
Experience adjustments
(12)
\u2014
\u2014
\u2014
\u2014
\u2014
(12)
(261)
(24)
(221)
(244)
(34)
(499)
(784)
Changes that relate to future services
Contracts initially recognised in the period
(124)
5
\u2014
\u2014
119
119
\u2014
Changes in estimates reflected in the CSM
177
19
(194)
(19)
17
(196)
\u2014
Changes in estimates that result in
onerous contract losses or reversal of
those losses
4
\u2014
\u2014
\u2014
\u2014
\u2014
4
57
24
(194)
(19)
136
(77)
4
Changes that relate to past services
Adjustments to liabilities for incurred
claims
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Insurance service result
(204)
\u2014
(415)
(263)
102
(576)
(780)
Finance expense/(income) from insurance
contracts issued
5,832
1
121
154
24
299
6,132
Total changes in income statement
5,628
1
(294)
(109)
126
(277)
5,352
Cash flows
Premiums received
7,157
\u2014
\u2014
\u2014
\u2014
\u2014
7,157
Incurred claims paid and other insurance
service expenses paid including
investment component
(11,951)
\u2014
\u2014
\u2014
\u2014
\u2014
(11,951)
Insurance acquisition cash flows
(139)
\u2014
\u2014
\u2014
\u2014
\u2014
(139)
Total cash flows
(4,933)
\u2014
\u2014
\u2014
\u2014
\u2014
(4,933)
Net closing balance
119,435
222
1,747
1,877
315
3,939
123,596
Closing insurance contract liabilities
119,435
222
1,747
1,877
315
3,939
123,596
Closing insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net closing balance
119,435
222
1,747
1,877
315
3,939
123,596
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.2 With-profits sub-funds (continued)
Insurance contracts (continued)
Analysis by measurement component (continued)
2022
Contractual service margin
Estimates of
present value
of future cash
flows
Risk
adjustment for
non-financial
risk
Contracts
under modified
retrospective
transition
approach
Contracts
under the fair
value transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
131,811
274
1,694
1,792
89
3,575
135,660
Opening insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net opening balance
131,811
274
1,694
1,792
89
3,575
135,660
Changes that relate to current services
CSM recognised in profit or loss for the
services provided
\u2014
\u2014
(229)
(279)
(18)
(526)
(526)
Change in the risk adjustment for non-
financial risk for the risk expired
\u2014
(22)
\u2014
\u2014
\u2014
\u2014
(22)
Expense recognised for incurred
policyholder tax
243
\u2014
\u2014
\u2014
\u2014
\u2014
243
Experience adjustments
23
\u2014
\u2014
\u2014
\u2014
\u2014
23
266
(22)
(229)
(279)
(18)
(526)
(282)
Changes that relate to future services
Contracts initially recognised in the period
(49)
1
\u2014
\u2014
49
49
1
Changes in estimates reflected in the CSM
(1,109)
56
558
427
68
1,053
\u2014
Changes in estimates that result in onerous
contract losses or reversal of those losses
10
\u2014
\u2014
\u2014
\u2014
\u2014
10
(1,148)
57
558
427
117
1,102
11
Changes that relate to past services
Adjustments to liabilities for incurred
claims
6
\u2014
\u2014
\u2014
\u2014
\u2014
6
6
\u2014
\u2014
\u2014
\u2014
\u2014
6
Insurance service result
(876)
35
329
148
99
576
(265)
Finance expense/(income) from insurance
contracts issued
(6,958)
(88)
18
46
1
65
(6,981)
Total changes in income statement
(7,834)
(53)
347
194
100
641
(7,246)
Cash flows
Premiums received
6,331
\u2014
\u2014
\u2014
\u2014
\u2014
6,331
Incurred claims paid and other
insurance service expenses paid
including investment component
(11,429)
\u2014
\u2014
\u2014
\u2014
\u2014
(11,429)
Insurance acquisition cash flows
(139)
\u2014
\u2014
\u2014
\u2014
\u2014
(139)
Total cash flows
(5,237)
\u2014
\u2014
\u2014
\u2014
\u2014
(5,237)
Net closing balance
118,740
221
2,041
1,986
189
4,216
123,177
Closing insurance contract liabilities
118,740
221
2,041
1,986
189
4,216
123,177
Closing insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net closing balance
118,740
221
2,041
1,986
189
4,216
123,177
24 Insurance liabilities
24.2.3 Unit-linked liabilities
Insurance contracts
Analysis by remaining coverage and incurred claims
2023
2022
Liabilities for remaining
coverage
Liabilities for remaining
coverage
Excluding
loss
component
Loss
component
Liabilities
for incurred
claims
Total
Excluding
loss
component
Loss
component
Liabilities for
incurred
claims
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
4,139
13
446
4,598
4,941
\u2014
377
5,318
Opening insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net opening balance
4,139
13
446
4,598
4,941
\u2014
377
5,318
Insurance revenue
Contracts under the modified
retrospective transition approach
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Contracts under the fair value
transition approach
(52)
\u2014
\u2014
(52)
(28)
\u2014
\u2014
(28)
New contracts and contracts
under the fully retrospective
transition approach
\u2014
\u2014
\u2014
\u2014
(1)
\u2014
\u2014
(1)
(52)
\u2014
\u2014
(52)
(29)
\u2014
\u2014
(29)
Insurance service expenses
Incurred claims and other
insurance service expenses
\u2014
(2)
66
64
\u2014
\u2014
62
62
Amortisation of insurance
acquisition cash flows
1
\u2014
\u2014
1
(6)
\u2014
\u2014
(6)
Adjustments to liability for
incurred claims
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Losses and reversals of losses on
onerous contracts
\u2014
(11)
\u2014
(11)
\u2014
13
\u2014
13
1
(13)
66
54
(6)
13
62
69
Insurance service result
(51)
(13)
66
2
(35)
13
62
40
Finance expense/(income) from
insurance contracts issued
239
\u2014
\u2014
239
(360)
\u2014
2
(358)
Total changes in income
statement
188
(13)
66
241
(395)
13
64
(318)
Investment components and
premium refunds
(456)
\u2014
456
\u2014
(420)
\u2014
420
\u2014
Cash flows
Premiums received
38
\u2014
\u2014
38
13
\u2014
\u2014
13
Incurred claims paid and other
insurance service expenses paid
including investment component
\u2014
\u2014
(473)
(473)
\u2014
\u2014
(415)
(415)
Insurance acquisition cash flows
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Total cash flows
38
\u2014
(473)
(435)
13
\u2014
(415)
(402)
Net closing balance
3,909
\u2014
495
4,404
4,139
13
446
4,598
Closing insurance contract liabilities
3,909
\u2014
495
4,404
4,139
13
446
4,598
Closing insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net closing balance
3,909
\u2014
495
4,404
4,139
13
446
4,598
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.3 Unit-linked liabilities (continued)
Insurance contracts (continued)
Analysis by measurement component
2023
Contractual service margin
Estimates of
present value
of future cash
flows
Risk
adjustment
for non-
financial risk
Contracts
under
modified
retrospective
transition
approach
Contracts
under the fair
value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
4,557
6
\u2014
35
\u2014
35
4,598
Opening insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net opening balance
4,557
6
\u2014
35
\u2014
35
4,598
Changes that relate to current
services
CSM recognised in profit or loss for
the services provided
\u2014
\u2014
\u2014
(9)
\u2014
(9)
(9)
Change in the risk adjustment for non-
financial risk for the risk expired
\u2014
(1)
\u2014
\u2014
\u2014
\u2014
(1)
Revenue recognised for incurred
policyholder tax
(6)
\u2014
\u2014
\u2014
\u2014
\u2014
(6)
Experience adjustments
29
\u2014
\u2014
\u2014
\u2014
\u2014
29
23
(1)
\u2014
(9)
\u2014
(9)
13
Changes that relate to future
services
Contracts initially recognised in the
period
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Changes in estimates reflected in the
CSM
(19)
1
\u2014
18
\u2014
18
\u2014
Changes in estimates that result in
onerous contract losses or reversal of
those losses
(11)
\u2014
\u2014
\u2014
\u2014
\u2014
(11)
(30)
1
\u2014
18
\u2014
18
(11)
Changes that relate to past services
Adjustments to liabilities for incurred
claims
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Insurance service result
(7)
\u2014
\u2014
9
\u2014
9
2
Finance expense/(income) from
insurance contracts issued
234
\u2014
\u2014
5
\u2014
5
239
Total changes in income statement
227
\u2014
\u2014
14
\u2014
14
241
Cash flows
Premiums received
38
\u2014
\u2014
\u2014
\u2014
\u2014
38
Incurred claims paid and other
insurance service expenses paid
including investment component
(473)
\u2014
\u2014
\u2014
\u2014
\u2014
(473)
Insurance acquisition cash flows
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Total cash flows
(435)
\u2014
\u2014
\u2014
\u2014
\u2014
(435)
Net closing balance
4,349
6
\u2014
49
\u2014
49
4,404
Closing insurance contract liabilities
4,349
6
\u2014
49
\u2014
49
4,404
Closing insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net closing balance
4,349
6
\u2014
49
\u2014
49
4,404
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.3 Unit-linked liabilities (continued)
Insurance contracts (continued)
Analysis by measurement component (continued)
2022
Contractual service margin
Estimates of
present value
of future cash
flows
Risk
adjustment for
non-financial
risk
Contracts
under
modified
retrospective
transition
approach
Contracts
under the fair
value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
5,274
7
\u2014
37
\u2014
37
5,318
Opening insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net opening balance
5,274
7
\u2014
37
\u2014
37
5,318
Changes that relate to current
services
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
CSM recognised in profit or loss for
the services provided
\u2014
\u2014
\u2014
(11)
\u2014
(11)
(11)
Change in the risk adjustment for non-
financial risk for the risk expired
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Expense recognised for incurred
policyholder tax
19
\u2014
\u2014
\u2014
\u2014
\u2014
19
Experience adjustments
19
\u2014
\u2014
\u2014
\u2014
\u2014
19
38
\u2014
\u2014
(11)
\u2014
(11)
27
Changes that relate to future
services
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Contracts initially recognised in the
period
(2)
\u2014
\u2014
\u2014
2
2
\u2014
Changes in estimates reflected in the
CSM
(6)
(1)
\u2014
9
(2)
7
\u2014
Changes in estimates that result in
onerous contract losses or reversal of
those losses
13
\u2014
\u2014
\u2014
\u2014
\u2014
13
5
(1)
\u2014
9
\u2014
9
13
Changes that relate to past services
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Adjustments to liabilities for incurred
claims
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Insurance service result
43
(1)
\u2014
(2)
\u2014
(2)
40
Finance expense/(income) from
insurance contracts issued
(358)
\u2014
\u2014
\u2014
\u2014
\u2014
(358)
Total changes in income statement
(315)
(1)
\u2014
(2)
\u2014
(2)
(318)
Cash flows
Premiums received
13
\u2014
\u2014
\u2014
\u2014
\u2014
13
Incurred claims paid and other
insurance service expenses paid
including investment component
(415)
\u2014
\u2014
\u2014
\u2014
\u2014
(415)
Insurance acquisition cash flows
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Total cash flows
(402)
\u2014
\u2014
\u2014
\u2014
\u2014
(402)
Net closing balance
4,557
6
\u2014
35
\u2014
35
4,598
Closing insurance contract liabilities
4,557
6
\u2014
35
\u2014
35
4,598
Closing insurance contract assets
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Net closing balance
4,557
6
\u2014
35
\u2014
35
4,598
24 Insurance liabilities
24.2.4 Annuity and other long-term business
Insurance contracts
Analysis by remaining coverage and incurred claims
2023
2022
Liabilities for remaining
coverage
Liability for remaining
coverage
Excluding
loss
component
Loss
component
Liabilities for
incurred
claims
Total
Excluding
loss
component
Loss
component
Liabilities for
incurred
claims
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
13,895
86
220
14,201
19,477
143
223
19,843
Opening insurance contract assets
(43)
\u2014
4
(39)
(31)
\u2014
3
(28)
Net opening balance
13,852
86
224
14,162
19,446
143
226
19,815
Insurance revenue
Contracts under the modified
retrospective transition approach
(6)
\u2014
\u2014
(6)
(6)
\u2014
\u2014
(6)
Contracts under the fair value
transition approach
(1,324)
\u2014
\u2014
(1,324)
(1,270)
\u2014
\u2014
(1,270)
New contracts and contracts
under the fully retrospective
transition approach
(98)
\u2014
\u2014
(98)
(83)
\u2014
\u2014
(83)
(1,428)
\u2014
\u2014
(1,428)
(1,359)
\u2014
\u2014
(1,359)
Insurance service expenses
Incurred claims and other
insurance service expenses
\u2014
(5)
1,196
1,191
\u2014
(3)
1,191
1,188
Amortisation of insurance
acquisition cash flows
29
\u2014
\u2014
29
24
\u2014
\u2014
24
Adjustments to liability for incurred
claims
\u2014
\u2014
(54)
(54)
\u2014
\u2014
3
3
Losses and reversals of losses on
onerous contracts
\u2014
(13)
\u2014
(13)
\u2014
(7)
\u2014
(7)
29
(18)
1,142
1,153
24
(10)
1,194
1,208
Insurance service result
(1,399)
(18)
1,142
(275)
(1,335)
(10)
1,194
(151)
Finance expense/(income) from
insurance contracts issued
946
1
\u2014
947
(4,437)
(47)
\u2014
(4,484)
Total changes in income
statement
(453)
(17)
1,142
672
(5,772)
(57)
1,194
(4,635)
Investment components and
premium refunds
(77)
\u2014
77
\u2014
(77)
\u2014
77
\u2014
Cash flows
Premiums received
553
\u2014
\u2014
553
278
\u2014
\u2014
278
Incurred claims paid and other
insurance service expenses paid
including investment component
\u2014
\u2014
(1,272)
(1,272)
\u2014
\u2014
(1,273)
(1,273)
Insurance acquisition cash flows
(24)
\u2014
\u2014
(24)
(23)
\u2014
\u2014
(23)
Total cash flows
529
\u2014
(1,272)
(743)
255
\u2014
(1,273)
(1,018)
Net closing balance
13,851
69
171
14,091
13,852
86
224
14,162
Closing insurance contract liabilities
13,901
69
165
14,135
13,895
86
220
14,201
Closing insurance contract assets
(50)
\u2014
6
(44)
(43)
\u2014
4
(39)
Net closing balance
13,851
69
171
14,091
13,852
86
224
14,162
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.4 Annuity and other long-term business (continued)
Insurance contracts (continued)
Analysis by measurement component
2023
Contractual service margin
Estimates
of present
value of
future cash
flows
Risk
adjustment
for non-
financial
risk
Contracts under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
12,076
397
\u2014
1,673
55
1,728
14,201
Opening insurance contract assets
(76)
3
\u2014
11
23
34
(39)
Net opening balance
12,000
400
\u2014
1,684
78
1,762
14,162
Changes that relate to current services
CSM recognised in profit or loss for the services
provided
\u2014
\u2014
\u2014
(130)
(11)
(141)
(141)
Change in the risk adjustment for non-financial risk
for the risk expired
\u2014
(32)
\u2014
\u2014
\u2014
\u2014
(32)
Experience adjustments
(35)
\u2014
\u2014
\u2014
\u2014
\u2014
(35)
(35)
(32)
\u2014
(130)
(11)
(141)
(208)
Changes that relate to future services
Contracts initially recognised in the period
(57)
11
\u2014
\u2014
46
46
\u2014
Changes in estimates reflected in the CSM
(112)
11
\u2014
94
7
101
\u2014
Changes in estimates that result in onerous
contract losses or reversal of those losses
(13)
\u2014
\u2014
\u2014
\u2014
\u2014
(13)
(182)
22
\u2014
94
53
147
(13)
Changes that relate to past services
Adjustments to liabilities for incurred claims
(54)
\u2014
\u2014
\u2014
\u2014
\u2014
(54)
(54)
\u2014
\u2014
\u2014
\u2014
\u2014
(54)
Insurance service result
(271)
(10)
\u2014
(36)
42
6
(275)
Finance expense/(income) from insurance
contracts issued
875
18
\u2014
47
7
54
947
Total changes in income statement
604
8
\u2014
11
49
60
672
Cash flows
Premiums received
553
\u2014
\u2014
\u2014
\u2014
\u2014
553
Incurred claims paid and other insurance service
expenses paid including investment component
(1,272)
\u2014
\u2014
\u2014
\u2014
\u2014
(1,272)
Insurance acquisition cash flows
(24)
\u2014
\u2014
\u2014
\u2014
\u2014
(24)
Total cash flows
(743)
\u2014
\u2014
\u2014
\u2014
\u2014
(743)
Net closing balance
11,861
408
\u2014
1,695
127
1,822
14,091
Closing insurance contract liabilities
11,954
404
\u2014
1,683
94
1,777
14,135
Closing insurance contract assets
(93)
4
\u2014
12
33
45
(44)
Net closing balance
11,861
408
\u2014
1,695
127
1,822
14,091
24 Insurance liabilities (continued)
24.2 Movements in insurance, investment with DPF and reinsurance contract balances (continued)
24.2.4 Annuity and other long-term business (continued)
Insurance contracts (continued)
Analysis by measurement component (continued)
2022
Contractual service margin
Estimates of
present
value of
future cash
flows
Risk
adjustment
for non-
financial risk
Contracts under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Opening insurance contract liabilities
17,613
699
2
1,508
21
1,531
19,843
Opening insurance contract assets
(58)
3
\u2014
10
17
27
(28)
Net opening balance
17,555
702
2
1,518
38
1,558
19,815
Changes that relate to current services
CSM recognised in profit or loss for the services
provided
\u2014
\u2014
\u2014
(121)
(6)
(127)
(127)
Change in the risk adjustment for non-financial risk
for the risk expired
\u2014
(41)
\u2014
\u2014
\u2014
\u2014
(41)
Experience adjustments
21
\u2014
\u2014
\u2014
\u2014
\u2014
21
21
(41)
\u2014
(121)
(6)
(127)
(147)
Changes that relate to future services
Contracts initially recognised in the period
(29)
2
\u2014
\u2014
27
27
\u2014
Changes in estimates reflected in the CSM
(310)
38
(2)
258
17
273
1
Changes in estimates that result in onerous contract
losses or reversal of those losses
(7)
(1)
\u2014
\u2014
\u2014
\u2014
(8)
(346)
39
(2)
258
44
300
(7)
Changes that relate to past services
Adjustments to liabilities for incurred claims
3
\u2014
\u2014
\u2014
\u2014
\u2014
3
3
\u2014
\u2014
\u2014
\u2014
\u2014
3
Insurance service result
(322)
(2)
(2)
137
38
173
(151)
Finance expense/(income) from insurance contracts
issued
(4,215)
(300)
\u2014
29
2
31
(4,484)
Total changes in income statement
(4,537)
(302)
(2)
166
40
204
(4,635)
Cash flows
Premiums received
278
\u2014
\u2014
\u2014
\u2014
\u2014
278
Incurred claims paid and other insurance service
expenses paid including investment component
(1,273)
\u2014
\u2014
\u2014
\u2014
\u2014
(1,273)
Insurance acquisition cash flows
(23)
\u2014
\u2014
\u2014
\u2014
\u2014
(23)
Total cash flows
(1,018)
\u2014
\u2014
\u2014
\u2014
\u2014
(1,018)
Net closing balance
12,000
400
\u2014
1,684
78
1,762
14,162
Closing insurance contract liabilities
12,076
397
\u2014
1,673
55
1,728
14,201
Closing insurance contract assets
(76)
3
\u2014
11
23
34
(39)
Net closing balance
12,000
400
\u2014
1,684
78
1,762
14,162
24 Insurance liabilities
24.3 Effect of contracts initially recognised in the year
The following tables summarise the effect on the measurement components arising from the initial recognition of insurance
contracts in the year.
2023
2022
Profitable
contracts
Profitable
contracts
Issued
Issued
For the year ended 31 December
\u00a3m
\u00a3m
With-profits sub-funds:
Contracts initially recognised in current year
Claims and other insurance service expenses payable
6,223
5,686
Insurance acquisition cash flows
137
135
Estimates of the present value of future cash outflows
6,360
5,821
Estimates of the present value of future cash inflows
(6,484)
(5,870)
Risk adjustment for non-financial risk
5
1
CSM
119
49
Losses recognised on initial recognition
\u2014
1
Unit-linked liabilities:
Contracts initially recognised in current year
Claims and other insurance service expenses payable
\u2014
21
Insurance acquisition cash flows
\u2014
\u2014
Estimates of the present value of future cash outflows
\u2014
21
Estimates of the present value of future cash inflows
\u2014
(23)
Risk adjustment for non-financial risk
\u2014
\u2014
CSM
\u2014
2
Losses recognised on initial recognition
\u2014
\u2014
Annuity and other long-term business:
Contracts initially recognised in current year
Claims and other insurance service expenses payable
303
75
Insurance acquisition cash flows
25
27
Estimates of the present value of future cash outflows
328
102
Estimates of the present value of future cash inflows
(385)
(131)
Risk adjustment for non-financial risk
11
2
CSM
46
27
Losses recognised on initial recognition
\u2014
\u2014
Total:
Contracts initially recognised in current year
Claims and other insurance service expenses payable
6,526
5,782
Insurance acquisition cash flows
162
162
Estimates of the present value of future cash outflows
6,688
5,944
Estimates of the present value of future cash inflows
(6,869)
(6,024)
Risk adjustment for non-financial risk
16
3
CSM
165
78
Losses recognised on initial recognition
\u2014
1
In the years ended 31\u00a0December 2023 and 31\u00a0December 2022, there were no new reinsurance contracts r24 Insurance liabilities
24.4 Expected recognition of the contractual service margin
2023
2022
Insurance contracts issued
Insurance contracts issued
With-profits
sub-funds
Unit-linked
liabilities
Annuity and
other long-
term
business
Total
With-profits
sub-funds
Unit-linked
liabilities
Annuity and
other long-
term
business
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Number of years until expected to be recognised:
0 to 1 year
428
8
114
550
462
4
102
568
1 to 2 years
379
6
110
495
407
4
100
511
2 to 3 years
343
5
106
454
368
4
98
470
3 to 4 years
309
5
103
417
332
4
95
431
4 to 5 years
279
4
99
382
299
3
92
394
5 to 10 years
1,019
13
435
1,467
1,088
9
415
1,512
10 to 15 years
570
5
331
906
608
4
327
939
15 to 20 years
301
2
227
530
321
2
231
554
20 to 25 years
155
1
138
294
164
1
142
307
Over 25 years
156
\u2014
159
315
167
\u2014
160
327
Total
3,939
49
1,822
5,810
4,216
35
1,762
6,013
The insurance contracts issued represents the run off of the net of insurance assets and insurance liabilities CSM. The amounts
presented in the table represent the current discounted value of the CSM amortisation expected to be recognised in the insurance
service result in future periods. The actual CSM amortisation in future periods will differ from that presented due to the impacts of
future new business, recalibrations of the CSM, changes in estimates reflected in the CSMs and changes in the future coverage
units.
2023
2022
Reinsurance
contracts
held
Reinsurance
contracts
held
As at 31 December
\u00a3m
\u00a3m
Number of years until expected to be recognised:
0 to 1 year
(9)
(8)
1 to 2 years
(9)
(8)
2 to 3 years
(9)
(9)
3 to 4 years
(10)
(9)
4 to 5 years
(10)
(9)
5 to 10 years
(55)
(50)
10 to 15 years
(56)
(50)
15 to 20 years
(50)
(44)
20 to 25 years
(40)
(35)
Over 25 years
(79)
(75)
Total
(327)
(297)
For reinsurance contracts held 98% (2022: 98%) relates to annuity and other long-term business contracts. The reinsurance
contracts held represents the run off of the net of reinsurance assets and reinsurance liabilities CSM.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInsuranceContractsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-672": { "value": "
25 Investment contract liabilities without discretionary participation features
Investment contract liabilities without DPF comprise unit-linked contracts that contain little or no insurance risk and certain
contracts invested in PruFund with a low level of discretion (see following paragraph). For the former, the assets and liabilities
arising under the contracts are distinguished between those that relate to the financial instrument liability, and the deferred
acquisition costs and deferred income that relate to the component of the contract that relates to investment management.
Deferred acquisition costs and deferred income are recognised in line with the level of service provision.
Certain contracts invested in PruFund which are sold via wholesale distribution agreements with certain European financial
institutions and that are not considered to have DPF are also included in investment contract liabilities without DPF. Accordingly,
the contracts are measured at FVTPL under IFRS 9. The carrying value of these liabilities as at 31\u00a0December 2023 is \u00a3294m
(31\u00a0December 2022: \u00a3164m).
The table below presents the analysis of change in investment contract liabilities without DPF:
2023
2022
\u00a3m
\u00a3m
As at 1 January 2022 / 2023
11,937
14,884
Net Flows:
Premiums
695
741
Surrenders
(770)
(1,941)
Maturities/deaths
(133)
(47)
Net flows
(208)
(1,247)
Corporate transactions
\u2014
\u2014
Switches
19
\u2014
Changes in reserving basis
\u2014
30
Investment-related items and other movements i
859
(1,758)
Foreign exchange differences
(72)
28
As at 31 December 2022 / 2023
12,535
11,937
i Investment-related items and other movements, foreign exchange differences and change in reserving basis closely align to the net change in investment
contract liabilities without DPF income statement amount. The difference between the values relates to policyholder tax, reclassifications and annual
management charges.
Certain parts of the unit-linked business are reinsured externally by way of fund reinsurance. Where this is the case, the fair value
of the underlying asset and liability is equal to the unit value obligation.
", "dimensions": { "concept": "mgplc:DisclosureOfInvestmentContractLiabilitiesWithoutDPFTextBlock", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-674": { "value": "
26 Subordinated liabilities and\u00a0other borrowings
2023
2022
As at 31 December
\u00a3m
\u00a3m
Subordinated liabilities
3,676
3,729
Operational borrowings
92
50
Borrowings attributable to the With-Profits Fund
4,321
3,758
Total subordinated liabilities and other borrowings
8,089
7,537
26 Subordinated liabilities and\u00a0other borrowings (continued)
26.1 Subordinated liabilities
The Group's subordinated liabilities consist of subordinated notes which were transferred from Prudential plc on 18 October 2019
and were recorded at fair value on initial recognition. The transfer of the subordinated liabilities was achieved by substituting the
Company in place of Prudential plc as issuer of the debt, as permitted under the terms and conditions of each applicable
instrument. All costs related to the transaction were borne by Prudential plc.
2023
2022
Principal
amount
Carrying
value
Principal
amount
Carrying
value
As at 31 December
\u00a3m
\u00a3m
5.625% sterling fixed rate due 20 October 2051
\u00a3750m
831
\u00a3750m
839
6.25% sterling fixed rate due 20 October 2068
\u00a3500m
602
\u00a3500m
604
6.50% US dollar fixed rate due 20 October 2048
$500m
434
$500m
466
6.34% sterling fixed rate due 19 December 2063
\u00a3700m
841
\u00a3700m
845
5.56% sterling fixed rate due 20 July 2055
\u00a3600m
667
\u00a3600m
672
3.875% sterling fixed rate due 20 July 2049
\u00a3300m
301
\u00a3300m
303
Total subordinated liabilities
3,676
3,729
Subordinated notes issued by the Company rank below its senior obligations and ahead of its preference shares and ordinary
share capital.
A description of the key features of each of the Group\u2019s subordinated notes as at 31\u00a0December 2023 is as follows:
5.625% sterling
fixed\u00a0rate
6.25% sterling
fixed\u00a0rate
6.50% US dollar
fixed\u00a0rate
6.34% sterling fixed\u00a0rate
5.56% sterling
fixed\u00a0rate
3.875% sterling
fixed\u00a0rate
Principal amount
\u00a3750m
\u00a3500m
$500m
\u00a3700m
\u00a3600m
\u00a3300m
Issue datei
3 October 2018
3 October 2018
3 October 2018
16 December 2013
(amended 10 June
2019)
9 June 2015
(amended 10
June 2019)
8 July 2019
Maturity date
20 October 2051
20 October 2068
20 October 2048
19 December 2063
20 July 2055
20 July 2049
Callable at par at
the\u00a0option of the
Company from
20 October 2031
(and each semi-
annual interest
payment date
thereafter)
20 October 2048
(and each semi-
annual interest
payment date
thereafter)
20 October 2028
(and each semi-
annual interest
payment date
thereafter)
19 December 2043
(and each semi-
annual interest
payment date
thereafter)
20 July 2035
(and each
semi-annual
interest
payment date
thereafter)
20 July 2024,
20 July 2029
(and each
semi-annual
interest
payment date
thereafter)
Solvency II own
funds treatment
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
i The subordinated notes were originally issued by Prudential plc rather than by the Company.
As at 31\u00a0December 2023, the principal amount of all subordinated liabilities has a contractual maturity of more than 12 months and
accrued interest of \u00a342m (2022: \u00a343m) is expected to be settled within 12 months.
26 Subordinated liabilities and\u00a0other borrowings (continued)
26.1 Subordinated liabilities (continued)
26.1.1 Movement in subordinated liabilities
The following table reconciles the movement in subordinated liabilities in the year:
2023
2022
For the year ended 31 December
\u00a3m
\u00a3m
At 1 January
3,729
3,706
Amortisation
(29)
(28)
Foreign exchange movements
(24)
51
At 31 December
3,676
3,729
There were no repayments of principal on these loans during the year. The amortisation of premium on the loans based on an
effective interest rate and the foreign exchange movement on the translation of the subordinated liabilities denominated in US
dollar are both non-cash items.
26.2 Other borrowings
26.2.1 Operational borrowings attributable to shareholder-financed operations
In March 2019, the Group entered into revolving credit facilities of \u00a31.5bn with several banks and financial institutions, and these
are due to mature in 2026 . As at 31\u00a0December 2023, these remain undrawn.
26.2.2 Borrowings attributable to the With-Profits Fund
2023
2022
As at 31 December
\u00a3m
\u00a3m
Non-recourse borrowings of consolidated investment funds i
3,950
3,608
Bank loans and overdrafts
371
150
Total
4,321
3,758
i In all instances, the holders of the debt instruments issued by these subsidiaries and funds do not have recourse beyond the assets of these subsidiaries
and funds.
26.3 Maturity analysis
The following table sets out the remaining contractual maturity analysis of the Group\u2019s other borrowings as recognised in the
consolidated statement of financial position:
Operational borrowings
Less than
1\u00a0year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
Over 5 years
No stated
maturity
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
As at 31 December 2023
91
\u2014
\u2014
\u2014
\u2014
\u2014
1
92
As at 31 December 2022
49
1
\u2014
\u2014
\u2014
\u2014
\u2014
50
Borrowings attributable to the With-Profits Fund
Less than
1\u00a0year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
Over 5 years
No stated
maturity
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
As at 31 December 2023
883
601
267
1,219
531
820
\u2014
4,321
As at 31 December 2022
401
1,117
285
163
268
1,524
\u2014
3,758
", "dimensions": { "concept": "ifrs-full:DisclosureOfBorrowingsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-673": { "value": "
26 Subordinated liabilities and\u00a0other borrowings
2023
2022
As at 31 December
\u00a3m
\u00a3m
Subordinated liabilities
3,676
3,729
Operational borrowings
92
50
Borrowings attributable to the With-Profits Fund
4,321
3,758
Total subordinated liabilities and other borrowings
8,089
7,537
26 Subordinated liabilities and\u00a0other borrowings (continued)
26.1 Subordinated liabilities
The Group's subordinated liabilities consist of subordinated notes which were transferred from Prudential plc on 18 October 2019
and were recorded at fair value on initial recognition. The transfer of the subordinated liabilities was achieved by substituting the
Company in place of Prudential plc as issuer of the debt, as permitted under the terms and conditions of each applicable
instrument. All costs related to the transaction were borne by Prudential plc.
2023
2022
Principal
amount
Carrying
value
Principal
amount
Carrying
value
As at 31 December
\u00a3m
\u00a3m
5.625% sterling fixed rate due 20 October 2051
\u00a3750m
831
\u00a3750m
839
6.25% sterling fixed rate due 20 October 2068
\u00a3500m
602
\u00a3500m
604
6.50% US dollar fixed rate due 20 October 2048
$500m
434
$500m
466
6.34% sterling fixed rate due 19 December 2063
\u00a3700m
841
\u00a3700m
845
5.56% sterling fixed rate due 20 July 2055
\u00a3600m
667
\u00a3600m
672
3.875% sterling fixed rate due 20 July 2049
\u00a3300m
301
\u00a3300m
303
Total subordinated liabilities
3,676
3,729
Subordinated notes issued by the Company rank below its senior obligations and ahead of its preference shares and ordinary
share capital.
A description of the key features of each of the Group\u2019s subordinated notes as at 31\u00a0December 2023 is as follows:
5.625% sterling
fixed\u00a0rate
6.25% sterling
fixed\u00a0rate
6.50% US dollar
fixed\u00a0rate
6.34% sterling fixed\u00a0rate
5.56% sterling
fixed\u00a0rate
3.875% sterling
fixed\u00a0rate
Principal amount
\u00a3750m
\u00a3500m
$500m
\u00a3700m
\u00a3600m
\u00a3300m
Issue datei
3 October 2018
3 October 2018
3 October 2018
16 December 2013
(amended 10 June
2019)
9 June 2015
(amended 10
June 2019)
8 July 2019
Maturity date
20 October 2051
20 October 2068
20 October 2048
19 December 2063
20 July 2055
20 July 2049
Callable at par at
the\u00a0option of the
Company from
20 October 2031
(and each semi-
annual interest
payment date
thereafter)
20 October 2048
(and each semi-
annual interest
payment date
thereafter)
20 October 2028
(and each semi-
annual interest
payment date
thereafter)
19 December 2043
(and each semi-
annual interest
payment date
thereafter)
20 July 2035
(and each
semi-annual
interest
payment date
thereafter)
20 July 2024,
20 July 2029
(and each
semi-annual
interest
payment date
thereafter)
Solvency II own
funds treatment
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
i The subordinated notes were originally issued by Prudential plc rather than by the Company.
As at 31\u00a0December 2023, the principal amount of all subordinated liabilities has a contractual maturity of more than 12 months and
accrued interest of \u00a342m (2022: \u00a343m) is expected to be settled within 12 months.
26 Subordinated liabilities and\u00a0other borrowings (continued)
26.1 Subordinated liabilities (continued)
26.1.1 Movement in subordinated liabilities
The following table reconciles the movement in subordinated liabilities in the year:
2023
2022
For the year ended 31 December
\u00a3m
\u00a3m
At 1 January
3,729
3,706
Amortisation
(29)
(28)
Foreign exchange movements
(24)
51
At 31 December
3,676
3,729
There were no repayments of principal on these loans during the year. The amortisation of premium on the loans based on an
effective interest rate and the foreign exchange movement on the translation of the subordinated liabilities denominated in US
dollar are both non-cash items.
26.2 Other borrowings
26.2.1 Operational borrowings attributable to shareholder-financed operations
In March 2019, the Group entered into revolving credit facilities of \u00a31.5bn with several banks and financial institutions, and these
are due to mature in 2026 . As at 31\u00a0December 2023, these remain undrawn.
26.2.2 Borrowings attributable to the With-Profits Fund
2023
2022
As at 31 December
\u00a3m
\u00a3m
Non-recourse borrowings of consolidated investment funds i
3,950
3,608
Bank loans and overdrafts
371
150
Total
4,321
3,758
i In all instances, the holders of the debt instruments issued by these subsidiaries and funds do not have recourse beyond the assets of these subsidiaries
and funds.
26.3 Maturity analysis
The following table sets out the remaining contractual maturity analysis of the Group\u2019s other borrowings as recognised in the
consolidated statement of financial position:
Operational borrowings
Less than
1\u00a0year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
Over 5 years
No stated
maturity
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
As at 31 December 2023
91
\u2014
\u2014
\u2014
\u2014
\u2014
1
92
As at 31 December 2022
49
1
\u2014
\u2014
\u2014
\u2014
\u2014
50
Borrowings attributable to the With-Profits Fund
Less than
1\u00a0year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
Over 5 years
No stated
maturity
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
As at 31 December 2023
883
601
267
1,219
531
820
\u2014
4,321
As at 31 December 2022
401
1,117
285
163
268
1,524
\u2014
3,758
", "dimensions": { "concept": "ifrs-full:DisclosureOfSubordinatedLiabilitiesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-675": { "value": "
27 Lease liabilities
The Group leases various land and buildings which it utilises as office space and also sublets to other organisations. Information
about leases for which the Group is a lessee is presented below.
2023
2022
For the year ended 31 December
\u00a3m
\u00a3m
At 1 January
420
413
Transfers i
(8)
(7)
Additions
8
53
Disposals
(8)
(9)
Interest expense
13
14
Lease repayments
(38)
(44)
At 31 December
387
420
i For the year ended 31\u00a0December 2023, transfers out of \u00a38m relates to lease liabilities held for sale in relation to the Group\u2019s consolidated infrastructure
capital private equity vehicles (2022: \u00a37m).
As at 31\u00a0December 2023, \u00a373m (2022 (Restatedi): \u00a385m) of the lease liabilities are attributable to the With-Profits Fund.
The table below presents a maturity analysis of lease liabilities:
2023
Restated i
2022
As at 31 December
\u00a3m
\u00a3m
Expected to be settled within one year
29
33
Expected to be settled after one year
358
387
Total lease liabilities
387
420
i Following a review of the Group\u2019s presentation of lease liabilities, comparative amounts have been restated from those previously reported
with\u00a0the\u00a0restatement having no impact on profit for the year or net assets.
The table below presents a maturity analysis of lease payments showing the undiscounted lease payments to be paid on an annual
basis on these leases:
2023
Restated i
2022
As at 31 December
\u00a3m
\u00a3m
Future minimum lease payments falling due in:
Less than 1 year
46
46
1 to 5 years
139
145
Over 5 years
939
1,432
i Following a review of the Group\u2019s presentation of lease liabilities, comparative amounts have been restated from those previously reported
with\u00a0the\u00a0restatement having no impact on profit for the year or net assets.
For the year ended 31\u00a0December 2023 there are no lease break options exercisable by the Group (2022: None).
", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-676": { "value": "
28 Provisions
2023
2022
\u00a3m
\u00a3m
Regulatory
1
1
Staff Benefits
52
48
Restructuring
4
11
Other
25
30
Total provisions
82
90
2023
2022
For the year ended 31 December
\u00a3m
\u00a3m
At 1 January
90
138
Charged to consolidated income statement:
Additional provisions
13
20
Unused amounts released
(7)
(8)
Used during the year
(13)
(58)
Foreign exchange difference
(1)
(2)
At 31 December
82
90
Staff benefits
Staff benefits primarily relates to performance-related bonuses expected to be paid to staff over the next three years.
Restructuring
Included in restructuring provisions is \u00a3Nil as at 31\u00a0December 2023 (2022: \u00a310m) related to change in control costs arising from the
demerger of the Group from Prudential plc in 2019. The change in control costs were expected to be incurred in the four years
following separation and the remaining provisions were released during 2023. The remaining \u00a34m restructuring provisions as at
31\u00a0December 2023 (2022: \u00a31m) are in relation to other transformation costs.
Other
Included within other provisions as at 31\u00a0December 2022 is the Group's obligation under the call option arrangement to purchase
the remaining shareholding of responsAbility. The Group acquired the remaining shares on 21 February 2023.
", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-680": { "value": "
29 Accruals, deferred income and other liabilities
2023
Restated i
2022
As at 31 December
\u00a3m
\u00a3m
Outstanding purchases of investment securities
3,943
4,607
Accruals and deferred income
1,230
1,344
Deferred consideration
239
246
Interest payable
97
80
Creation of units awaiting settlement
40
32
Property related creditors
20
17
Other
657
442
Total accruals, deferred income and other liabilities
6,226
6,768
Analysed as:
Expected to be settled within one year
5,993
6,449
Expected to be settled after one year
233
319
Total accruals, deferred income and other liabilities
6,226
6,768
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredIncomeExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-679": { "value": "
29 Accruals, deferred income and other liabilities
2023
Restated i
2022
As at 31 December
\u00a3m
\u00a3m
Outstanding purchases of investment securities
3,943
4,607
Accruals and deferred income
1,230
1,344
Deferred consideration
239
246
Interest payable
97
80
Creation of units awaiting settlement
40
32
Property related creditors
20
17
Other
657
442
Total accruals, deferred income and other liabilities
6,226
6,768
Analysed as:
Expected to be settled within one year
5,993
6,449
Expected to be settled after one year
233
319
Total accruals, deferred income and other liabilities
6,226
6,768
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-678": { "value": "
29 Accruals, deferred income and other liabilities
2023
Restated i
2022
As at 31 December
\u00a3m
\u00a3m
Outstanding purchases of investment securities
3,943
4,607
Accruals and deferred income
1,230
1,344
Deferred consideration
239
246
Interest payable
97
80
Creation of units awaiting settlement
40
32
Property related creditors
20
17
Other
657
442
Total accruals, deferred income and other liabilities
6,226
6,768
Analysed as:
Expected to be settled within one year
5,993
6,449
Expected to be settled after one year
233
319
Total accruals, deferred income and other liabilities
6,226
6,768
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAccruedExpensesAndOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-677": { "value": "
29 Accruals, deferred income and other liabilities
2023
Restated i
2022
As at 31 December
\u00a3m
\u00a3m
Outstanding purchases of investment securities
3,943
4,607
Accruals and deferred income
1,230
1,344
Deferred consideration
239
246
Interest payable
97
80
Creation of units awaiting settlement
40
32
Property related creditors
20
17
Other
657
442
Total accruals, deferred income and other liabilities
6,226
6,768
Analysed as:
Expected to be settled within one year
5,993
6,449
Expected to be settled after one year
233
319
Total accruals, deferred income and other liabilities
6,226
6,768
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-681": { "value": "
30 Structured entities
Structured entities are those that have been designed so that voting or similar rights are not the dominant factor in deciding
who\u00a0controls the entity. The Group invests in structured entities such as:
\u2013 Pooled investment vehicles, including OEICs, unit trusts, SICAVs and limited partnerships.
\u2013 Debt securitisation vehicles, including collateralised debt obligations, mortgage-backed securities and other similar
asset-backed securities.
Structured entities which the Group is deemed to control are consolidated in the consolidated financial statements.
As\u00a0at\u00a031\u00a0December 2023 and 31\u00a0December 2022, the Group has not provided, and has no intention to provide, non-contractual
financial or other support to consolidated or unconsolidated structured entities that could expose the Group to a loss.
30.1 Investments in unconsolidated structured entities
The table below shows aggregate carrying amounts of the investments in unconsolidated structured entities reported in the
consolidated statement of financial position:
2023
2022
As at 31 December
\u00a3m
\u00a3m
Statement of financial position line item:
Equity securities and pooled investment funds
12,146
13,497
Debt securities
2,174
2,134
Total
14,320
15,631
The Group generates returns and retains the ownership risks in these investments commensurate to its participation and does not
have any further exposure to the residual risks or losses of the investments or the vehicles in which it holds investments. Further
details on risks associated with financial assets and how they are managed are provided in Note 32.
Included in equity investments and pooled investment funds as at 31\u00a0December 2023 were \u00a34,170m (2022: \u00a36,858m) of
investments in structured entities managed by the Group. Investment management fees for the year end 31\u00a0December 2023 of
\u00a3414m (2022: \u00a3416m) were recognised from managing these entities.
The maximum exposure to loss for unconsolidated structured entities in which the Group holds an investment is the carrying value
of the Group\u2019s investment and the loss of future fees.
The Group also has interests in structured entities managed by the Group in which it holds no investment through the collection of
investment management fees. The maximum exposure to loss for these interests is loss of future fees.
Investment management fees recognised for the year end 31\u00a0December 2023 from managing these entities were \u00a3151m
(2022:\u00a0\u00a3168m). The comparative has been restated following a review of the entities within the scope of the disclosure.
There\u00a0is\u00a0no\u00a0impact on the fees earned by the Group.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutConsolidatedStructuredEntitiesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-683": { "value": "
31.1 Determination of fair value hierarchy
The fair values of assets and liabilities for which fair valuation is required under IFRS are determined by the use of current market
bid prices for exchange-quoted investments, by using quotations from independent third parties such as brokers and pricing
services, or by using appropriate valuation techniques. Fair value is the amount for which an asset could be exchanged or a liability
settled in an arm\u2019s length transaction.
To provide further information on the approach used to determine and measure the fair value of certain assets and liabilities, the
following fair value hierarchy categorisation has been used. This hierarchy is based on the inputs to the fair value measurement and
reflects the lowest level input that is significant to that measurement.
Level 1 - quoted prices (unadjusted) in active markets for identical assets and liabilities
Level 1 principally includes exchange-listed equities, mutual funds with quoted prices, exchange-traded derivatives such as futures
and options, and national government bonds, unless there is evidence that trading in a given instrument is so infrequent that the
market could not be considered active. It also includes other financial instruments where there is clear evidence that the year-end
valuation is based on a traded price in an active market.
Level 2 - inputs other than quoted prices included within level 1 that are observable either directly (ie as prices) or indirectly (ie derived from
prices)
Level 2 principally includes corporate bonds and other national and non-national government debt securities which are valued
using observable inputs, together with over-the-counter derivatives such as forward exchange contracts and non-quoted
investment funds valued with observable inputs. It also includes investment contract liabilities without DPF that are valued using
observable inputs.
Level 3 - significant inputs for the asset or liability are not based on observable market data (unobservable inputs)
Level 3 principally includes investments in private equity funds, directly held investment properties and investments in property
funds which are exposed to bespoke properties or risks and investments which are internally valued or subject to a significant
number of unobservable assumptions. It also includes debt securities which are rarely traded or traded only in privately negotiated
transactions and hence where it is difficult to assert that their valuations have been based on observable market data.
31.2 Valuation approach for level 2 assets and liabilities
A significant proportion of the Group\u2019s level 2 assets are corporate bonds, structured securities and other national and non-
national government debt securities. These assets, in line with market practice, are generally valued using independent pricing
services or quotes from third party brokers. These valuations are subject to a number of monitoring controls, such as monthly price
variances, stale price reviews and variance analysis on prices achieved on subsequent trades.
Pricing services, where available, are used to obtain third party broker quotes. When prices are not available from pricing services,
quotes are sourced directly from brokers. The Group seeks to obtain a number of quotes from different brokers so as to obtain the
most comprehensive information available on their executability. Where quotes are sourced directly from brokers, the price used in
the valuation is normally selected from one of the quotes based on a number of factors, including the timeliness and regularity of
the quotes and the accuracy of the quotes considering the spreads provided. The selected quote is the one which best represents
an executable quote for the security at the measurement date.
31.3 Level 3 assets and liabilities
31.3.1 Valuation approach for level 3
Investments valued using valuation techniques include financial investments which by 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\u00a0market illiquidity. The valuation techniques used include comparison to recent arm\u2019s length transactions, reference to other
instruments that are substantially the same, discounted cash flow analysis, option-adjusted spread models and, if applicable,
enterprise valuation. These techniques may include a number of assumptions relating to variables such as credit risk and interest
rates. Changes in assumptions relating to these variables could positively or negatively impact the reported fair value of these
instruments. When determining the inputs into the valuation techniques used, priority is given to publicly available prices from
independent sources when available, but overall the source of pricing is chosen with the objective of arriving at a fair value
measurement that reflects the price at which an orderly transaction would take place between market participants on the
measurement date.
Exposure to climate risk is mitigated as part of the acquisition and asset management of real estate properties through careful
assessment of potential acquisitions and regularly monitoring the energy intensity and carbon emissions of our existing portfolio.
Where relevant, we procure independent third party advice to assess our portfolio\u2019s potential and cost of retrofitting to minimise
carbon emissions and energy intensity.
31 Fair value methodology (continued)
31.3 Level 3 assets and liabilities (continued)
31.3.1 Valuation approach for level 3 (continued)
Where certain debt securities are valued using broker quotes, adjustments may be required in limited circumstances. This is
generally where it is determined that the third-party valuations obtained do not reflect fair value (eg either because the value is
stale and/or the values are extremely diverse in range). These are usually securities which are distressed or that could be subject
to a debt restructure, or where reliable market prices are no longer available due to an inactive market or market dislocation. In
these instances, prices are derived using internal valuation techniques including those described below with the objective of
arriving at a fair value measurement that reflects the price at which an orderly transaction would take place between market
participants on the measurement date. The techniques used require a number of assumptions relating to variables such as credit
risk and interest rates. Examples of such variables include an average credit spread based on the corporate bond universe and the
relevant duration of the asset being valued. The input assumptions are determined based on the best available information at the
measurement dates. Securities valued in such manner are classified as level 3 where these significant inputs are not based on
observable market data.
Certain debt securities were valued using matrix pricing, which is based on assessing the credit quality of the underlying borrower
and allocating an internal credit rating which is unobservable. The internal credit rating implicitly incorporates Environmental,
Social and Governance (ESG) considerations through the analysts' views of the industry and issuer. Under matrix pricing, these
debt securities are priced by taking the credit spreads on comparable quoted public debt securities and applying these to the
equivalent debt securities, factoring in a specified liquidity premium. The selection of comparable quoted public debt securities
used to determine the credit spread is based on a credit spread matrix that takes into account the internal credit rating, maturity
and currency of the debt security. During the year, the methodology for valuing the securities was further enhanced to place focus
on the use of comparable instruments or a comparable basket of securities to derive a credit spread for each in scope private debt
investment. This approach aligns to views of best practice and considers key features of the investment being valued.
The fair value estimates are made at a specific point in time, based upon any available market information and judgements about
the financial instruments, including estimates of the timing and amount of expected future cash flows and the credit standing of
counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time a
significant volume of a particular financial instrument, nor do they consider the tax impact of the realisation of unrealised gains or
losses from selling the financial instrument being fair valued. In some cases, the disclosed value cannot be realised in immediate
settlement of the financial instrument. In accordance with the Group Risk Framework, the estimated fair value of derivative financial
instruments valued internally using standard market practices are subject to assessment against external counterparties\u2019
valuations.
The investment properties of the Group are externally valued by professionally qualified external valuers using the RICS valuation
standards which includes the issued Guidance Note \u201cSustainability and ESG in commercial property valuation and strategic
advice\u201d. The Group's investment properties are predominantly valued using an income capitalisation technique. This technique
calculates the value through the yield and rental value depending on factors such as the lease length, building quality, covenants
and location. Typically these variables used are compared to recent transactions with similar features to those being valued. The
valuation of investment property inherently captures the impact of climate change if it were located in an area subject to climate
change events. The key inputs of yield and rental value are proxies for a range of factors which will include climate change. The
trend is towards greener buildings achieving better rents and yields than comparable buildings, all other factors being equal.
As the comparisons are not with properties that are virtually identical to the Group\u2019s investment properties, adjustments are made
by the valuers where appropriate to the variables used.
31 Fair value methodology (continued)
31.3 Level 3 assets and liabilities (continued)
31.3.2 Analysis of internally valued level 3 financial instruments
Level 3 financial assets, net of financial liabilities, which were internally valued as at 31\u00a0December 2023 were \u00a37,878m
(2022 (Restated): \u00a38,630m), representing 6.0% of the total fair-valued financial assets net of financial liabilities (2022: 6.7%).
Internal valuations are inherently more subjective than external valuations. These internally valued assets and liabilities primarily
consist of the following items:
\u2013 Debt securities of \u00a37,278m as at 31\u00a0December 2023 (2022: \u00a37,083m), of which \u00a35,746m (2022: \u00a35,885m) were valued using
discounted cash flow models with an internally developed discount rate.These include senior and junior notes backed by
residential ground rents with a carrying value of \u00a31,241m (2022: \u00a31,423m). Please see notes 31.8.1 and 31.8.2 for more information
on these assets. The remaining debt securities were valued using other valuation methodologies such as enterprise valuation
and estimated recovery (such as liquidators' reports).
\u2013 Private equity investments in both debt and equity securities of \u00a3325m as at 31\u00a0December 2023 (2022: \u00a3497m), of which
investments of \u00a3325m (2022: \u00a3497m) were valued internally using a discounted cash flow model. The most significant inputs to
the valuation are the forecast cash flows of the underlying business, internally derived discount rate, and terminal value
assumption, all of which involve significant judgement. The valuation is performed in accordance with International Private Equity
and Venture Capital Association valuation guidelines. These investments are held by the Group's consolidated private equity
infrastructure funds.
\u2013 Equity release mortgage loans of \u00a3928m as at 31\u00a0December 2023 (2022: \u00a3934m) and a corresponding liability of \u00a3239m
(2022:\u00a0\u00a3246m), which were valued internally using discounted cash flow models. The inputs that are most significant to the
valuation of these loans are the internally derived discount rate, the current property value, the assumed future property growth
and the assumed future annual property rental yields.
\u2013 Other commercial loans of \u00a31,417m as at 31\u00a0December 2023 (2022: \u00a31,114m) were valued using discounted cash flow models
with an internally developed discount rate.
\u2013 Liabilities of \u00a32,967m as at 31\u00a0December 2023 (2022: \u00a31,688m), for the third party interest in consolidated funds in respect of the
consolidated investment funds, which are non-recourse to the Group. These liabilities were valued by reference to the
underlying assets.
31.3.3 Governance of level 3
The Group\u2019s valuation policies, procedures and analyses for instruments categorised as level 3 are overseen by management
committees as part of the Group\u2019s wider financial reporting governance processes. The procedures undertaken include approval of
valuation methodologies, verification processes, and resolution of significant or complex valuation issues. In undertaking these
activities, the Group makes use of the extensive expertise of its asset management function. 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.
31.4 Fair value hierarchy for assets measured at fair value in the consolidated statement of financial position
The tables below present the Group's assets measured at fair value by level of the fair value hierarchy for each component of
business as set out in Note 32.
2023
Level 1
Level 2
Level 3
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
With-profits:
Investment property
\u2014
\u2014
14,423
14,423
Equity securities and pooled investment funds
38,863
1,660
14,080
54,603
Loans
\u2014
747
1,860
2,607
Debt securities
17,966
29,837
4,436
52,239
Derivative assets
222
1,082
\u2014
1,304
Total with-profits
57,051
33,326
34,799
125,176
Unit-linked:
Investment property
\u2014
\u2014
310
310
Equity securities and pooled investment funds
10,642
473
43
11,158
Debt securities
1,796
2,841
14
4,651
Derivative assets
18
12
\u2014
30
Total unit-linked
12,456
3,326
367
16,149
Annuity and other long-term business:
Investment property
\u2014
\u2014
689
689
Equity securities and pooled investment funds
177
88
4
269
Loans
\u2014
\u2014
1,301
1,301
Debt securities
2,631
5,851
4,275
12,757
Derivative assets
\u2014
195
32
227
Total annuity and other long-term business
2,808
6,134
6,301
15,243
Other:
Equity securities and pooled investment funds
151
\u2014
67
218
Debt securities
678
358
\u2014
1,036
Derivative assets
\u2014
132
\u2014
132
Total other
829
490
67
1,386
Group:
Investment property
32
\u2014
\u2014
15,422
15,422
Equity securities and pooled investment funds
32
49,833
2,221
14,194
66,248
Loans
32
\u2014
747
3,161
3,908
Debt securities
32
23,071
38,887
8,725
70,683
Derivative assets
32
240
1,421
32
1,693
Total assets at fair value
73,144
43,276
41,534
157,954
31 Fair value methodology (continued)
31.4 Fair value hierarchy for assets measured at fair value in the consolidated statement of financial position (continued)
Restated i 2022
Level 1
Level 2
Level 3
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
With-profits:
Investment property
\u2014
\u2014
15,132
15,132
Equity securities and pooled investment funds
40,155
5,322
13,087
58,564
Loans
\u2014
507
1,366
1,873
Debt securities
13,685
26,380
4,725
44,790
Derivative assets
52
2,350
1
2,403
Total with-profits
53,892
34,559
34,311
122,762
Unit-linked:
Investment property
\u2014
\u2014
497
497
Equity securities and pooled investment funds
10,788
515
33
11,336
Debt securities
1,378
3,069
19
4,466
Derivative assets
5
2
\u2014
7
Total unit-linked
12,171
3,586
549
16,306
Annuity and other long-term business:
Investment property
\u2014
\u2014
876
876
Equity securities and pooled investment funds
5
\u2014
2
7
Loans
\u2014
\u2014
1,361
1,361
Debt securities
1,617
6,616
4,166
12,399
Derivative assets
\u2014
265
25
290
Total annuity and other long-term business
1,622
6,881
6,430
14,933
Other:
Equity securities and pooled investment funds
162
\u2014
58
220
Debt securities
686
440
40
1,166
Derivative assets
\u2014
150
\u2014
150
Total other
848
590
98
1,536
Group:
Investment property
32
\u2014
\u2014
16,505
16,505
Equity securities and pooled investment funds
32
51,110
5,837
13,180
70,127
Loans
32
\u2014
507
2,727
3,234
Debt securities
32
17,366
36,505
8,950
62,821
Derivative assets
32
57
2,767
26
2,850
Total assets at fair value
68,533
45,616
41,388
155,537
i The comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
31.5 Fair value hierarchy for liabilities measured at fair value in the consolidated statement of financial position
The tables below present the Group's liabilities measured at fair value by level of the fair value hierarchy:
2023
Level 1
Level 2
Level 3
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment contract liabilities without DPF
\u2014
12,535
\u2014
12,535
Third party interest in consolidated funds
6,584
342
2,967
9,893
Derivative liabilities
76
2,821
13
2,910
Accruals, deferred income and other liabilities
\u2014
\u2014
239
239
Total liabilities at fair value
6,660
15,698
3,219
25,577
2022
Level 1
Level 2
Level 3
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment contract liabilities without DPF
\u2014
11,937
\u2014
11,937
Third party interest in consolidated funds
7,372
1,329
1,688
10,389
Derivative liabilities
95
4,081
9
4,185
Accruals, deferred income and other liabilities
\u2014
\u2014
246
246
Total liabilities at fair value
7,467
17,347
1,943
26,757
31.6 Transfers between levels
The Group\u2019s policy is to recognise transfers into and transfers out of levels as at the end of each half-year 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.
2023
Transfers between levels
Equity securities and
pooled investment
funds
Loans
Debt
securities
Derivatives
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
From level 1 to level 2 i
\u2014
\u2014
3,127
\u2014
3,127
From level 1 to level 3 ii
39
\u2014
45
\u2014
84
From level 2 to level 1 iii
\u2014
\u2014
3,301
\u2014
3,301
From level 2 to level 3 ii
632
50
310
3
995
From level 3 to level 1
\u2014
\u2014
5
\u2014
5
From level 3 to level 2
\u2014
1
171
\u2014
172
2022
Transfers between levels
Equity securities and
pooled investment
funds
Loans
Debt
securities
Derivatives
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
From level 1 to level 2 iv
7
\u2014
14,099
\u2014
14,106
From level 1 to level 3
1
\u2014
4
\u2014
5
From level 2 to level 1
17
\u2014
220
\u2014
237
From level 2 to level 3
\u2014
2
582
\u2014
584
From level 3 to level 1
9
\u2014
\u2014
\u2014
9
From level 3 to level 2
137
42
555
\u2014
734
i The transfers in debt securities from level 1 to 2 (and level 1 to 3) are in line with the Group's levelling policy during the year ended 31 December 2023.
ii During the year additional information has been identified in relation to a number of collective investment holdings (within equity securities and pooled
investment funds) with a value of \u00a3658m now reflected within level 3.
iii The transfers in debt securities from level 2 to level 1 are primarily driven by increased liquidity in the bond markets towards the end of December 2023,
compared to a fall in liquidity towards the end of December 2022, and refinements made to our levelling methodology.
iv Movements arising from refinements made to the Group\u2019s levelling policy during the year ended 31 December 2022.
31.7 Reconciliation of movements in level 3 assets and liabilities
The movements during the year of level 3 assets and liabilities held at fair value (excluding those held for sale) are analysed in the
tables below:
2023
At 1 Jan
Total
gains/
(losses)
recorded
in income
statement
Foreign
exchange
Purchases
Sales
Transfer
(to) /
from
held for
sale
Settled
Issued
Transfers
into
level 3
Transfers
out of
level 3
At 31 Dec
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Level 3 assets:
Investment property
16,505
(1,053)
(365)
1,037
(530)
(172)
\u2014
\u2014
\u2014
\u2014
15,422
Equity securities and
pooled investment funds
13,180
(784)
(142)
2,632
(1,212)
(151)
\u2014
\u2014
671
\u2014
14,194
Loans
2,727
21
(19)
968
(585)
\u2014
\u2014
\u2014
50
(1)
3,161
Debt securities
8,950
107
(20)
853
(1,280)
(64)
\u2014
\u2014
355
(176)
8,725
Derivative assets
26
8
\u2014
\u2014
\u2014
\u2014
(5)
\u2014
3
\u2014
32
Total level 3 assets
41,388
(1,701)
(546)
5,490
(3,607)
(387)
(5)
\u2014
1,079
(177)
41,534
Level 3 liabilities:
Third party interest in
consolidated funds
1,688
(223)
(18)
\u2014
\u2014
\u2014
(9)
617
949
(37)
2,967
Borrowings and
subordinated liabilities
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Derivative liabilities
9
4
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
13
Other financial liabilities
246
\u2014
\u2014
\u2014
\u2014
\u2014
(7)
\u2014
\u2014
\u2014
239
Total level 3 liabilities
1,943
(219)
(18)
\u2014
\u2014
\u2014
(16)
617
949
(37)
3,219
Restatedi
2022
At 1 Jan
Total
gains/
(losses)
recorded
in income
statement
Foreign
exchange
Purchases
Sales
Transfer
(to) /
from held
for sale
Settled
Issued
Transfers
into
level 3
Transfers
out of
level\u00a03
At 31 Dec
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Level 3 assets:
Investment property
19,698
(1,477)
204
2,699
(4,643)
24
\u2014
\u2014
\u2014
\u2014
16,505
Equity securities and
pooled investment funds
10,968
419
128
3,683
(1,873)
\u2014
\u2014
\u2014
1
(146)
13,180
Loans
5,227
(901)
4
579
(786)
\u2014
(1,356)
\u2014
2
(42)
2,727
Debt securities
12,370
(3,401)
8
760
(818)
\u2014
\u2014
\u2014
586
(555)
8,950
Derivative assets
58
(31)
\u2014
2
\u2014
\u2014
(3)
\u2014
\u2014
\u2014
26
Total level 3 assets
48,321
(5,391)
344
7,723
(8,120)
24
(1,359)
\u2014
589
(743)
41,388
Level 3 liabilities:
Third party interest in
consolidated funds
1,241
(22)
16
\u2014
\u2014
\u2014
(89)
542
\u2014
\u2014
1,688
Borrowings and
subordinated liabilities
1,159
\u2014
\u2014
\u2014
\u2014
\u2014
(1,159)
\u2014
\u2014
\u2014
\u2014
Derivative liabilities
4
\u2014
\u2014
5
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
9
Other financial liabilities
403
(148)
\u2014
\u2014
\u2014
\u2014
(9)
\u2014
\u2014
\u2014
246
Total level 3 liabilities
2,807
(170)
16
5
\u2014
\u2014
(1,257)
542
\u2014
\u2014
1,943
31.8 Sensitivity of the fair value of level 3 instruments to changes in significant inputs
31.8.1 Level 3 assets inputs
Where possible, the Group assesses the sensitivity of the fair value of level 3 assets to reasonably possible changes in the most
significant unobservable inputs.
The most significant unobservable inputs in determining the fair value of level 3 assets are presented within the tables below.
Real estate:
Average estimated rental valuei
Average equivalent yield
As at 31 December
Property type
Geographical location
2023
2022
2023
2022
Investment property
Industrial
UK
\u00a312
\u00a39
6.33%
6.31%
Asia/Pacific
$126
$96
5.72%
6.31%
Office
UK
\u00a336
\u00a339
7.32%
6.18%
Asia/Pacific
$437
$442
5.57%
5.48%
North America
$50
$45
7.75%
5.75%
Residential
UK
\u00a337
\u00a337
5.24%
3.96%
Europe ii
\u20ac239
\u20ac370
5.14%
3.62%
Asia/Pacific
$249
$258
4.55%
5.32%
Retail
UK
\u00a325
\u00a327
7.08%
6.51%
Asia/Pacific iii
$786
$755
7.25%
6.92%
Other
UK
\u00a341
\u00a338
5.73%
5.77%
Asia/Pacific
$196
$195
8.50%
8.50%
i The average estimated rental value for the UK and North America is quoted per square foot, while the average estimated rental value for Europe
and Asia/Pacific is quoted per square metre in line with local practice.
ii The 31\u00a0December 2022 average estimated rental value for Residential - Europe has been restated following a review of the assets included within
the\u00a0calculation of the average.
iii The 31\u00a0December 2022 average estimated rental value for Retail - Asia/Pacific has been restated following a review of the assets included within
the\u00a0calculation of the average.
Other assets:
As at 31 December
Unobservable input
2023
2022
Retail income strips
Discount rate
1.1% to 5.94%
1.06% to 5.00%
Equity release mortgages
Discount rate
2.76%
2.07%
Total portfolio property value
c. \u00a33.0bn
c. \u00a33.4bn
Assumed property growth rate
Risk free + 0.7%
2.65%
Property rental yield
2.25%
2.00%
Other commercial loans
Credit risk premium:
AAA to A
0.58% to 5.87%
0.60% to 1.81%
BBB to BB
1.09% to 6.65%
1.45% to 5.86%
Private placement loans i
Credit risk premium:
AAA to A
0.58% to 5.87%
0.60% to 1.81%
BBB to BB
1.09% to 6.65%
1.45% to 5.86%
Infrastructure fund investments
Discount rate
8.5% to 12%
7.75% to 12%
iNote on residential ground rent assets
Included within private placement loans are senior and junior notes backed by residential ground rents with a carrying value of \u00a31,241m (2022:
\u00a31,423m), of which \u00a3859m are held in the shareholder-backed fund (2022: \u00a3994m). In November 2023, the Department for Levelling up, Housing and
Communities, a department of the UK Government, issued a consultation titled, \"Modern leasehold: restricting residential ground rent for existing
leases\" . The consultation, which is now closed to comments, included five options for capping ground rents in existing leases. One of the potential
options is to cap ground rents in existing leases at the nominal value of a peppercorn (peppercorn cap), which would eliminate materially the full value
of the asset. We have been engaging with the UK Government and, together with other industry participants, have provided constructive responses to
the consultation. However, the outcome of the consultation in terms of any proposed change in legislation is still uncertain.
The impact of the potential outcomes of the consultation have been reflected in the valuation through a ratings downgrade to all senior notes impacted
from AA- to A+ and the application of an incremental illiquidity spread of 0.60% above the comparable spread implied by the rating to reflect the
compensation that a market participation would require at reporting date due to the uncertainty in future values. Consequently, the risk premium on
the residential ground rents as at 31\u00a0December 2023 ranges between 1.80% and 2.69% on the senior notes and between 3.81% and 4.49% on the
junior notes. The impact of these assumption changes is a decline in the value of the residential ground rent portfolio of \u00a3170m, of which \u00a3121m relates
to assets held in the shareholder-backed fund. The corresponding impact to insurance contract liabilities and profit after tax is disclosed in note 32.7.3.
31 Fair value methodology (continued)
31.8 Sensitivity of the fair value of level 3 instruments to changes in significant inputs (continued)
31.8.2 Level 3 asset sensitivities
The table below provides a breakdown of assets within the level 3 fair value hierarchy by investment type, the sensitivity of the fair
value to the possible changes in the most significant unobservable inputs, and the impact on IFRS profit after tax and shareholders'
equity for those held within the shareholder backed-funds.
2023
Fair
value
Held in
shareholder-
backed fund
Valuation
technique
Most significant
unobservable input
Sensitivity
Change in
fair value
Impact on
IFRS profit
after tax and
shareholders'
equityvii
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment property
Property in use
14,414
994
Income
capitalisation
Equivalent yield
Increase by 50bps
(1,277)
(67)
Decrease by 50bps
1,535
81
Estimated rental
value
Increase by 10%
(1,240)
(65)
Decrease by 10%
1,286
68
Property under
development
1,008
5
Development cost
Increase by 10%
101
\u2014
Decrease by 10%
(101)
\u2014
Loans
Equity-release
mortgages i
928
928
Discounted cash
flowii
Illiquidity premium
Increase by 50bps
(61)
(47)
Decrease by 50bps
66
51
Current property
value
Increase by 10%
44
33
Decrease by 10%
(54)
(41)
Assumed annual
property growth rate
Increase by 100bps
109
84
Decrease by 100bps
(154)
(118)
Assumed annual
property rental yield
Increase by 100bps
(77)
(59)
Decrease by 100bps
72
55
Other mortgages and
retail loans
816
\u2014
Broker quotes iii
Broker quotes
Increase by 10%
82
\u2014
Decrease by 10%
(82)
\u2014
Other commercial loans
1,417
373
Broker quotes iii
Broker quotes
Increase by 10%
142
29
Decrease by 10%
(142)
(29)
Equity securities and
pooled investment funds iv
14,090
104
Net asset
statements
Net asset value
Increase by 10%
1,409
8
Decrease by 10%
(1,409)
(8)
Infrastructure fund
investments
325
\u2014
Discounted cash
flowv
Discount rate
Increase by 10%
72
\u2014
Decrease by 10%
(62)
\u2014
Debt securities iv
Private placement loansviii
5,523
3,242
Discounted cash
flowvi
Discount rate
Increase by 40bps
(236)
(106)
Decrease by 40bps
256
115
Retail income strips
224
188
Discounted cash
flowvi
Discount rate
Increase by 50bps
(12)
(7)
Decrease by 50bps
13
9
Unquoted corporate
bonds
2,757
859
Broker quotes,
enterprise valuation,
estimated recovery
Broker quotes
Increase by 10%
276
66
Decrease by 10%
(276)
(66)
Derivative assets
32
32
Discounted cash
flowvi
Discount rate
Increase by 50bps
\u2014
\u2014
Decrease by 50bps
\u2014
\u2014
Total level 3
41,534
6,725
31 Fair value methodology (continued)
31.8 Sensitivity of the fair value of level 3 instruments to changes in significant inputs (continued)
31.8.2 Level 3 asset sensitivities (continued)
Restated 2022
Fair
value
Held in
shareholder-
backed fund
Valuation
technique
Most significant
unobservable input
Sensitivity
Change in
fair value
Impact on
IFRS profit
after tax and
shareholders'
equityvii
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment property:
Property in use
15,371
1,368
Income
capitalisation
Equivalent yield
Increase by 50bps
(1,419)
(102)
Decrease by 50bps
1,715
125
Estimated rental
value
Increase by 10%
(1,260)
(69)
Decrease by 10%
1,316
70
Property under
development
1,134
5
Development cost
Increase by 10%
113
\u2014
Decrease by 10%
(113)
\u2014
Loans
Equity-release mortgagesi
934
934
Discounted cash
flowii
Illiquidity premium
Increase by 50bps
(67)
(83)
Decrease by 50bps
73
90
Current property
value
Increase by 10%
44
54
Decrease by 10%
(53)
(65)
Assumed annual
property growth
rate
Increase by 100bps
127
157
Decrease by 100bps
(177)
(219)
Assumed annual
property rental yield
Increase by 100bps
(81)
(100)
Decrease by 100bps
77
96
Other mortgages and retail
loans
680
\u2014
Broker quotes iii
Broker quotes
Increase by 10%
68
\u2014
Decrease by 10%
(68)
\u2014
Other Commercial loans
1,113
427
Broker quotes iii
Broker quotes
Increase by 10%
111
42
Decrease by 10%
(111)
(42)
Equity securities and
pooled investment funds iv
12,967
93
Net asset
statements
Net asset value
Increase by 10%
1,297
7
Decrease by 10%
(1,297)
(7)
Infrastructure fund
investments
497
\u2014
Discounted cash
flowv
Discount rate
Increase by 10%
(75)
\u2014
Decrease by 10%
88
\u2014
Debt securities iv
Private placement loansviii
5,649
3,225
Discounted cash
flowvi
Discount rate
Increase by 40bps
(278)
(223)
Decrease by 40bps
268
184
Retail income strips
236
199
Discounted cash
flowvi
Discount rate
Increase by 50bps
(15)
(16)
Decrease by 50bps
17
18
Unquoted corporate bonds
2,781
800
Broker quotes,
enterprise
valuation,
estimated recovery
Broker quotes
Increase by 10%
278
97
Decrease by 10%
(278)
(97)
Derivative assets
26
26
Discounted cash
flowvi
Discount rate
Increase by 50bps
(1)
(1)
Decrease by 50bps
1
1
Total level 3
41,388
7,077
i The equity release mortgages have a no-negative equity guarantee (NNEG) that caps the loan repayment in the event of death, or entry into long-term
care, to be no greater than the proceeds from the sale of the property that the loans are secured against. The value of the NNEG, which is recognised as a
deduction from the value of the loans, is based on a Black-Scholes option pricing valuation utilising a real-world approach and is estimated using
assumptions, including future property growth rate and property price volatility.
ii The equity release mortgage loans of \u00a3928m as at 31\u00a0December 2023 (2022: \u00a3934m) and a corresponding liability of \u00a3239m (2022: \u00a3246m), which were
valued internally using discounted cash flow models. Future cash flows are estimated based on assumptions, including prepayment, death and entry into
long-term care, and discounted using an appropriate discount rate, which references market rates for equity release mortgage loans.
iii Quotes received from an external pricing service.
31 Fair value methodology (continued)
31.8 Sensitivity of the fair value of level 3 instruments to changes in significant inputs (continued)
31.8.2 Level 3 asset sensitivities (continued)
iv Infrastructure fund investments comprises \u00a3104m (31 December 2022: \u00a3213m) of equity securities and pooled investment funds and \u00a3220m
(31\u00a0December\u00a02022: \u00a3284m) of debt securities. These investments are valued in accordance with the International Private Equity and Venture Association
valuation guidelines (latest edition December 2022). Valuations are also benchmarked against comparable infrastructure fund transactions. The discount
rate is made up of cash flows from dividends due in respect of the equity investments and principal and interest from loan notes in respect of debt
investments.
v These investments are valued in accordance with the International Private Equity and Venture Association valuation guidelines (latest edition December
2019). Valuations are also benchmarked against comparable infrastructure transactions. The discount rate is made up of cash flows from dividends due in
respect of the equity investments and principal and interest from loan notes in respect of debt investments.
vi The discount rate is made up of a risk-free rate and a credit spread. The risk-free rate is taken from an appropriate gilt of comparable duration and the
spread is taken from a basket of comparable securities.
vii Of the \u00a36,725m (31\u00a0December 2022: \u00a37,077m) of level 3 assets held in shareholder-backed funds, \u00a3367m (2022: \u00a3549m) is held by unit-linked business.
These assets are included in the analysis presented however, as the investment risk is borne by the unit-linked policyholders, there is no impact on IFRS
profit after tax and shareholder's equity.
viii Included within private placement loans is senior and junior notes backed by residential ground rent assets with a carrying value of \u00a31,241m of which
\u00a3859m were held in the shareholder-backed fund (2022: \u00a31,423m of which \u00a3994m in the shareholder-backed fund) which are subject to the UK
Government consultation mentioned in note 31.8.1. An increase in the illiquidity spread of 50bps would result in the value of the assets decreasing by
\u00a3100m, of which \u00a370m would relate to the assets held in the shareholder-backed fund. In the event of a \u2018peppercorn cap\u2019, the assets would have a value of
close to Nil. The corresponding impact to insurance contract liabilities and profit after tax is disclosed in note 32.7.3.
31.9 Unrealised gains and losses in respect of level 3 assets and liabilities
Unrealised gains and losses recognised in the consolidated income statement in respect of assets and liabilities classified as level 3
that are held at the end of the year are analysed as follows:
2023
Restated i
2022
As at 31 December
\u00a3m
\u00a3m
Investment property
(1,124)
(1,538)
Equity securities and pooled investment funds
(605)
452
Loans
11
(899)
Debt securities
(106)
(3,350)
Third party interest in consolidated funds
223
9
Derivatives
\u2014
(33)
Other financial liabilities
\u2014
148
Total
(1,601)
(5,211)
i The comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
31.10 Fair value of assets and liabilities at amortised cost
The tables below show the assets and liabilities carried at amortised cost on the consolidated statement of financial position for
which fair value is disclosed. The assets and liabilities that are carried at amortised cost, where the carrying value approximates the
fair value, are excluded from the analysis below:
2023
Level 1
Level 2
Level 3
Total fair
value
Total
carrying
value
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Liabilities:
Subordinated liabilities and other borrowings
\u2014
7,264
260
7,524
8,089
31 Fair value methodology (continued)
31.10 Fair value of assets and liabilities at amortised cost (continued)
Restatedi
2022
Level 1
Level 2
Level 3
Total fair
value
Total
carrying
value
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Liabilities:
Subordinated liabilities and other borrowings
\u2014
6,416
6
6,422
7,537
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
The estimated fair value of subordinated liabilities are based on the quoted market offer price. The fair value of the liabilities in the
tables above have been estimated from the discounted cash flows expected to be received or paid. Where appropriate, an
observable market interest rate has been used and the assets and liabilities are classified within level 2. Otherwise, they are
included as level 3 assets or liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-682": { "value": "
31.1 Determination of fair value hierarchy
The fair values of assets and liabilities for which fair valuation is required under IFRS are determined by the use of current market
bid prices for exchange-quoted investments, by using quotations from independent third parties such as brokers and pricing
services, or by using appropriate valuation techniques. Fair value is the amount for which an asset could be exchanged or a liability
settled in an arm\u2019s length transaction.
To provide further information on the approach used to determine and measure the fair value of certain assets and liabilities, the
following fair value hierarchy categorisation has been used. This hierarchy is based on the inputs to the fair value measurement and
reflects the lowest level input that is significant to that measurement.
Level 1 - quoted prices (unadjusted) in active markets for identical assets and liabilities
Level 1 principally includes exchange-listed equities, mutual funds with quoted prices, exchange-traded derivatives such as futures
and options, and national government bonds, unless there is evidence that trading in a given instrument is so infrequent that the
market could not be considered active. It also includes other financial instruments where there is clear evidence that the year-end
valuation is based on a traded price in an active market.
Level 2 - inputs other than quoted prices included within level 1 that are observable either directly (ie as prices) or indirectly (ie derived from
prices)
Level 2 principally includes corporate bonds and other national and non-national government debt securities which are valued
using observable inputs, together with over-the-counter derivatives such as forward exchange contracts and non-quoted
investment funds valued with observable inputs. It also includes investment contract liabilities without DPF that are valued using
observable inputs.
Level 3 - significant inputs for the asset or liability are not based on observable market data (unobservable inputs)
Level 3 principally includes investments in private equity funds, directly held investment properties and investments in property
funds which are exposed to bespoke properties or risks and investments which are internally valued or subject to a significant
number of unobservable assumptions. It also includes debt securities which are rarely traded or traded only in privately negotiated
transactions and hence where it is difficult to assert that their valuations have been based on observable market data.
31.2 Valuation approach for level 2 assets and liabilities
A significant proportion of the Group\u2019s level 2 assets are corporate bonds, structured securities and other national and non-
national government debt securities. These assets, in line with market practice, are generally valued using independent pricing
services or quotes from third party brokers. These valuations are subject to a number of monitoring controls, such as monthly price
variances, stale price reviews and variance analysis on prices achieved on subsequent trades.
Pricing services, where available, are used to obtain third party broker quotes. When prices are not available from pricing services,
quotes are sourced directly from brokers. The Group seeks to obtain a number of quotes from different brokers so as to obtain the
most comprehensive information available on their executability. Where quotes are sourced directly from brokers, the price used in
the valuation is normally selected from one of the quotes based on a number of factors, including the timeliness and regularity of
the quotes and the accuracy of the quotes considering the spreads provided. The selected quote is the one which best represents
an executable quote for the security at the measurement date.
31.3 Level 3 assets and liabilities
31.3.1 Valuation approach for level 3
Investments valued using valuation techniques include financial investments which by 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\u00a0market illiquidity. The valuation techniques used include comparison to recent arm\u2019s length transactions, reference to other
instruments that are substantially the same, discounted cash flow analysis, option-adjusted spread models and, if applicable,
enterprise valuation. These techniques may include a number of assumptions relating to variables such as credit risk and interest
rates. Changes in assumptions relating to these variables could positively or negatively impact the reported fair value of these
instruments. When determining the inputs into the valuation techniques used, priority is given to publicly available prices from
independent sources when available, but overall the source of pricing is chosen with the objective of arriving at a fair value
measurement that reflects the price at which an orderly transaction would take place between market participants on the
measurement date.
Exposure to climate risk is mitigated as part of the acquisition and asset management of real estate properties through careful
assessment of potential acquisitions and regularly monitoring the energy intensity and carbon emissions of our existing portfolio.
Where relevant, we procure independent third party advice to assess our portfolio\u2019s potential and cost of retrofitting to minimise
carbon emissions and energy intensity.
31 Fair value methodology (continued)
31.3 Level 3 assets and liabilities (continued)
31.3.1 Valuation approach for level 3 (continued)
Where certain debt securities are valued using broker quotes, adjustments may be required in limited circumstances. This is
generally where it is determined that the third-party valuations obtained do not reflect fair value (eg either because the value is
stale and/or the values are extremely diverse in range). These are usually securities which are distressed or that could be subject
to a debt restructure, or where reliable market prices are no longer available due to an inactive market or market dislocation. In
these instances, prices are derived using internal valuation techniques including those described below with the objective of
arriving at a fair value measurement that reflects the price at which an orderly transaction would take place between market
participants on the measurement date. The techniques used require a number of assumptions relating to variables such as credit
risk and interest rates. Examples of such variables include an average credit spread based on the corporate bond universe and the
relevant duration of the asset being valued. The input assumptions are determined based on the best available information at the
measurement dates. Securities valued in such manner are classified as level 3 where these significant inputs are not based on
observable market data.
Certain debt securities were valued using matrix pricing, which is based on assessing the credit quality of the underlying borrower
and allocating an internal credit rating which is unobservable. The internal credit rating implicitly incorporates Environmental,
Social and Governance (ESG) considerations through the analysts' views of the industry and issuer. Under matrix pricing, these
debt securities are priced by taking the credit spreads on comparable quoted public debt securities and applying these to the
equivalent debt securities, factoring in a specified liquidity premium. The selection of comparable quoted public debt securities
used to determine the credit spread is based on a credit spread matrix that takes into account the internal credit rating, maturity
and currency of the debt security. During the year, the methodology for valuing the securities was further enhanced to place focus
on the use of comparable instruments or a comparable basket of securities to derive a credit spread for each in scope private debt
investment. This approach aligns to views of best practice and considers key features of the investment being valued.
The fair value estimates are made at a specific point in time, based upon any available market information and judgements about
the financial instruments, including estimates of the timing and amount of expected future cash flows and the credit standing of
counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time a
significant volume of a particular financial instrument, nor do they consider the tax impact of the realisation of unrealised gains or
losses from selling the financial instrument being fair valued. In some cases, the disclosed value cannot be realised in immediate
settlement of the financial instrument. In accordance with the Group Risk Framework, the estimated fair value of derivative financial
instruments valued internally using standard market practices are subject to assessment against external counterparties\u2019
valuations.
The investment properties of the Group are externally valued by professionally qualified external valuers using the RICS valuation
standards which includes the issued Guidance Note \u201cSustainability and ESG in commercial property valuation and strategic
advice\u201d. The Group's investment properties are predominantly valued using an income capitalisation technique. This technique
calculates the value through the yield and rental value depending on factors such as the lease length, building quality, covenants
and location. Typically these variables used are compared to recent transactions with similar features to those being valued. The
valuation of investment property inherently captures the impact of climate change if it were located in an area subject to climate
change events. The key inputs of yield and rental value are proxies for a range of factors which will include climate change. The
trend is towards greener buildings achieving better rents and yields than comparable buildings, all other factors being equal.
As the comparisons are not with properties that are virtually identical to the Group\u2019s investment properties, adjustments are made
by the valuers where appropriate to the variables used.
31 Fair value methodology (continued)
31.3 Level 3 assets and liabilities (continued)
31.3.2 Analysis of internally valued level 3 financial instruments
Level 3 financial assets, net of financial liabilities, which were internally valued as at 31\u00a0December 2023 were \u00a37,878m
(2022 (Restated): \u00a38,630m), representing 6.0% of the total fair-valued financial assets net of financial liabilities (2022: 6.7%).
Internal valuations are inherently more subjective than external valuations. These internally valued assets and liabilities primarily
consist of the following items:
\u2013 Debt securities of \u00a37,278m as at 31\u00a0December 2023 (2022: \u00a37,083m), of which \u00a35,746m (2022: \u00a35,885m) were valued using
discounted cash flow models with an internally developed discount rate.These include senior and junior notes backed by
residential ground rents with a carrying value of \u00a31,241m (2022: \u00a31,423m). Please see notes 31.8.1 and 31.8.2 for more information
on these assets. The remaining debt securities were valued using other valuation methodologies such as enterprise valuation
and estimated recovery (such as liquidators' reports).
\u2013 Private equity investments in both debt and equity securities of \u00a3325m as at 31\u00a0December 2023 (2022: \u00a3497m), of which
investments of \u00a3325m (2022: \u00a3497m) were valued internally using a discounted cash flow model. The most significant inputs to
the valuation are the forecast cash flows of the underlying business, internally derived discount rate, and terminal value
assumption, all of which involve significant judgement. The valuation is performed in accordance with International Private Equity
and Venture Capital Association valuation guidelines. These investments are held by the Group's consolidated private equity
infrastructure funds.
\u2013 Equity release mortgage loans of \u00a3928m as at 31\u00a0December 2023 (2022: \u00a3934m) and a corresponding liability of \u00a3239m
(2022:\u00a0\u00a3246m), which were valued internally using discounted cash flow models. The inputs that are most significant to the
valuation of these loans are the internally derived discount rate, the current property value, the assumed future property growth
and the assumed future annual property rental yields.
\u2013 Other commercial loans of \u00a31,417m as at 31\u00a0December 2023 (2022: \u00a31,114m) were valued using discounted cash flow models
with an internally developed discount rate.
\u2013 Liabilities of \u00a32,967m as at 31\u00a0December 2023 (2022: \u00a31,688m), for the third party interest in consolidated funds in respect of the
consolidated investment funds, which are non-recourse to the Group. These liabilities were valued by reference to the
underlying assets.
31.3.3 Governance of level 3
The Group\u2019s valuation policies, procedures and analyses for instruments categorised as level 3 are overseen by management
committees as part of the Group\u2019s wider financial reporting governance processes. The procedures undertaken include approval of
valuation methodologies, verification processes, and resolution of significant or complex valuation issues. In undertaking these
activities, the Group makes use of the extensive expertise of its asset management function. 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.
31.4 Fair value hierarchy for assets measured at fair value in the consolidated statement of financial position
The tables below present the Group's assets measured at fair value by level of the fair value hierarchy for each component of
business as set out in Note 32.
2023
Level 1
Level 2
Level 3
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
With-profits:
Investment property
\u2014
\u2014
14,423
14,423
Equity securities and pooled investment funds
38,863
1,660
14,080
54,603
Loans
\u2014
747
1,860
2,607
Debt securities
17,966
29,837
4,436
52,239
Derivative assets
222
1,082
\u2014
1,304
Total with-profits
57,051
33,326
34,799
125,176
Unit-linked:
Investment property
\u2014
\u2014
310
310
Equity securities and pooled investment funds
10,642
473
43
11,158
Debt securities
1,796
2,841
14
4,651
Derivative assets
18
12
\u2014
30
Total unit-linked
12,456
3,326
367
16,149
Annuity and other long-term business:
Investment property
\u2014
\u2014
689
689
Equity securities and pooled investment funds
177
88
4
269
Loans
\u2014
\u2014
1,301
1,301
Debt securities
2,631
5,851
4,275
12,757
Derivative assets
\u2014
195
32
227
Total annuity and other long-term business
2,808
6,134
6,301
15,243
Other:
Equity securities and pooled investment funds
151
\u2014
67
218
Debt securities
678
358
\u2014
1,036
Derivative assets
\u2014
132
\u2014
132
Total other
829
490
67
1,386
Group:
Investment property
32
\u2014
\u2014
15,422
15,422
Equity securities and pooled investment funds
32
49,833
2,221
14,194
66,248
Loans
32
\u2014
747
3,161
3,908
Debt securities
32
23,071
38,887
8,725
70,683
Derivative assets
32
240
1,421
32
1,693
Total assets at fair value
73,144
43,276
41,534
157,954
31 Fair value methodology (continued)
31.4 Fair value hierarchy for assets measured at fair value in the consolidated statement of financial position (continued)
Restated i 2022
Level 1
Level 2
Level 3
Total
As at 31 December
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
With-profits:
Investment property
\u2014
\u2014
15,132
15,132
Equity securities and pooled investment funds
40,155
5,322
13,087
58,564
Loans
\u2014
507
1,366
1,873
Debt securities
13,685
26,380
4,725
44,790
Derivative assets
52
2,350
1
2,403
Total with-profits
53,892
34,559
34,311
122,762
Unit-linked:
Investment property
\u2014
\u2014
497
497
Equity securities and pooled investment funds
10,788
515
33
11,336
Debt securities
1,378
3,069
19
4,466
Derivative assets
5
2
\u2014
7
Total unit-linked
12,171
3,586
549
16,306
Annuity and other long-term business:
Investment property
\u2014
\u2014
876
876
Equity securities and pooled investment funds
5
\u2014
2
7
Loans
\u2014
\u2014
1,361
1,361
Debt securities
1,617
6,616
4,166
12,399
Derivative assets
\u2014
265
25
290
Total annuity and other long-term business
1,622
6,881
6,430
14,933
Other:
Equity securities and pooled investment funds
162
\u2014
58
220
Debt securities
686
440
40
1,166
Derivative assets
\u2014
150
\u2014
150
Total other
848
590
98
1,536
Group:
Investment property
32
\u2014
\u2014
16,505
16,505
Equity securities and pooled investment funds
32
51,110
5,837
13,180
70,127
Loans
32
\u2014
507
2,727
3,234
Debt securities
32
17,366
36,505
8,950
62,821
Derivative assets
32
57
2,767
26
2,850
Total assets at fair value
68,533
45,616
41,388
155,537
i The comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
31.5 Fair value hierarchy for liabilities measured at fair value in the consolidated statement of financial position
The tables below present the Group's liabilities measured at fair value by level of the fair value hierarchy:
2023
Level 1
Level 2
Level 3
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment contract liabilities without DPF
\u2014
12,535
\u2014
12,535
Third party interest in consolidated funds
6,584
342
2,967
9,893
Derivative liabilities
76
2,821
13
2,910
Accruals, deferred income and other liabilities
\u2014
\u2014
239
239
Total liabilities at fair value
6,660
15,698
3,219
25,577
2022
Level 1
Level 2
Level 3
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment contract liabilities without DPF
\u2014
11,937
\u2014
11,937
Third party interest in consolidated funds
7,372
1,329
1,688
10,389
Derivative liabilities
95
4,081
9
4,185
Accruals, deferred income and other liabilities
\u2014
\u2014
246
246
Total liabilities at fair value
7,467
17,347
1,943
26,757
31.6 Transfers between levels
The Group\u2019s policy is to recognise transfers into and transfers out of levels as at the end of each half-year 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.
2023
Transfers between levels
Equity securities and
pooled investment
funds
Loans
Debt
securities
Derivatives
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
From level 1 to level 2 i
\u2014
\u2014
3,127
\u2014
3,127
From level 1 to level 3 ii
39
\u2014
45
\u2014
84
From level 2 to level 1 iii
\u2014
\u2014
3,301
\u2014
3,301
From level 2 to level 3 ii
632
50
310
3
995
From level 3 to level 1
\u2014
\u2014
5
\u2014
5
From level 3 to level 2
\u2014
1
171
\u2014
172
2022
Transfers between levels
Equity securities and
pooled investment
funds
Loans
Debt
securities
Derivatives
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
From level 1 to level 2 iv
7
\u2014
14,099
\u2014
14,106
From level 1 to level 3
1
\u2014
4
\u2014
5
From level 2 to level 1
17
\u2014
220
\u2014
237
From level 2 to level 3
\u2014
2
582
\u2014
584
From level 3 to level 1
9
\u2014
\u2014
\u2014
9
From level 3 to level 2
137
42
555
\u2014
734
i The transfers in debt securities from level 1 to 2 (and level 1 to 3) are in line with the Group's levelling policy during the year ended 31 December 2023.
ii During the year additional information has been identified in relation to a number of collective investment holdings (within equity securities and pooled
investment funds) with a value of \u00a3658m now reflected within level 3.
iii The transfers in debt securities from level 2 to level 1 are primarily driven by increased liquidity in the bond markets towards the end of December 2023,
compared to a fall in liquidity towards the end of December 2022, and refinements made to our levelling methodology.
iv Movements arising from refinements made to the Group\u2019s levelling policy during the year ended 31 December 2022.
31.7 Reconciliation of movements in level 3 assets and liabilities
The movements during the year of level 3 assets and liabilities held at fair value (excluding those held for sale) are analysed in the
tables below:
2023
At 1 Jan
Total
gains/
(losses)
recorded
in income
statement
Foreign
exchange
Purchases
Sales
Transfer
(to) /
from
held for
sale
Settled
Issued
Transfers
into
level 3
Transfers
out of
level 3
At 31 Dec
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Level 3 assets:
Investment property
16,505
(1,053)
(365)
1,037
(530)
(172)
\u2014
\u2014
\u2014
\u2014
15,422
Equity securities and
pooled investment funds
13,180
(784)
(142)
2,632
(1,212)
(151)
\u2014
\u2014
671
\u2014
14,194
Loans
2,727
21
(19)
968
(585)
\u2014
\u2014
\u2014
50
(1)
3,161
Debt securities
8,950
107
(20)
853
(1,280)
(64)
\u2014
\u2014
355
(176)
8,725
Derivative assets
26
8
\u2014
\u2014
\u2014
\u2014
(5)
\u2014
3
\u2014
32
Total level 3 assets
41,388
(1,701)
(546)
5,490
(3,607)
(387)
(5)
\u2014
1,079
(177)
41,534
Level 3 liabilities:
Third party interest in
consolidated funds
1,688
(223)
(18)
\u2014
\u2014
\u2014
(9)
617
949
(37)
2,967
Borrowings and
subordinated liabilities
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Derivative liabilities
9
4
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
13
Other financial liabilities
246
\u2014
\u2014
\u2014
\u2014
\u2014
(7)
\u2014
\u2014
\u2014
239
Total level 3 liabilities
1,943
(219)
(18)
\u2014
\u2014
\u2014
(16)
617
949
(37)
3,219
Restatedi
2022
At 1 Jan
Total
gains/
(losses)
recorded
in income
statement
Foreign
exchange
Purchases
Sales
Transfer
(to) /
from held
for sale
Settled
Issued
Transfers
into
level 3
Transfers
out of
level\u00a03
At 31 Dec
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Level 3 assets:
Investment property
19,698
(1,477)
204
2,699
(4,643)
24
\u2014
\u2014
\u2014
\u2014
16,505
Equity securities and
pooled investment funds
10,968
419
128
3,683
(1,873)
\u2014
\u2014
\u2014
1
(146)
13,180
Loans
5,227
(901)
4
579
(786)
\u2014
(1,356)
\u2014
2
(42)
2,727
Debt securities
12,370
(3,401)
8
760
(818)
\u2014
\u2014
\u2014
586
(555)
8,950
Derivative assets
58
(31)
\u2014
2
\u2014
\u2014
(3)
\u2014
\u2014
\u2014
26
Total level 3 assets
48,321
(5,391)
344
7,723
(8,120)
24
(1,359)
\u2014
589
(743)
41,388
Level 3 liabilities:
Third party interest in
consolidated funds
1,241
(22)
16
\u2014
\u2014
\u2014
(89)
542
\u2014
\u2014
1,688
Borrowings and
subordinated liabilities
1,159
\u2014
\u2014
\u2014
\u2014
\u2014
(1,159)
\u2014
\u2014
\u2014
\u2014
Derivative liabilities
4
\u2014
\u2014
5
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
9
Other financial liabilities
403
(148)
\u2014
\u2014
\u2014
\u2014
(9)
\u2014
\u2014
\u2014
246
Total level 3 liabilities
2,807
(170)
16
5
\u2014
\u2014
(1,257)
542
\u2014
\u2014
1,943
31.8 Sensitivity of the fair value of level 3 instruments to changes in significant inputs
31.8.1 Level 3 assets inputs
Where possible, the Group assesses the sensitivity of the fair value of level 3 assets to reasonably possible changes in the most
significant unobservable inputs.
The most significant unobservable inputs in determining the fair value of level 3 assets are presented within the tables below.
Real estate:
Average estimated rental valuei
Average equivalent yield
As at 31 December
Property type
Geographical location
2023
2022
2023
2022
Investment property
Industrial
UK
\u00a312
\u00a39
6.33%
6.31%
Asia/Pacific
$126
$96
5.72%
6.31%
Office
UK
\u00a336
\u00a339
7.32%
6.18%
Asia/Pacific
$437
$442
5.57%
5.48%
North America
$50
$45
7.75%
5.75%
Residential
UK
\u00a337
\u00a337
5.24%
3.96%
Europe ii
\u20ac239
\u20ac370
5.14%
3.62%
Asia/Pacific
$249
$258
4.55%
5.32%
Retail
UK
\u00a325
\u00a327
7.08%
6.51%
Asia/Pacific iii
$786
$755
7.25%
6.92%
Other
UK
\u00a341
\u00a338
5.73%
5.77%
Asia/Pacific
$196
$195
8.50%
8.50%
i The average estimated rental value for the UK and North America is quoted per square foot, while the average estimated rental value for Europe
and Asia/Pacific is quoted per square metre in line with local practice.
ii The 31\u00a0December 2022 average estimated rental value for Residential - Europe has been restated following a review of the assets included within
the\u00a0calculation of the average.
iii The 31\u00a0December 2022 average estimated rental value for Retail - Asia/Pacific has been restated following a review of the assets included within
the\u00a0calculation of the average.
Other assets:
As at 31 December
Unobservable input
2023
2022
Retail income strips
Discount rate
1.1% to 5.94%
1.06% to 5.00%
Equity release mortgages
Discount rate
2.76%
2.07%
Total portfolio property value
c. \u00a33.0bn
c. \u00a33.4bn
Assumed property growth rate
Risk free + 0.7%
2.65%
Property rental yield
2.25%
2.00%
Other commercial loans
Credit risk premium:
AAA to A
0.58% to 5.87%
0.60% to 1.81%
BBB to BB
1.09% to 6.65%
1.45% to 5.86%
Private placement loans i
Credit risk premium:
AAA to A
0.58% to 5.87%
0.60% to 1.81%
BBB to BB
1.09% to 6.65%
1.45% to 5.86%
Infrastructure fund investments
Discount rate
8.5% to 12%
7.75% to 12%
iNote on residential ground rent assets
Included within private placement loans are senior and junior notes backed by residential ground rents with a carrying value of \u00a31,241m (2022:
\u00a31,423m), of which \u00a3859m are held in the shareholder-backed fund (2022: \u00a3994m). In November 2023, the Department for Levelling up, Housing and
Communities, a department of the UK Government, issued a consultation titled, \"Modern leasehold: restricting residential ground rent for existing
leases\" . The consultation, which is now closed to comments, included five options for capping ground rents in existing leases. One of the potential
options is to cap ground rents in existing leases at the nominal value of a peppercorn (peppercorn cap), which would eliminate materially the full value
of the asset. We have been engaging with the UK Government and, together with other industry participants, have provided constructive responses to
the consultation. However, the outcome of the consultation in terms of any proposed change in legislation is still uncertain.
The impact of the potential outcomes of the consultation have been reflected in the valuation through a ratings downgrade to all senior notes impacted
from AA- to A+ and the application of an incremental illiquidity spread of 0.60% above the comparable spread implied by the rating to reflect the
compensation that a market participation would require at reporting date due to the uncertainty in future values. Consequently, the risk premium on
the residential ground rents as at 31\u00a0December 2023 ranges between 1.80% and 2.69% on the senior notes and between 3.81% and 4.49% on the
junior notes. The impact of these assumption changes is a decline in the value of the residential ground rent portfolio of \u00a3170m, of which \u00a3121m relates
to assets held in the shareholder-backed fund. The corresponding impact to insurance contract liabilities and profit after tax is disclosed in note 32.7.3.
31 Fair value methodology (continued)
31.8 Sensitivity of the fair value of level 3 instruments to changes in significant inputs (continued)
31.8.2 Level 3 asset sensitivities
The table below provides a breakdown of assets within the level 3 fair value hierarchy by investment type, the sensitivity of the fair
value to the possible changes in the most significant unobservable inputs, and the impact on IFRS profit after tax and shareholders'
equity for those held within the shareholder backed-funds.
2023
Fair
value
Held in
shareholder-
backed fund
Valuation
technique
Most significant
unobservable input
Sensitivity
Change in
fair value
Impact on
IFRS profit
after tax and
shareholders'
equityvii
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment property
Property in use
14,414
994
Income
capitalisation
Equivalent yield
Increase by 50bps
(1,277)
(67)
Decrease by 50bps
1,535
81
Estimated rental
value
Increase by 10%
(1,240)
(65)
Decrease by 10%
1,286
68
Property under
development
1,008
5
Development cost
Increase by 10%
101
\u2014
Decrease by 10%
(101)
\u2014
Loans
Equity-release
mortgages i
928
928
Discounted cash
flowii
Illiquidity premium
Increase by 50bps
(61)
(47)
Decrease by 50bps
66
51
Current property
value
Increase by 10%
44
33
Decrease by 10%
(54)
(41)
Assumed annual
property growth rate
Increase by 100bps
109
84
Decrease by 100bps
(154)
(118)
Assumed annual
property rental yield
Increase by 100bps
(77)
(59)
Decrease by 100bps
72
55
Other mortgages and
retail loans
816
\u2014
Broker quotes iii
Broker quotes
Increase by 10%
82
\u2014
Decrease by 10%
(82)
\u2014
Other commercial loans
1,417
373
Broker quotes iii
Broker quotes
Increase by 10%
142
29
Decrease by 10%
(142)
(29)
Equity securities and
pooled investment funds iv
14,090
104
Net asset
statements
Net asset value
Increase by 10%
1,409
8
Decrease by 10%
(1,409)
(8)
Infrastructure fund
investments
325
\u2014
Discounted cash
flowv
Discount rate
Increase by 10%
72
\u2014
Decrease by 10%
(62)
\u2014
Debt securities iv
Private placement loansviii
5,523
3,242
Discounted cash
flowvi
Discount rate
Increase by 40bps
(236)
(106)
Decrease by 40bps
256
115
Retail income strips
224
188
Discounted cash
flowvi
Discount rate
Increase by 50bps
(12)
(7)
Decrease by 50bps
13
9
Unquoted corporate
bonds
2,757
859
Broker quotes,
enterprise valuation,
estimated recovery
Broker quotes
Increase by 10%
276
66
Decrease by 10%
(276)
(66)
Derivative assets
32
32
Discounted cash
flowvi
Discount rate
Increase by 50bps
\u2014
\u2014
Decrease by 50bps
\u2014
\u2014
Total level 3
41,534
6,725
31 Fair value methodology (continued)
31.8 Sensitivity of the fair value of level 3 instruments to changes in significant inputs (continued)
31.8.2 Level 3 asset sensitivities (continued)
Restated 2022
Fair
value
Held in
shareholder-
backed fund
Valuation
technique
Most significant
unobservable input
Sensitivity
Change in
fair value
Impact on
IFRS profit
after tax and
shareholders'
equityvii
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment property:
Property in use
15,371
1,368
Income
capitalisation
Equivalent yield
Increase by 50bps
(1,419)
(102)
Decrease by 50bps
1,715
125
Estimated rental
value
Increase by 10%
(1,260)
(69)
Decrease by 10%
1,316
70
Property under
development
1,134
5
Development cost
Increase by 10%
113
\u2014
Decrease by 10%
(113)
\u2014
Loans
Equity-release mortgagesi
934
934
Discounted cash
flowii
Illiquidity premium
Increase by 50bps
(67)
(83)
Decrease by 50bps
73
90
Current property
value
Increase by 10%
44
54
Decrease by 10%
(53)
(65)
Assumed annual
property growth
rate
Increase by 100bps
127
157
Decrease by 100bps
(177)
(219)
Assumed annual
property rental yield
Increase by 100bps
(81)
(100)
Decrease by 100bps
77
96
Other mortgages and retail
loans
680
\u2014
Broker quotes iii
Broker quotes
Increase by 10%
68
\u2014
Decrease by 10%
(68)
\u2014
Other Commercial loans
1,113
427
Broker quotes iii
Broker quotes
Increase by 10%
111
42
Decrease by 10%
(111)
(42)
Equity securities and
pooled investment funds iv
12,967
93
Net asset
statements
Net asset value
Increase by 10%
1,297
7
Decrease by 10%
(1,297)
(7)
Infrastructure fund
investments
497
\u2014
Discounted cash
flowv
Discount rate
Increase by 10%
(75)
\u2014
Decrease by 10%
88
\u2014
Debt securities iv
Private placement loansviii
5,649
3,225
Discounted cash
flowvi
Discount rate
Increase by 40bps
(278)
(223)
Decrease by 40bps
268
184
Retail income strips
236
199
Discounted cash
flowvi
Discount rate
Increase by 50bps
(15)
(16)
Decrease by 50bps
17
18
Unquoted corporate bonds
2,781
800
Broker quotes,
enterprise
valuation,
estimated recovery
Broker quotes
Increase by 10%
278
97
Decrease by 10%
(278)
(97)
Derivative assets
26
26
Discounted cash
flowvi
Discount rate
Increase by 50bps
(1)
(1)
Decrease by 50bps
1
1
Total level 3
41,388
7,077
i The equity release mortgages have a no-negative equity guarantee (NNEG) that caps the loan repayment in the event of death, or entry into long-term
care, to be no greater than the proceeds from the sale of the property that the loans are secured against. The value of the NNEG, which is recognised as a
deduction from the value of the loans, is based on a Black-Scholes option pricing valuation utilising a real-world approach and is estimated using
assumptions, including future property growth rate and property price volatility.
ii The equity release mortgage loans of \u00a3928m as at 31\u00a0December 2023 (2022: \u00a3934m) and a corresponding liability of \u00a3239m (2022: \u00a3246m), which were
valued internally using discounted cash flow models. Future cash flows are estimated based on assumptions, including prepayment, death and entry into
long-term care, and discounted using an appropriate discount rate, which references market rates for equity release mortgage loans.
iii Quotes received from an external pricing service.
31 Fair value methodology (continued)
31.8 Sensitivity of the fair value of level 3 instruments to changes in significant inputs (continued)
31.8.2 Level 3 asset sensitivities (continued)
iv Infrastructure fund investments comprises \u00a3104m (31 December 2022: \u00a3213m) of equity securities and pooled investment funds and \u00a3220m
(31\u00a0December\u00a02022: \u00a3284m) of debt securities. These investments are valued in accordance with the International Private Equity and Venture Association
valuation guidelines (latest edition December 2022). Valuations are also benchmarked against comparable infrastructure fund transactions. The discount
rate is made up of cash flows from dividends due in respect of the equity investments and principal and interest from loan notes in respect of debt
investments.
v These investments are valued in accordance with the International Private Equity and Venture Association valuation guidelines (latest edition December
2019). Valuations are also benchmarked against comparable infrastructure transactions. The discount rate is made up of cash flows from dividends due in
respect of the equity investments and principal and interest from loan notes in respect of debt investments.
vi The discount rate is made up of a risk-free rate and a credit spread. The risk-free rate is taken from an appropriate gilt of comparable duration and the
spread is taken from a basket of comparable securities.
vii Of the \u00a36,725m (31\u00a0December 2022: \u00a37,077m) of level 3 assets held in shareholder-backed funds, \u00a3367m (2022: \u00a3549m) is held by unit-linked business.
These assets are included in the analysis presented however, as the investment risk is borne by the unit-linked policyholders, there is no impact on IFRS
profit after tax and shareholder's equity.
viii Included within private placement loans is senior and junior notes backed by residential ground rent assets with a carrying value of \u00a31,241m of which
\u00a3859m were held in the shareholder-backed fund (2022: \u00a31,423m of which \u00a3994m in the shareholder-backed fund) which are subject to the UK
Government consultation mentioned in note 31.8.1. An increase in the illiquidity spread of 50bps would result in the value of the assets decreasing by
\u00a3100m, of which \u00a370m would relate to the assets held in the shareholder-backed fund. In the event of a \u2018peppercorn cap\u2019, the assets would have a value of
close to Nil. The corresponding impact to insurance contract liabilities and profit after tax is disclosed in note 32.7.3.
31.9 Unrealised gains and losses in respect of level 3 assets and liabilities
Unrealised gains and losses recognised in the consolidated income statement in respect of assets and liabilities classified as level 3
that are held at the end of the year are analysed as follows:
2023
Restated i
2022
As at 31 December
\u00a3m
\u00a3m
Investment property
(1,124)
(1,538)
Equity securities and pooled investment funds
(605)
452
Loans
11
(899)
Debt securities
(106)
(3,350)
Third party interest in consolidated funds
223
9
Derivatives
\u2014
(33)
Other financial liabilities
\u2014
148
Total
(1,601)
(5,211)
i The comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
31.10 Fair value of assets and liabilities at amortised cost
The tables below show the assets and liabilities carried at amortised cost on the consolidated statement of financial position for
which fair value is disclosed. The assets and liabilities that are carried at amortised cost, where the carrying value approximates the
fair value, are excluded from the analysis below:
2023
Level 1
Level 2
Level 3
Total fair
value
Total
carrying
value
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Liabilities:
Subordinated liabilities and other borrowings
\u2014
7,264
260
7,524
8,089
31 Fair value methodology (continued)
31.10 Fair value of assets and liabilities at amortised cost (continued)
Restatedi
2022
Level 1
Level 2
Level 3
Total fair
value
Total
carrying
value
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Liabilities:
Subordinated liabilities and other borrowings
\u2014
6,416
6
6,422
7,537
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
The estimated fair value of subordinated liabilities are based on the quoted market offer price. The fair value of the liabilities in the
tables above have been estimated from the discounted cash flows expected to be received or paid. Where appropriate, an
observable market interest rate has been used and the assets and liabilities are classified within level 2. Otherwise, they are
included as level 3 assets or liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-684": { "value": "
32 Risk management and\u00a0sensitivity analysis
The Group\u2019s business involves the acceptance and management of risk. The Group\u2019s risk management process is governed by the
Risk Management Framework (RMF). The RMF is designed to manage risk within agreed appropriate levels, aligned to delivering its
strategy and creating long-term value for clients and shareholders. Risk management is the process of identifying, assessing,
managing and reporting current and emerging risks, supported by embedded risk culture and strong governance. Effective risk
management enables better decision-making and safeguards its ability to meet commitments to its shareholders, customers and
clients, comply with regulation, manage disruption and protects its reputation. For more information on the RMF, please refer to
page 58.
Risk appetite is the amount and type of risk that the Group is willing to accept in pursuit of its business objectives, and is approved
by the Board. The risk appetite statements and limits specify the risk appetite and tolerance to take on risk. The statements and
thresholds are aligned to the business model and strategy and cover significant financial and non-financial risks. For more
information on risk appetite and limits please refer to page 59.
A number of risk factors affect the Group\u2019s results and financial position. The financial risk categories affecting the Group\u2019s
financial instruments and insurance assets and liabilities are set out below:
Risk type
Definition
Market risk
The risk of loss or adverse change in the financial situation of the business or that of the Group's customers
and clients resulting, directly or indirectly, from fluctuations in the level or volatility of market prices of assets
and liabilities.
Credit risk
The risk of loss or adverse change in the financial situation of the business, or that of the Group's customers
and clients, resulting from fluctuations in the credit standing of issuers of securities, counterparties and any
debtors in the form of default or other significant credit event, such as downgrade or spread widening.
Insurance risk
The risk of loss, or of adverse change in the financial situation of the business, or that of the Group's
customers and clients, resulting from changes in the level, trend or volatility of the following:
\u2013 Morbidity/Mortality risk: the risk of unexpected impact resulting from adverse morbidity and/or
mortality experience.
\u2013 Persistency risk: the risk of unexpected impact resulting from an adverse persistency experience.
\u2013 Expenses and margin pricing: the risk of unexpected impact resulting from adverse expense
experience.
\u2013 Longevity: the risk of unexpected impact resulting from adverse longevity experience.
Liquidity risk
The risk that the Group and/or its business are unable to meet financial obligations (eg claims, creditors and
collateral calls) as they fall due because they do not have or are unable to generate sufficient liquid assets.
Fund liquidity risk is the risk of being unable to meet liabilities arising from a mismatch in liquidity of the
underlying assets and the frequency of liability requirements of the fund.
These risks are described in more detail in the following sections.
The Group\u2019s exposure to risks arising from financial instruments and insurance assets and liabilities is different for each component
of the Group\u2019s business. The Group\u2019s consolidated statement of financial position is presented below for the different components
of business.
32 Risk management and\u00a0sensitivity analysis (continued)
32.1 Risk overview (continued)
Analysis of consolidated statement of financial position by component of business
2023
Shareholder-backed funds
With-
profits
Unit-linked
Annuity and
other long-
term
business
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets:
Goodwill and intangible assets
360
\u2014
11
1,444
1,815
Deferred acquisition costs
\u2014
5
4
14
23
Defined benefit pension asset
9
\u2014
4
6
19
Investment in joint ventures and associates accounted for using
the\u00a0equity method
265
\u2014
\u2014
22
287
Property, plant and equipment
1,826
\u2014
13
226
2,065
Investment property
14,423
310
689
\u2014
15,422
Deferred tax assets
79
3
193
168
443
Insurance contract assets
\u2014
\u2014
44
\u2014
44
Reinsurance contract assets
11
7
1,081
\u2014
1,099
Equity securities and pooled investment funds
54,603
11,158
269
218
66,248
Loans
2,607
\u2014
1,301
\u2014
3,908
Debt securities
52,239
4,651
12,757
1,036
70,683
Derivative assets
1,304
30
227
132
1,693
Deposits
12,253
1,808
2,255
8
16,324
Current tax assets
9
15
41
2
67
Accrued investment income and other debtors
1,620
206
290
420
2,536
Assets held for sale
1,112
105
1
138
1,356
Cash and cash equivalents
3,394
592
555
1,049
5,590
Total assets
146,114
18,890
19,735
4,883
189,622
Liabilities:
Insurance contract liabilities
123,596
4,404
14,135
\u2014
142,135
Reinsurance contract liabilities
1
21
335
\u2014
357
Investment contract liabilities without DPF
1,805
10,723
7
\u2014
12,535
Third party interest in consolidated funds
7,617
2,271
5
\u2014
9,893
Subordinated liabilities and other borrowings
4,321
91
1
3,676
8,089
Defined benefit pension liability
\u2014
\u2014
\u2014
294
294
Deferred tax liabilities
619
11
38
14
682
Lease liabilities
73
\u2014
11
303
387
Current tax liabilities
51
7
37
2
97
Derivative liabilities
1,129
4
1,514
263
2,910
Other financial liabilities
961
\u2014
30
195
1,186
Provisions
\u2014
\u2014
12
70
82
Accruals, deferred income and other liabilities
4,371
495
792
568
6,226
Liabilities held for sale
665
\u2014
\u2014
\u2014
665
Total liabilities
145,209
18,027
16,917
5,385
185,538
Total equity
4,084
Total equity and liabilities
189,622
32 Risk management and\u00a0sensitivity analysis (continued)
32.1 Risk overview (continued)
Analysis of consolidated statement of financial position by component of business (continued)
Restated i 2022
Shareholder-backed funds
With-profits
Unit-linked
Annuity and
other long-
term
business
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets:
Goodwill and intangible assets
364
\u2014
25
1,488
1,877
Deferred acquisition costs
\u2014
9
5
17
31
Defined benefit pension asset
13
\u2014
10
132
155
Investment in joint ventures and associates accounted for using
the\u00a0equity method
413
\u2014
\u2014
\u2014
413
Property, plant and equipment
1,630
\u2014
16
307
1,953
Investment property
15,132
497
876
\u2014
16,505
Deferred tax assets
55
21
233
136
445
Insurance contract assets
\u2014
\u2014
39
\u2014
39
Reinsurance contract assets
8
5
1,069
\u2014
1,082
Equity securities and pooled investment funds
58,564
11,336
7
220
70,127
Loans
1,873
\u2014
1,361
\u2014
3,234
Debt securities
44,790
4,466
12,399
1,166
62,821
Derivative assets
2,403
7
290
150
2,850
Deposits
17,755
1,623
2,021
\u2014
21,399
Current tax assets
133
18
78
26
255
Accrued investment income and other debtors
1,507
200
329
368
2,404
Assets held for sale
447
79
\u2014
158
684
Cash and cash equivalents
2,857
586
555
886
4,884
Total assets
147,944
18,847
19,313
5,054
191,158
Liabilities:
Insurance contract liabilities
123,431
4,598
13,947
\u2014
141,976
Reinsurance contract liabilities
1
22
325
\u2014
348
Investment contract liabilities without DPF
155
11,782
\u2014
\u2014
11,937
Third party interest in consolidated funds
8,217
2,086
5
81
10,389
Subordinated liabilities and other borrowings
3,757
45
1
3,734
7,537
Defined benefit pension liability
\u2014
\u2014
\u2014
\u2014
\u2014
Deferred tax liabilities
758
10
27
\u2014
795
Lease liabilities
85
\u2014
15
320
420
Current tax liabilities
13
17
8
20
58
Derivative liabilities
2,213
9
1,748
215
4,185
Other financial liabilities
1,928
\u2014
89
155
2,172
Provisions
\u2014
\u2014
11
79
90
Accruals, deferred income and other liabilities
4,242
791
1,192
543
6,768
Liabilities held for sale
172
\u2014
\u2014
\u2014
172
Total liabilities
144,972
19,360
17,368
5,147
186,847
Total equity
4,311
Total equity and liabilities
191,158
i The comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
32.2 Market risk
Market risk is the risk of loss or adverse change in the financial situation of the Group's business or that of the Group's
customers and clients resulting, directly or indirectly, from fluctuations in the level or volatility of market prices of assets and
liabilities.
Market risk comprises six types of risk, namely:
\u2013 Interest rate risk: fluctuations in the level and volatility of interest rates or the shape or curvature of the yield curve or spread
relationship
\u2013 Inflation risk: fluctuations in actual or implied inflation rates
\u2013 Equity risk: fluctuations in the level or volatility of equity investments
\u2013 Property risk: fluctuations in the level or volatility of property investments
\u2013 Currency risk: fluctuations, including translation risk, in the level or volatility of currency exposures
\u2013 Alternative investments risk: fluctuations in the level or volatility of alternative investment exposures
The primary market risks that the Group faces are equity risk, property risk and interest rate risk. Most assets the Group
holds are investments that are either equity or property-type investments and subject to equity or property price risk, or
bonds, mortgages and cash deposits, the values of which are subject to interest rate risk. Alternative investments may
exhibit some or all of these risks depending on the type of investment. The amount of risk borne by the Group\u2019s
shareholders depends on the extent to which its customers share the investment risk through the structure of the Group\u2019s
products.
The split of the Group\u2019s investments between equity investments and interest-sensitive instruments depends principally on
the type of liabilities supported by those investments and the amount of capital the Group has available. This mix of liabilities
allows the Group to invest a substantial portion of its investment funds in equity and property investments that the Group
believes produce greater returns over the long term.
Market risk is managed through a robust market risk framework which includes: policies, risk appetite statements and risk limits
and triggers covering key market risk exposures; asset and liability management programmes; a quality of capital framework;
strategic asset allocations; investment and hedging strategies; and investment constraints
32.2.1 Interest rate risk and inflation risk
The majority of the Group\u2019s interest rate exposure arises from shareholder-backed annuities. The liabilities are exposed to interest
rate movements, but these are closely matched with assets of an appropriate duration. The matching of assets of appropriate
duration to the annuity liabilities is based on management of regulatory capital reporting requirements. The assets held in excess of
the liabilities, which back the capital requirements of the annuity business, result in an exposure to interest rate risk.
Exposure to interest rate risk also arises on the shareholders' share of the excess assets in the With-Profits Fund.
The assets and liabilities for the with-profits and unit-linked components of business are sensitive to interest rates, but the
shareholder is not directly exposed to changes in the value of these assets and liabilities. The shareholder is indirectly exposed to
interest rate risk through the value of future shareholder transfers from with-profits business and charges levied on unit-linked and
asset management business.
Inflation risk primarily arises from certain annuity contracts that have benefit escalation linked to a price index. The Group manages
this exposure by matching inflation-linked annuity liabilities with corresponding inflation-linked assets.
32.2.2 Equity and property risk
While the Group holds significant amounts of equity and property assets on its consolidated statement of financial position, the
shareholders' exposure to equity and property risk for the with-profits and unit-linked business is limited as the risk is
predominantly borne by the policyholder. For with-profits business, the impact of market risk is reduced due to the 'smoothed'
basis of bonus declaration, so the sensitivity to short-term investment performance is relatively low. However, long-term
investment performance may affect future shareholder transfers. The Group has entered into a partial equity hedge of the
shareholder transfers expected to emerge from the WPSF in order to mitigate this risk.
The Group\u2019s direct exposure to this risk arises from the 'annuities and other long-term business' component\u2019s holdings in equity
securities and property, which are not hedged or matched by corresponding liabilities.
32.2 Market risk
32.2.3 Currency risk
The Group invests significant amounts of policyholder funds in overseas assets as part of its investment strategy. The direct
currency risk exposure to the shareholder from the with-profits and unit-linked components of business is minimal, although the
shareholder is indirectly exposed to currency risk in relation to the future value of shareholder transfers from with-profits business
and charges levied on unit-linked and asset management business. Currency risk exposure arising from overseas assets held by
the shareholder-backed annuity and other long-term business is mitigated through the use of derivatives.
The currency risk analysis for the year ended 31 December 2022 presented below has been restated to better reflect the currency
exposure of the Group's financial assets and financial liabilities.
As at 31\u00a0December 2023, the Group held 50% (2022: 48%) and 38% (2022: 38%) of its financial assets and financial liabilities
respectively, in currencies other than pounds sterling, the presentation currency of the Group. The non-sterling currencies are
primarily US dollar and euro.
Of these financial assets, as at 31\u00a0December 2023, 92 % (2022: 90%) are held by the With-Profits Fund, allowing the fund to obtain
exposure to foreign equity markets. Of these financial liabilities, as at 31\u00a0December 2023, 74% (2022: 88%) are held by the With-
Profits Fund, mainly relating to foreign currency borrowings. The exchange risks inherent in these exposures are mitigated through
the use of derivatives, mainly forward currency contracts.
For the year ended 31\u00a0December 2023, exchange losses of \u00a3126m (2022 restated: gains of \u00a3576m) were recognised in the
consolidated income statement; mainly arising on assets held by the With-Profits Fund, the majority of which are offset by changes
in with-profits and unit-linked liabilities. This excludes exchange gains and losses arising on foreign currency investments
measured at FVTPL, which are included as part of gains and losses included in investment return, which is shown in Note 5.
The Group is also exposed to structural currency translation risk as a result of overseas operations which contribute to equity. The
assets and liabilities of foreign operations are translated into the Group\u2019s presentational currency, pounds sterling. Foreign
exchange differences arising from this translation of foreign operations are reported as an item of other comprehensive income
and accumulated in the translation reserve.
32.3 Credit risk
The Group\u2019s exposure to credit risk primarily arises from the annuity funds, which hold substantial volumes of public and private
fixed income investments on which a certain level of defaults and downgrades are expected.
Exposure to the credit risk also arises on the shareholders' share of the excess assets in the With-Profits Fund.
While the with-profits and unit-linked funds have large holdings of assets subject to credit risk, the shareholder results of the
Group are not directly exposed to credit defaults on assets held in these components of business. However, the shareholder is
indirectly exposed to credit risk from these components of business in relation to the future value of shareholder transfers from
with-profits business and charges levied on unit-linked and asset management business. The direct exposure of the Group\u2019s
shareholders' equity to credit default risk in the 'other' component is small in the context of the Group.
Credit risk is managed through a robust credit and counterparty framework which includes: policies, standards, appetite
statements, limits and triggers (including relevant governance and controls); investment constraints and limits on the asset
portfolios, in relation to credit rating, seniority, sector and issuer, and counterparties in particular for derivatives, reinsurance and
cash; and a robust credit rating process.
32.3.1 Financial assets
The following tables provide an analysis of the quality of financial assets which are exposed to credit risk. The financial assets
below are analysed according to external credit ratings issued, with equivalent ratings issued by different ratings agencies
grouped together. Standard & Poor\u2019s ratings have been used where available. For securities where Standard & Poor\u2019s ratings are
not immediately available, those produced by Moody\u2019s and then Fitch have been used as an alternative.
2023
AAA
AA+ to AA-
A+ to A-
BBB+
to\u00a0BBB-
Below BBB-
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Reinsurance contract assets
\u2014
74
923
\u2014
\u2014
102
1,099
Loans
\u2014
\u2014
783
4
370
2,751
3,908
Debt Securities
6,604
17,340
16,919
14,213
4,930
10,677
70,683
Deposits
9
4,667
8,526
1,427
\u2014
1,695
16,324
Accrued investment income and other debtors
38
117
297
126
49
1,909
2,536
Cash and cash equivalents
826
1,058
3,644
18
17
27
5,590
Total financial assets
7,477
23,256
31,092
15,788
5,366
17,161
100,140
32 Risk management and\u00a0sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.1 Financial assets (continued)
Restatedi 2022
AAA
AA+ to AA-
A+ to A-
BBB+
to\u00a0BBB-
Below BBB-
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Reinsurance contract assets
\u2014
129
893
\u2014
\u2014
60
1,082
Loans
\u2014
\u2014
1,037
168
589
1,440
3,234
Debt Securities
6,651
12,632
11,774
16,147
4,377
11,240
62,821
Deposits
\u2014
2,011
14,952
3,594
\u2014
842
21,399
Accrued investment income and other debtors
38
82
140
155
64
1,925
2,404
Cash and cash equivalents
224
1,060
3,342
144
18
96
4,884
Total financial assets
6,913
15,914
32,138
20,208
5,048
15,603
95,824
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
The credit ratings, information or data contained in this report which are attributed and specifically provided by Standard & Poor\u2019s,
Moody\u2019s 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.
In the table above, 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- and are non-investment grade.
The Group is exposed to the risk of counterparty default on its reinsurance assets. The Group evaluates the financial condition of
its reinsurers and monitors concentration of credit risk to minimise its exposure from reinsurer insolvencies. The split of the
reinsurance asset by credit rating is shown above.
Loans that were impaired are not significant to the Group. Further information on the loans portfolio is provided in Note 18.
Debt securities with no external credit rating are classified as 'other'. The following table shows the majority of debt securities
shown as 'other' are allocated an internal rating and are considered to be of investment grade quality:
2023
2022
As at 31 December
\u00a3m
\u00a3m
AAA
188
43
AA+ to AA-
841
1,548
A+ to A-
4,721
3,844
BBB+ to BBB-
1,944
1,845
Below BBB-
1,138
786
Unrated
1,845
3,174
Total
10,677
11,240
32.3 Credit risk
32.3.2 Debt securities
The table below presents the Group's debt securities by asset category and external credit rating issued for each component of
business as set out in note 32.1.
2023
AAA
AA+ to AA-
A+ to A-
BBB+
to\u00a0BBB-
Below BBB-
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Government Sovereign debt
4,790
12,650
1,699
2,295
1,213
187
22,834
\u00a0 With-profits
3,365
9,297
1,670
2,220
1,213
80
17,845
\u00a0 Unit-linked
109
1,354
15
47
\u2014
107
1,632
\u00a0 Annuity and other long-term business
715
1,934
14
27
\u2014
\u2014
2,690
\u00a0 Other
601
65
\u2014
1
\u2014
\u2014
667
Quasi-sovereign and Public sector debt
202
1,572
204
397
873
300
3,548
\u00a0 With-profits
157
821
145
377
873
238
2,611
\u00a0 Unit-linked
1
58
13
2
\u2014
1
75
\u00a0 Annuity and other long-term business
44
693
46
18
\u2014
61
862
Corporate debt
1,242
2,875
14,587
11,268
2,755
8,544
41,271
\u00a0 With-profits
745
1,789
11,670
8,332
2,423
4,462
29,421
\u00a0 Unit-linked
27
110
1,239
1,209
257
23
2,865
\u00a0 Annuity and other long-term business
283
904
1,644
1,707
72
4,057
8,667
\u00a0 Other
187
72
34
20
3
2
318
Asset-backed securities
370
243
429
253
89
1,646
3,030
\u00a0 With-profits
217
161
203
153
89
1,539
2,362
\u00a0 Unit-linked
17
22
17
23
\u2014
\u2014
79
\u00a0 Annuity and other long-term business
85
60
209
77
\u2014
107
538
\u00a0 Other
51
\u2014
\u2014
\u2014
\u2014
\u2014
51
Total debt securities
6,604
17,340
16,919
14,213
4,930
10,677
70,683
\u00a0 With-profits
4,484
12,068
13,688
11,082
4,598
6,319
52,239
\u00a0 Unit-linked
154
1,544
1,284
1,281
257
131
4,651
\u00a0 Annuity and other long-term business
1,127
3,591
1,913
1,829
72
4,225
12,757
\u00a0 Other
839
137
34
21
3
2
1,036
32 Risk management and\u00a0sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.2 Debt securities (continued)
2022
AAA
AA+ to AA-
A+ to A-
BBB+
to\u00a0BBB-
Below BBB-
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Government Sovereign debt
4,325
7,641
1,379
2,194
1,062
187
16,788
With-profits
3,382
4,633
1,297
2,106
1,058
187
12,663
Unit-linked
211
923
81
58
\u2014
\u2014
1,273
Annuity and other long-term business
671
1,497
\u2014
26
\u2014
\u2014
2,194
Other
61
588
1
4
4
\u2014
658
Quasi-sovereign and Public sector debt
329
1,800
328
175
21
305
2,958
With-profits
257
942
250
172
21
261
1,903
Unit-linked
34
83
15
3
\u2014
2
137
Annuity and other long-term business
38
775
63
\u2014
\u2014
42
918
Corporate debt
1,368
2,952
9,623
13,527
3,250
9,235
39,955
With-profits
760
1,812
7,251
10,333
2,695
5,032
27,883
Unit-linked
87
180
772
1,473
382
53
2,947
Annuity and other long-term business
326
870
1,542
1,687
148
4,150
8,723
Other
195
90
58
34
25
\u2014
402
Asset-backed securities
629
239
444
251
44
1,513
3,120
With-profits
398
158
208
144
44
1,389
2,341
Unit-linked
30
21
18
31
\u2014
9
109
Annuity and other long-term business
95
60
218
76
\u2014
115
564
Other
106
\u2014
\u2014
\u2014
\u2014
\u2014
106
Total Debt Securities
6,651
12,632
11,774
16,147
4,377
11,240
62,821
With-profits
4,797
7,545
9,006
12,755
3,818
6,869
44,790
Unit-linked
362
1,207
886
1,565
382
64
4,466
Annuity and other long-term business
1,130
3,202
1,823
1,789
148
4,307
12,399
Other
362
678
59
38
29
\u2014
1,166
As at 31\u00a0December 2023 corporate debt exposure to banks amounted to \u00a3 8,884m (2022: \u00a38,273m).
The Group has holdings in asset-backed securities (ABS) which are presented within debt securities on the consolidated
statement of financial position. The Group\u2019s holdings in ABS, which comprise residential mortgage-backed securities (RMBS),
commercial mortgage-backed securities (CMBS), collateralised debt obligations (CDO) funds and other asset-backed securities
are shown within the table above.
32 Risk management and\u00a0sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.2 Debt securities (continued)
The Groups exposure to sovereign debt are analysed by issuer as follows:
2023
With-profits
Unit-linked
Annuity and
other long
term business
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Sovereign debt securities by country:
United Kingdom
5,195
1,338
1,910
606
9,049
Germany
601
16
140
\u2014
757
Other European countries
1,235
1
436
\u2014
1,672
Total Europe
7,031
1,355
2,486
606
11,478
United States
3,328
5
\u2014
10
3,343
Latin America Countries
425
19
27
\u2014
471
South Africa
922
105
\u2014
\u2014
1,027
South Korea
1,047
12
\u2014
\u2014
1,059
Indonesia
858
9
\u2014
\u2014
867
Malaysia
810
8
\u2014
\u2014
818
Singapore
491
5
\u2014
\u2014
496
Philippines
522
6
\u2014
\u2014
528
Thailand
499
6
\u2014
\u2014
505
India
450
5
\u2014
\u2014
455
Other
1,462
97
177
51
1,787
Total
17,845
1,632
2,690
667
22,834
2022
With-profits
Unit-linked
Annuity and
other long
term business
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Sovereign debt securities by country:
United Kingdom
2,290
947
1,239
578
5,054
Germany
503
39
201
\u2014
743
Other European countries
1,223
57
586
4
1,870
Total Europe
4,016
1,043
2,026
582
7,667
United States
1,990
6
\u2014
23
2,019
Latin America Countries
604
\u2014
26
\u2014
630
South Africa
90
98
\u2014
1
189
South Korea
760
12
\u2014
\u2014
772
Indonesia
891
12
\u2014
\u2014
903
Malaysia
566
8
\u2014
\u2014
574
Singapore
460
5
\u2014
\u2014
465
Philippines
477
7
\u2014
\u2014
484
Thailand
476
7
\u2014
\u2014
483
India
349
5
\u2014
\u2014
354
Other
1,984
70
142
52
2,248
Total
12,663
1,273
2,194
658
16,788
As at 31\u00a0December 2023 Other European Countries included \u00a31,232m (2022: \u00a31,403m) and Other included \u00a31,342m
(2022:\u00a0\u00a31,226m) of Supranational Government bonds.
32.3.3 Derecognition, collateral and offsetting
Securities lending and repurchase agreements
The Group has entered into securities lending and repurchase agreements whereby blocks of securities are transferred to third
parties, primarily major brokerage firms, in exchange for collateral. Typically, the value of collateral assets pledged to the Group in
these transactions is in excess of the value of securities transferred, with the excess determined by the quality of the collateral
assets granted. Collateral requirements are calculated on a daily basis. The securities lent and securities subject to repurchase
agreements are not derecognised from the Group\u2019s consolidated statement of financial position. Collateral typically consists of
cash, debt securities, equity securities and letters of credit. Cash collateral received is recognised on the consolidated statement of
financial position and a financial liability for the obligation for the Group to repay the cash is also recognised. Non-cash collateral
received is not recognised on the consolidated statement of financial position. Collateral pledged by the Group under reverse
repurchase arrangements, aside from cash, is not derecognised from the consolidated statement of financial position as the risks
and rewards are still retained by the Group. Cash collateral pledged is derecognised as it is pledged under right to use by the
counterparty and a financial asset is recognised for the obligation for the counterparty to repay the cash to the Group.
As at 31\u00a0December 2023, the Group had \u00a37,308m (2022: \u00a3 3,638m) of collateral pledged under securities lending and repurchase
agreements, primarily relating to the With-Profits Fund. The cash and securities collateral accepted under securities lending
agreements was \u00a36,961m (2022: \u00a35,471m). As at 31\u00a0December 2023, the Group had entered into reverse repurchase transactions
under which it purchased securities and had taken on the obligation to resell the securities. The fair value of the collateral held in
respect of these transactions was \u00a310,165m (2022: \u00a315,316m).
Collateral and pledges under derivative transactions
At 31\u00a0December 2023, the Group had pledged \u00a32,116m (2022: \u00a32,818m) for liabilities and held collateral of \u00a3468m (2022: \u00a31,318m)
in respect of over-the-counter derivative transactions.
These transactions are conducted under terms that are usual and customary to collateralised transactions including, where
relevant, standard securities lending and repurchase agreements.
Other collateral
At 31\u00a0December 2023, the Group had pledged collateral of \u00a3635m (2022: \u00a3552m) in respect of other transactions. This primarily
arises from collateral pledged in relation to consolidated funds held by the With-Profits Fund, in addition to deferred purchase
consideration on lifetime (equity release) mortgages.
Offsetting assets and liabilities
The Group\u2019s derivative instruments, repurchase agreements and securities lending agreements are subject to master netting
arrangements and collateral arrangements. A master netting arrangement with a counterparty creates a right of offset for amounts
due to and due from that same counterparty that is enforceable in the event of a default or bankruptcy. The Group recognises
amounts subject to master netting arrangements on a gross basis on the consolidated statement of financial position.
The following tables present the gross and net information about the Group\u2019s financial instruments subject to master netting
arrangements:
2023
Related amounts not offset in the consolidated
statement\u00a0of\u00a0financial position
Gross amount
included in the
consolidated
statement of
financial position
Financial
instruments
Cash collateral
Securities
collateral
Net amount
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial assets:
Derivative assets
1,280
(884)
(387)
(6)
3
Reverse repurchase agreements
13,615
\u2014
\u2014
(10,141)
3,474
Total financial assets
14,895
(884)
(387)
(10,147)
3,477
Financial liabilities:
Derivative liabilities
2,520
(884)
(29)
(1,548)
59
Securities lending and repurchase
agreements
726
\u2014
\u2014
(730)
(4)
Total financial liabilities
3,246
(884)
(29)
(2,278)
55
32 Risk management and\u00a0sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.3 Derecognition, collateral and offsetting (continued)
2022
Related amounts not offset in the consolidated
statement\u00a0of\u00a0financial position
Gross amount
included in the
consolidated
statement of
financial position
Financial
instruments
Cash collateral
Securities collateral
Net amount
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial assets:
Derivative assets
2,560
(1,293)
(1,309)
277
235
Reverse repurchase agreements
18,892
\u2014
\u2014
(15,295)
3,597
Total financial assets
21,452
(1,293)
(1,309)
(15,018)
3,832
Financial liabilities:
Derivative liabilities
3,705
(1,293)
(18)
(2,317)
77
Securities lending and repurchase
agreements
939
\u2014
\u2014
(938)
1
Total financial liabilities
4,644
(1,293)
(18)
(3,255)
78
In the tables above, the amounts of assets or liabilities included on the consolidated statement of financial position would be offset
first by financial instruments that have the right of offset under master netting or similar arrangements, with any remaining amount
reduced by the amount of cash and securities collateral. The actual amount of collateral may be greater than the amounts
presented in the tables. Reverse repurchase agreements shown in the tables above are included within deposits on the
consolidated statement of financial position.
32.3.4 Impairment of financial assets
Significant increase in credit risk
When determining whether the credit risk (ie risk of default) on a financial instrument has increased significantly since initial
recognition, the Group considers reasonable and supportable information that is relevant and available without undue cost or
effort. This includes both qualitative and quantitative information and analysis based on the Group\u2019s experience, expert credit
assessment and forward-looking information.
The Group primarily identifies whether a significant increase in credit risk has occurred for an exposure by comparing:
\u2013 the remaining lifetime probability of default (PD) as at the reporting date; with
\u2013 the remaining lifetime PD for this point in time that was estimated on initial recognition of the exposure.
The Group considers that a significant increase in credit risk occurs no later than when an asset is more than 30 days past due.
Days past due are determined by counting the number of days since the earliest elapsed due date in respect of which full payment
has not been received. Due dates are determined without considering any grace period that might be available to the debtor.
Some qualitative indicators of an increase in credit risk, such as delinquency or forbearance, may be indicative of an increased risk
of default that persists after the indicator itself has ceased to exist. In these cases, the Group determines a probation period during
which the financial asset is required to show a period of good payment behaviour.
If there is evidence that there is no longer a significant increase in credit risk relative to initial recognition, then the loss allowance
on an instrument returns to being measured as 12-month ECL.
32 Risk management and\u00a0sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.4 Impairment of financial assets (continued)
Low credit risk debt instruments
The Group has used the low credit risk exemption for financial instruments when they meet the following conditions:
\u2013 the financial instrument has a low risk of default;
\u2013 the borrower is considered to have a strong capacity to meet its obligations in the near term; and
\u2013 the Group expects, in the longer term, that adverse changes in economic and business conditions might, but will not necessarily,
reduce the ability of the borrower to fulfil its obligations.
The Group considers a financial asset to have low credit risk when its credit risk rating is equivalent to the globally understood
definition of \u2018investment grade\u2019. The Group considers this to be BBB- or higher based on Moody's ratings. The Group defines low
credit risk financial assets as financial assets that are BBB- investment grade at the reporting date, based on the Group\u2019s credit
grading policies. For such instruments, the significant increase in credit risk is not assessed, and the impairment allowance is
calculated and the financial asset is measured using the 12-month ECL, as long as the financial asset meets the criteria above.
Definition of default
The Group considers any exposure to financial assets in default to be credit impaired.
The impact of any collateral received will not be considered for the assessment of whether an asset is credit impaired. The
collateral is considered for the estimate of the related ECLs.
Write-off
Financial assets are written off either partially or in their entirety only when the Group has stopped pursuing the recovery. If the
amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the
allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to credit loss expense.
Modified financial assets
The contractual terms of a financial asset may be modified for a number of reasons, including changing market conditions and
other factors not related to a current or potential credit deterioration of the debtor. An existing financial asset whose terms have
been modified may be derecognised and the renegotiated asset recognised as a new financial asset at fair value plus eligible
transaction costs. The new asset is allocated to Stage 1 under IFRS 9 (assuming that it is not credit-impaired at the date of
modification).
When the terms of a financial asset are modified and the modification does not result in derecognition, the determination of
whether the asset\u2019s credit risk has increased significantly reflects a comparison of:
\u2013 its remaining lifetime PD as at the reporting date based on the modified terms; with
\u2013 the remaining lifetime PD estimated based on data on initial recognition and the original contractual terms.
Measurement of ECL
Where modelling of a parameter is carried out on a collective basis, the financial instruments are grouped on the basis of shared
risk characteristics, which include:
\u2013 instrument type;
\u2013 credit risk grade;
\u2013 collateral type;
\u2013 date of initial recognition;
\u2013 remaining term to maturity;
\u2013 industry; and
\u2013 geographic location of the borrower.
The groupings are subject to regular review to ensure that exposures within a particular group remain appropriately homogeneous.
32 Risk management and\u00a0sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.4 Impairment of financial assets (continued)
Loss allowance
The Group has used the low credit risk exemption for deposits and accrued investment income and other debtors and calculates
the loss allowance based on 12-month ECL.\u00a0 The carrying amounts and ECL allowances are shown in the following table:
2023
2022
12-month ECL
12-month ECL
Carrying amount
Related ECL
allowance
Carrying amount
Related ECL
allowance
Balance as at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Deposits
16,324
8
21,399
2
Accrued investment income and other debtors
2,536
2
2,404
41
There were no financial assets that were still subject to enforcement activity as at 31\u00a0December 2023 and 31\u00a0December 2022.
The table presenting an analysis of the credit risk exposure of financial instruments for which an ECL allowance is recognised is
included in Note 32.3.1. The carrying amount of financial assets above also represents the Group\u2019s maximum exposure to credit risk
on these assets.
32.4 Demographic and expense risk
The Group is exposed to significant levels of demographic risk. This arises mainly from the annuity business in the form of longevity
risk, which is the risk of unexpected changes in the life expectancy (longevity) of policyholders. If mortality improvement rates
significantly exceed the level assumed, the Group\u2019s results could be adversely affected. Further to this, any major medical
breakthrough (for example, in the treatment of cancer or other life-threatening diseases) that would require the Group to
strengthen its longevity assumptions would have an impact on the Group\u2019s results.
Longevity risk for both shareholder-backed business and policyholder-backed business has been predominantly managed
through:
\u2013 Annual reviews of best estimate assumptions, supported by detailed assessments of actual mortality experience versus best
estimate assumptions;
\u2013 Regular monitoring of longevity exposure;
\u2013 Longevity research; and
\u2013 Longevity risk transfer transactions, assessed against principles and guidance provided in internal standards.
The Group is also exposed to expense risk in relation to maintenance expense levels from the shareholder-backed annuity
business.
For with-profits business, mortality and other demographic risks are relatively minor factors in the determination of the
policyholder bonus rates. Adverse persistency experience can affect the level of profitability from with-profits contracts, but in any
given year the shareholders\u2019 share of cost of bonus may only be marginally affected. However, altered persistency trends may
affect future expected shareholder transfers.
For unit-linked business, by virtue of the design features of most of the contracts which provide low levels of mortality cover, profit
is relatively insensitive to changes in mortality experience. Persistency experience variances can affect the level of profit in the
year. The shareholder is also exposed to variances in expenses relative to the charges levied on these products.
The risk arising from the other long-term business is not significant in the context of the Group\u2019s overall liabilities.
32.4 Demographic and expense risk
32.4.1 Concentration of insurance risk
The geographical concentration of the insurance contract assets and liabilities (both gross and net of reinsurance) is shown below.
The disclosure is based on the carrying amounts of insurance contract assets and liabilities and reinsurance contract assets and
liabilities disaggregated to countries where the business is written.
2023
2022
United
Kingdom
Europe
Total
United
Kingdom
Europe
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
With-profits:
Insurance contract assets and liabilities
(116,135)
(7,461)
(123,596)
(115,953)
(7,224)
(123,177)
Reinsurance
10
\u2014
10
7
\u2014
7
Net
(116,125)
(7,461)
(123,586)
(115,946)
(7,224)
(123,170)
Unit-linked:
Insurance contract assets and liabilities
(3,964)
(440)
(4,404)
(4,182)
(416)
(4,598)
Reinsurance
7
(21)
(14)
5
(22)
(17)
Net
(3,957)
(461)
(4,418)
(4,177)
(438)
(4,615)
Annuity and other long-term business:
Insurance contract assets and liabilities
(13,892)
(199)
(14,091)
(13,967)
(195)
(14,162)
Reinsurance
746
\u2014
746
744
\u2014
744
Net
(13,146)
(199)
(13,345)
(13,223)
(195)
(13,418)
Total:
Insurance contract assets and liabilities
(133,991)
(8,100)
(142,091)
(134,102)
(7,835)
(141,937)
Reinsurance
763
(21)
742
756
(22)
734
Net
(133,228)
(8,121)
(141,349)
(133,346)
(7,857)
(141,203)
32.5 Liquidity risk
Liquidity risk is the risk of loss for the Group's business, or of adverse changes in the financial situation, resulting from the Group\u2019s
inability to meet financial obligations (for example, claims, creditors and collateral calls) as they fall due because they do not have or
are unable to generate sufficient liquid assets.
Fund liquidity risk is the risk of being unable to meet liabilities arising from a mismatch in liquidity of the underlying assets and the
frequency of liability requirements of the fund.
The Group\u2019s IFRS results are indirectly exposed to fund liquidity risk, for example, through reputational damage leading to lower
funds under management and lower revenue through charges collected. However, as the effect on the Group\u2019s IFRS results is
indirect, this risk is not discussed further and the remainder of this section refers to liquidity risk.
Liquidity management in the Group seeks to ensure that, even under adverse conditions, the Group has access to the funds
necessary to cover surrenders, withdrawals and maturing liabilities.
Liquidity risk is carefully managed, in particular in relation to: bank balances, cash flow forecasting, appropriate fund management
(to ensure that assets are not unduly concentrated in less liquid investments) and detailed cash flow matching for the annuity
business. Specific arrangements are also in place to manage liquidity in the unit-linked funds, particularly property funds where the
underlying assets are relatively illiquid.
32 Risk management and\u00a0sensitivity analysis (continued)
32.5 Liquidity risk (continued)
32.5.1 Contractual maturities of financial liabilities on an undiscounted cash flow basis
The following table sets out the contractual maturities for applicable classes of financial liabilities, excluding derivative liabilities
that are separately presented in section 32.5.2. The financial liabilities are included in the column relating to the contractual
maturities at the undiscounted cash flows (including contractual interest payments and expected benefit payments) due to be
paid, assuming conditions are consistent with those at the year end.
2023
Total
carrying
value
1 year or
less
After
1 year to
5 years
After
5 years
to 10 years
After
10 years
to 15 years
After
15 years to
20 years
Over
20 years
No stated
maturity
Total undis-
counted
value
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities:
Investment contracts
without DPF
12,535
12,535
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
12,535
Third party interest in
consolidated funds
9,893
521
463
190
\u2014
\u2014
13
8,706
9,893
Subordinated liabilities and
other borrowings
8,089
1,310
3,427
1,321
941
1,345
5,846
\u2014
14,190
Other financial liabilities
1,186
1,092
\u2014
\u2014
\u2014
\u2014
\u2014
94
1,186
Accruals, deferred income
and other liabilities
6,083
6,563
43
90
116
107
170
\u2014
7,089
Total
37,786
22,021
3,933
1,601
1,057
1,452
6,029
8,800
44,893
Restated i 2022
Total
carrying
value
1 year or
less
After
1 year to
5 years
After
5 years
to 10 years
After
10 years
to 15 years
After
15 years to
20 years
Over
20 years
No stated
maturity
Total undis-
counted
value
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities:
Investment contracts
without DPF
11,937
11,937
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
11,937
Third party interest in
consolidated funds
10,389
116
999
108
\u2014
\u2014
130
9,036
10,389
Subordinated liabilities and
other borrowings
7,537
995
2,993
1,585
965
1,281
6,080
\u2014
13,899
Other financial liabilities
2,172
2,039
\u2014
\u2014
\u2014
\u2014
\u2014
133
2,172
Accruals, deferred income
and other liabilities
6,649
6,190
110
87
114
109
191
\u2014
6,801
Total
38,684
21,277
4,102
1,780
1,079
1,390
6,401
9,169
45,198
i The comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
Most investment contracts have options to surrender early, often subject to surrender or other penalties. Therefore, most
contracts can be said to have a contractual maturity of less than one year, but the additional charges and term of the contracts
mean surrenders are unlikely to be exercised in practice.
The vast majority of the Group\u2019s financial assets are held to back the Group\u2019s policyholder liabilities. Although asset/liability
matching is an important component of managing policyholder liabilities (both those classified as insurance and those classified as
investments), this profile is mainly relevant for managing market risk rather than liquidity risk. Within each business unit this asset/
liability matching is performed on a portfolio-by-portfolio basis.
In terms of liquidity risk, a large proportion of the policyholder liabilities contain discretionary surrender values or surrender
charges, meaning that many of the Group\u2019s liabilities are expected to be held for the long term. Many of the Group\u2019s investment
portfolios are in marketable securities, which can therefore be converted quickly to liquid assets. As a result, an analysis of the
Group\u2019s assets by contractual maturity is not considered appropriate to evaluate the nature and extent of the Group\u2019s liquidity risk.
32 Risk management and\u00a0sensitivity analysis (continued)
32.5 Liquidity risk (continued)
32.5.2 Maturity analysis of derivatives
The following table shows the gross and net derivative positions together with the maturity profile of the contractual undiscounted
cash flows:
2023
Total
carrying
value
1 year or
less
After
1 year to
5 years
After
5 years
to 10 years
After
10 years
to 15 years
After
15 years to
20 years
Over
20 years
No stated
maturity
Total undis-
counted
value
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivative assets
1,693
740
534
284
76
115
461
\u2014
2,210
Derivative liabilities
2,910
561
841
1,052
187
757
2,160
\u2014
5,558
Net derivative position
(1,217)
179
(307)
(768)
(111)
(642)
(1,699)
\u2014
(3,348)
2022
Total
carrying
value
1 year or
less
After
1 year to
5 years
After
5 years
to 10 years
After
10 years
to 15 years
After
15 years to
20 years
Over
20 years
No stated
maturity
Total undis-
counted
value
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivative assets
2,850
384
816
722
526
554
1,258
\u2014
4,260
Derivative liabilities
4,185
772
1,066
821
1,164
934
1,662
\u2014
6,419
Net derivative position
(1,335)
(388)
(250)
(99)
(638)
(380)
(404)
\u2014
(2,159)
32.5.3 Maturity analysis of insurance contracts
The following tables provide a maturity analysis of the Group\u2019s insurance and reinsurance contract liabilities, which reflects the
dates on which the cash flows are expected to occur. The Group has elected to analyse the estimates of the present value of the
future cash flows by estimated timing. It excludes the release of the CSM which is in Note 24.4.
For reinsurance contracts held 98% (2022: 99%) relates to annuity and other long-term business contracts and so analysis by each
line of business are not presented.
Insurance contractsi
2023
As at 31 December
With-profits
sub-funds
Unit-linked
insurance
Annuity and
other long-
term business
Total
0 to 1 year
11%
15%
9%
11%
1 to 2 years
9%
12%
9%
9%
2 to 3 years
8%
10%
8%
8%
3 to 4 years
7%
9%
7%
7%
4 to 5 years
7%
8%
7%
7%
5 to 10 years
24%
26%
27%
25%
10 to 15 years
15%
12%
17%
15%
15 to 20 years
9%
5%
9%
9%
20 to 25 years
5%
2%
4%
5%
Over 25 years
5%
1%
3%
4%
Total
100%
100%
100%
100%
32 Risk management and\u00a0sensitivity analysis (continued)
32.5 Liquidity risk (continued)
32.5.3 Maturity analysis of insurance contracts (continued)
Insurance contractsi
2022
As at 31 December
With-profits
sub-funds
Unit-linked
insurance
Annuity and
other long-term
business
Total
0 to 1 year
11%
14%
9%
11%
1 to 2 years
8%
12%
8%
9%
2 to 3 years
8%
10%
8%
8%
3 to 4 years
7%
8%
7%
7%
4 to 5 years
6%
7%
7%
6%
5 to 10 years
25%
28%
28%
25%
10 to 15 years
16%
13%
17%
15%
15 to 20 years
9%
5%
9%
9%
20 to 25 years
5%
2%
4%
5%
Over 25 years
5%
1%
3%
5%
Total
100%
100%
100%
100%
Reinsurance contracts
2023
2022
As at 31 December
Total
Total
0 to 1 year
10%
10%
1 to 2 years
9%
9%
2 to 3 years
9%
8%
3 to 4 years
8%
8%
4 to 5 years
7%
7%
5 to 10 years
29%
29%
10 to 15 years
16%
16%
15 to 20 years
8%
8%
20 to 25 years
3%
3%
Over 25 years
1%
2%
Total
100%
100%
32.6 Derivatives and hedging
The Group uses derivatives for the purpose of efficient portfolio management or the reduction in investment risk. In doing so, the
Group obtains cost-effective and efficient exposure to various markets and manages exposure to equity, interest rate, currency,
credit and other business risks. The Group has opted not to apply hedge accounting to derivatives.
The Group uses various interest rate derivative instruments such as interest rate swaps and swap options to reduce exposure to
interest rate volatility. The Group also uses various currency derivatives in order to limit volatility due to foreign currency exchange
rate fluctuations arising on securities denominated in currencies other than pounds sterling.
All over-the-counter (OTC) derivative transactions are conducted under standardised International Swaps and Derivatives
Association Inc (ISDA) master agreements and Credit Support Annexes (CSA). The Group has collateral agreements between the
individual entities in the Group, of which the Company is one, and relevant counterparties in place under each of these market
master agreements. The Group also has the ability to enter into cleared derivative positions under European Market Infrastructure
Regulation (EMIR).
The total fair value balances of derivative assets and liabilities are shown in Note 18.
There are hedging arrangements in place for the with-profits liabilities, including some product-specific arrangements. The actual
and required hedging positions are monitored at least monthly and rebalanced if required.
Under Article 11 of the European Market Infrastructure Regulation on derivatives, central counterparties and trade repositories
EMIR and Commission Delegated Regulation (EU) 2016/2251 supplementing EMIR, market participants transacting in non-cleared
OTC derivatives are required to exchange collateral to cover variation and initial margin. However, trades between counterparties
belonging to the same group are exempt from these margin requirements subject to certain criteria.
Prudential Capital Plc (Legal Entity Identifier reference (LEI) CHW8NHK268SFPTV63Z64) has entered into such derivative
agreements with the following group entities. These counterparties pairings meets the criteria to be eligible for intra-group
exemptions to the margin requirements:
As at 31 December
2023
2022
Counterparty
Legal Entity Identifier
Relationship between parties
Type of
exemption
Aggregate notional
of OTC derivatives
contract
Aggregate notional
of OTC derivatives
contract
\u00a3m
\u00a3m
Prudential Lifetime
Mortgages Limited
5493001GSK4HF84IOB02
M&G plc is the ultimate Parent
Company for both parties
Full
\u2014
37
M&G FA Limited
213800TFNC2ZYHSGTN11
M&G plc is the ultimate Parent
Company for both parties
Full
392
255
32.6.1 Hedges in respect of shareholder transfers arising from the with-profits business
The shareholders' exposure to market risk from with-profits business arises from the shareholder transfers which depend on
investment return of the funds. These shareholder transfers, while smoothed, are particularly exposed to equity risk.
The Group has entered into a partial equity hedge of the shareholder transfers expected to emerge from the WPSF in order to
mitigate this risk. The effect for the year ended 31\u00a0December 2023 was an unrealised loss of \u00a38m (2022: unrealised gain of \u00a3121m)
and a realised loss of \u00a3109m (2022: realised loss of \u00a3119m).
PAC's shareholder fund had also previously entered into a risk management arrangement with the WPSF in relation to the
shareholder transfers expected to emerge from the WPSF, specifically with regard to the PruFund new business written during
2018 to 2020. This arrangement was designed to protect the shareholders against extremely weak market returns. This
arrangement was terminated in 2023. The arrangement resulted in a \u00a39m realised loss for the year ended 31\u00a0December 2023
(2022: unrealised loss of \u00a38m).
In 2023, PAC's shareholder fund entered into a further arrangement with the WPSF in relation to the shareholder transfers
expected to emerge from PruFund business written to 31\u00a0December 2022. The shareholder fund accepted a one-off cash
payment in lieu of 20% of future shareholder transfers. This arrangement is mutually beneficial since it generates certainty and
cash for the shareholder while reducing the WPSF exposure to a potential mismatch between the value of the shareholder
transfers and the fixed charges taken to cover those transfers. In addition, under the arrangement the shareholder paid the WPSF
for a higher share of future surplus from certain cohorts of business. For the year ended 31\u00a0December 2023 this arrangement
resulted in a loss of \u00a336m (2022: n/a).
32 Risk management and\u00a0sensitivity analysis (continued)
32.6 Derivatives and hedging (continued)
32.6.2 Other shareholder hedging arrangements
The Group\u2019s shareholder fund has purchased interest rate swap instruments to protect the capital position against interest rate
movements. For the year ended 31\u00a0December 2023, these instruments resulted in an unrealised gain of \u00a3116m (2022: unrealised
loss of \u00a3803 m) and a realised loss of \u00a336m (2022 unrealised loss of: \u00a3186m).
32.7 IFRS profit and liability sensitivity analysis
The Group uses a wide ranging stress and scenario testing approach to, among other things, understand the potential volatility of
earnings, and capital requirements and for the purposes of efficient capital management. Results of the IFRS profit and liability
sensitivity analysis for the long-term business to reasonable possible movements in key economic and non-economic risk factors
are summarised below (sensitivity of the capital position is detailed separately in the supplementary notes). For sensitivities arising
from financial assets refer to Note 31.8.
The risks are described in further detail throughout this note. For each sensitivity test the impact of a reasonably possible change in
a single factor is shown, with other assumptions left unchanged. The sensitivities applied are described below. The sensitivities
capture the immediate effects of an event occurring, as opposed to the longer-term or second-order effects which may impact
future years\u2019 profits, and do not reflect management actions which could be taken to mitigate the impacts of these events
occurring. The results shown include the impacts on both the with-profits business and the non-profit annuity business.
Sensitivity factor
Sensitivity applied
Economic scenario:
+/- 50bps interest rates
The impact of a parallel increase (decrease) in the market interest rates. The scenario allows
for the impact on both the changes to future yields and investment returns and the market
values of the fixed interest securities.
+/- 10% change in equity &
property market values
The impact of an increase (decrease) in equity and property market values.
+ 5 bps increase in the with-profits
illiquidity premium
The impact of an increase in the illiquidity premium on with-profits business of 5 bps.
+ 5 bps increase in annuity credit
default/downgrade assumption
The impact on non-profit annuity liabilities from a 5 bps strengthening of the credit default/
downgrade assumptions.
Non-economic scenario:
+/- 5% renewal expenses
The impact of a permanent increase (decrease) in future maintenance expense assumptions
across all lines of business.
+/- 10% persistency assumptions
The impact of a permanent increase (decrease) in the lapse rates for the business.
+/- 1% base mortality rates
The impact of a permanent increase (decrease) in the base mortality rates at all ages.
+ 0.25% increase in mortality
improvements
The impact of an increase in the annual rate of mortality improvements at all ages.
32 Risk management and\u00a0sensitivity analysis (continued)
32.7 IFRS profit and liability sensitivity analysis (continued)
32.7.1 Sensitivity - Profit after tax/equity
The sensitivity of IFRS profit after tax to the key economic and non-economic risks is summ arised below. The impact on equity is
expected to be consistent with the impact on IFRS profit after tax. The change in net of reinsurance CSM is also shown.
2023
2022
Profit
CSM
Profit
CSM
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Economic sensitivities
50bps increase in interest rates
(152)
129
(138)
137
50bps decrease in interest rates
160
(138)
144
(154)
10% fall in equity and property markets
(26)
(595)
(43)
(654)
10% rise in equity and property markets
15
592
29
650
5bps increase in with-profits illiquidity premium
2
20
2
19
5bps increase in annuity credit default/downgrade assumptions
(39)
\u2014
(36)
\u2014
Non-economic sensitivities
5% increase in renewal expense assumptions
9
(42)
7
(40)
5% decrease in renewal expense assumptions
(9)
42
(7)
39
10% increase in persistency assumptions
(4)
(69)
(5)
(79)
10% decrease in persistency assumptions
5
76
5
84
1% increase in base mortality assumptions
(40)
75
(37)
71
1% decrease in base mortality assumptions
40
(79)
38
(72)
0.25% increase in mortality improvements
107
(208)
103
(198)
The interest rate stresses reflect a parallel shift in the nominal rate of interest at all durations. As described in Note 32.2.1, the
impact on IFRS profit after tax predominantly arises from assets held in excess of the IFRS liabilities. These assets are held to back
the regulatory capital requirements.
The main impact to the Group of changes in equity and property asset values is through the entity\u2019s share of the returns in the with-
profits fund through future shareholder transfers. Under IFRS reporting, the change in expected future profits adjusts the CSM and
is released over the remaining lifetime of the business. The key impact to post-tax profit arises from the change in the level of CSM
amortised in the current reporting period.
The impact of the non-economic sensitivities to expenses, mortality and mortality improvements are the opposite of the result that
may be expected, and which may be seen in other financial metrics (eg in general we would expect an increase in mortality rates
would result in an increase in IFRS profits, whereas a reduction is observed in the stress scenario). As detailed in Note 3.2, the
application of IFRS 17 results in mismatches due to the use of locked-in rates for the CSM for annuities under GMM and in relation
to the measurement of the non-profit business in the With-Profits Fund. This results in the sensitivity analysis reflecting an increase
in IFRS profits when there is a strengthening of mortality assumptions, whereas the opposite effect might have been expected. The
primary reasons for this are i) interest rates at the time of recognising most of the in-force annuity business were substantially
lower than current rates, resulting in a larger reduction in the CSM (from discounting the change in future cash flows at locked-in
rates) than the increase in the fulfilment cash flows (from discounting the change in future cash flows at current rates), and ii) the
fair value of non-profit business written in the With-Profits Fund is reflected in the liabilities for with-profits policyholders, resulting
in a mismatch in the timing of when the change in mortality assumptions impacts the with-profits liabilities and when the IFRS 17
CSM for non-profit business is recognised as insurance revenue.
As described above, the main impacts of the sensitivities on profit arise through either short-term fluctuations in investment
returns or through mismatches arising on the application of IFRS 17. As a result there is limited impact on adjusted operating profit
(in line with the methodology detailed in Note 3.2).
32 Risk management and\u00a0sensitivity analysis (continued)
32.7 IFRS profit and liability sensitivity analysis (continued)
32.7.2 Sensitivity \u2013 Insurance and investment contract liabilities
The sensitivity of insurance and investment contract liabilities (detailed in Note 24) to the same key economic and non-economic
sensitivities are summarised below:
Insurance contractsi
Reinsurance contracts
Estimates of
present value
of future cash
flows and risk
adjustment
Contractual
Service
Margin
Total
Estimates of
present value
of future cash
flows and risk
adjustment
Contractual
Service
Margin
Total
As at 31 December 2023
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Economic sensitivities
50 bps increase in interest rates
(1,831)
129
(1,702)
(19)
\u2014
(19)
50 bps decrease in interest rates
1,973
(138)
1,835
22
\u2014
22
10% fall in equity and property markets
(6,369)
(595)
(6,964)
\u2014
\u2014
\u2014
10% rise in equity and property markets
6,370
592
6,962
\u2014
\u2014
\u2014
5 bps increase in with-profits illiquidity premium
(22)
20
(2)
\u2014
\u2014
\u2014
5 bps increase in annuity credit default/downgrade
assumptions
54
\u2014
54
2
\u2014
2
Non-economic sensitivities
5% increase in renewal expense assumptions
31
(42)
(11)
\u2014
\u2014
\u2014
5% decrease in renewal expense assumptions
(31)
42
11
\u2014
\u2014
11
10% increase in persistency assumptions
75
(69)
6
\u2014
\u2014
\u2014
10% decrease in persistency assumptions
(82)
76
(6)
\u2014
\u2014
\u2014
1% increase in base mortality assumptions
(42)
99
57
(16)
24
8
1% decrease in base mortality assumptions
46
(103)
(57)
16
(24)
(8)
0.25% increase in mortality improvements
112
(277)
(165)
38
(69)
(31)
Insurance contractsi
Reinsurance contracts ii
Estimates of
present value
of future cash
flows and risk
adjustment
Contractual
Service
Margin
Total
Estimates of
present value
of future cash
flows and risk
adjustment
Contractual
Service
Margin
Total
As at 31 December 2022
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Economic sensitivities
50 bps increase in interest rates
(1,500)
137
(1,363)
(21)
\u2014
(21)
50 bps decrease in interest rates
1,620
(154)
1,466
24
\u2014
11
10% fall in equity and property markets
(6,707)
(654)
(7,361)
\u2014
\u2014
\u2014
10% rise in equity and property markets
6,709
650
7,359
\u2014
\u2014
\u2014
5 bps increase in with-profits illiquidity premium
(21)
19
(2)
\u2014
\u2014
\u2014
5 bps increase in annuity credit default/downgrade
assumptions
50
\u2014
50
2
\u2014
2
Non-economic sensitivities
5% increase in renewal expense assumptions
30
(40)
(10)
\u2014
\u2014
\u2014
5% decrease in renewal expense assumptions
(30)
39
9
\u2014
\u2014
\u2014
10% increase in persistency assumptions
85
(79)
6
\u2014
\u2014
\u2014
10% decrease in persistency assumptions
(91)
84
(7)
\u2014
\u2014
\u2014
1% increase in base mortality assumptions
(40)
97
57
(16)
27
11
1% decrease in base mortality assumptions
41
(99)
(58)
16
(27)
(11)
0.25% increase in mortality improvements
108
(277)
(169)
40
(79)
(39)
The presentation above reflects a change in insurance contract liabilities where insurance contract liabilities are expressed as a
positive liability amount and reinsurance contracts are a positive asset amount. Insurance contracts are insurance contract
liabilities net of insurance contract assets. Reinsurance contracts are reinsurance contract assets net of reinsurance contract
liabilities.
32 Risk management and\u00a0sensitivity analysis (continued)
32.7 IFRS profit and liability sensitivity analysis (continued)
32.7.2 Sensitivity \u2013 Insurance and investment contract liabilities (continued)
The vast majority of the Group\u2019s financial assets are held to back the Group\u2019s policyholder liabilities. Consistent with this, the
changes in the insurance and investment contract liabilities in the economic sensitivities are offset by corresponding changes in
the value of the assets, with only the changes in the surplus assets contributing to changes in profit after tax (as detailed in Note
32.7.1).
32.7.3 Other estimates in measurement of insurance contract liabilities
As a consequence of applying the mutualisation requirements of IFRS 17, a portion of the with-profits surplus assets are allocated
to policyholders and a portion to shareholders. Under IFRS 4, this was included within the unallocated surplus of the With-Profits
Fund. The portion of the with-profits surplus assets allocated to policyholders and shareholders under IFRS 17 reflects a judgement
on the division of surplus in the With-Profits Fund. The policyholders\u2019 share is assessed on a prospective basis and is assumed to
be 90%, consistent with the division of profits permitted by the Articles of Association. The portion of the surplus assets allocated
to shareholders, \u00a31,037m (after tax) at 31\u00a0December 2023 (2022: \u00a31,053m) is not easily or practicably fungible to shareholders in
the short term.
IFRS 17 liabilities include an explicit risk adjustment, covering the Group\u2019s assessment of the margin required to cover non-financial
risks. The assessment of the risk adjustment requires assumptions about the compensation that the Group requires for bearing
uncertainty about the amount and timing of the cash flows that arises from non-financial risk, the most significant of which is the
assumed rates of policyholder mortality for annuity contracts. The Group has calibrated the risk adjustment at the 75th percentile
of its internal calibrations of the risk distributions (which have a time horizon of one year) and amounts to \u00a3488m (2022: \u00a3478m) net
of reinsurance. Increasing the calibration to the 80th percentile (over a one year time horizon) would increase the risk adjustment
(net of reinsurance) at 31\u00a0December 2023 by around \u00a390m (2022: \u00a390m). The increase would be offset by a corresponding
reduction in CSM, but with the CSM impact being assessed at locked-in rates as described above.
The UK Government's consultation on residential ground rents has had an impact on the value of the assets that back insurance
contract liabilities as discussed in note 31.8.1. The main impact on the insurance contract liabilities has been through a change in
discount rate which has resulted in the carrying value decreasing by \u00a398m, of which \u00a350m relates to annuities which are
shareholder-backed.
The net asset and liability impact is to reduce profit after tax by \u00a354m in 2023.
If the yield on the residential ground rents were to increase by 50bps to reflect a change in illiquidity spread (aligned to the asset
sensitivity in note 31.8.2), the carrying value of the insurance contract liabilities will decrease by \u00a350m, of which \u00a322m would relate
to the annuities which are shareholder-backed.
The net asset and liability impact of an increase in spread of 50bps would be to reduce the profit after tax by \u00a338m.
In the event that the Government implements the peppercorn cap, the value of the insurance contract liabilities would be impacted
due to a change in the overall portfolio yield on the writing down of the underlying residential ground rent assets. The impact would
be dependent on replacement assets that are used to rebalance the portfolio.
32.7.4 Limitations
The sensitivity results demonstrate the effect of an instantaneous change in a key assumption while other assumptions remain
unchanged. In reality, changes may occur over a period of time and there may be a correlation between the risks. The sensitivity
analysis does not take into consideration active management of the Group\u2019s assets and liabilities, and that this may change the
impact of an emerging risk scenario. It should also be noted that these sensitivities are non-linear, and larger or smaller impacts
should not be interpolated or extrapolated from these results.
The sensitivity analysis includes the use of \u2018hypothetical\u2019 market movements to demonstrate potential risk exposures, for example:
\u2013 The sensitivity analysis assumes a parallel shift in interest rates at all terms. These results cannot be used to calculate the impact
of non-parallel yield movements.
\u2013 The sensitivity analysis assumes equivalent assumption changes across all markets eg all equity and property assets rise (fall) by
10%. The actual impact on the Group\u2019s assets may not be identical to the observed changes in market indices and so actual
impacts on the Group cannot be inferred by applying the sensitivities to observed changes in key indices.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-685": { "value": "
Analysis of consolidated statement of financial position by component of business
2023
Shareholder-backed funds
With-
profits
Unit-linked
Annuity and
other long-
term
business
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets:
Goodwill and intangible assets
360
\u2014
11
1,444
1,815
Deferred acquisition costs
\u2014
5
4
14
23
Defined benefit pension asset
9
\u2014
4
6
19
Investment in joint ventures and associates accounted for using
the\u00a0equity method
265
\u2014
\u2014
22
287
Property, plant and equipment
1,826
\u2014
13
226
2,065
Investment property
14,423
310
689
\u2014
15,422
Deferred tax assets
79
3
193
168
443
Insurance contract assets
\u2014
\u2014
44
\u2014
44
Reinsurance contract assets
11
7
1,081
\u2014
1,099
Equity securities and pooled investment funds
54,603
11,158
269
218
66,248
Loans
2,607
\u2014
1,301
\u2014
3,908
Debt securities
52,239
4,651
12,757
1,036
70,683
Derivative assets
1,304
30
227
132
1,693
Deposits
12,253
1,808
2,255
8
16,324
Current tax assets
9
15
41
2
67
Accrued investment income and other debtors
1,620
206
290
420
2,536
Assets held for sale
1,112
105
1
138
1,356
Cash and cash equivalents
3,394
592
555
1,049
5,590
Total assets
146,114
18,890
19,735
4,883
189,622
Liabilities:
Insurance contract liabilities
123,596
4,404
14,135
\u2014
142,135
Reinsurance contract liabilities
1
21
335
\u2014
357
Investment contract liabilities without DPF
1,805
10,723
7
\u2014
12,535
Third party interest in consolidated funds
7,617
2,271
5
\u2014
9,893
Subordinated liabilities and other borrowings
4,321
91
1
3,676
8,089
Defined benefit pension liability
\u2014
\u2014
\u2014
294
294
Deferred tax liabilities
619
11
38
14
682
Lease liabilities
73
\u2014
11
303
387
Current tax liabilities
51
7
37
2
97
Derivative liabilities
1,129
4
1,514
263
2,910
Other financial liabilities
961
\u2014
30
195
1,186
Provisions
\u2014
\u2014
12
70
82
Accruals, deferred income and other liabilities
4,371
495
792
568
6,226
Liabilities held for sale
665
\u2014
\u2014
\u2014
665
Total liabilities
145,209
18,027
16,917
5,385
185,538
Total equity
4,084
Total equity and liabilities
189,622
32 Risk management and\u00a0sensitivity analysis (continued)
32.1 Risk overview (continued)
Analysis of consolidated statement of financial position by component of business (continued)
Restated i 2022
Shareholder-backed funds
With-profits
Unit-linked
Annuity and
other long-
term
business
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets:
Goodwill and intangible assets
364
\u2014
25
1,488
1,877
Deferred acquisition costs
\u2014
9
5
17
31
Defined benefit pension asset
13
\u2014
10
132
155
Investment in joint ventures and associates accounted for using
the\u00a0equity method
413
\u2014
\u2014
\u2014
413
Property, plant and equipment
1,630
\u2014
16
307
1,953
Investment property
15,132
497
876
\u2014
16,505
Deferred tax assets
55
21
233
136
445
Insurance contract assets
\u2014
\u2014
39
\u2014
39
Reinsurance contract assets
8
5
1,069
\u2014
1,082
Equity securities and pooled investment funds
58,564
11,336
7
220
70,127
Loans
1,873
\u2014
1,361
\u2014
3,234
Debt securities
44,790
4,466
12,399
1,166
62,821
Derivative assets
2,403
7
290
150
2,850
Deposits
17,755
1,623
2,021
\u2014
21,399
Current tax assets
133
18
78
26
255
Accrued investment income and other debtors
1,507
200
329
368
2,404
Assets held for sale
447
79
\u2014
158
684
Cash and cash equivalents
2,857
586
555
886
4,884
Total assets
147,944
18,847
19,313
5,054
191,158
Liabilities:
Insurance contract liabilities
123,431
4,598
13,947
\u2014
141,976
Reinsurance contract liabilities
1
22
325
\u2014
348
Investment contract liabilities without DPF
155
11,782
\u2014
\u2014
11,937
Third party interest in consolidated funds
8,217
2,086
5
81
10,389
Subordinated liabilities and other borrowings
3,757
45
1
3,734
7,537
Defined benefit pension liability
\u2014
\u2014
\u2014
\u2014
\u2014
Deferred tax liabilities
758
10
27
\u2014
795
Lease liabilities
85
\u2014
15
320
420
Current tax liabilities
13
17
8
20
58
Derivative liabilities
2,213
9
1,748
215
4,185
Other financial liabilities
1,928
\u2014
89
155
2,172
Provisions
\u2014
\u2014
11
79
90
Accruals, deferred income and other liabilities
4,242
791
1,192
543
6,768
Liabilities held for sale
172
\u2014
\u2014
\u2014
172
Total liabilities
144,972
19,360
17,368
5,147
186,847
Total equity
4,311
Total equity and liabilities
191,158
i The comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredAcquisitionCostsArisingFromInsuranceContractsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-686": { "value": "
32.2 Market risk
Market risk is the risk of loss or adverse change in the financial situation of the Group's business or that of the Group's
customers and clients resulting, directly or indirectly, from fluctuations in the level or volatility of market prices of assets and
liabilities.
Market risk comprises six types of risk, namely:
\u2013 Interest rate risk: fluctuations in the level and volatility of interest rates or the shape or curvature of the yield curve or spread
relationship
\u2013 Inflation risk: fluctuations in actual or implied inflation rates
\u2013 Equity risk: fluctuations in the level or volatility of equity investments
\u2013 Property risk: fluctuations in the level or volatility of property investments
\u2013 Currency risk: fluctuations, including translation risk, in the level or volatility of currency exposures
\u2013 Alternative investments risk: fluctuations in the level or volatility of alternative investment exposures
The primary market risks that the Group faces are equity risk, property risk and interest rate risk. Most assets the Group
holds are investments that are either equity or property-type investments and subject to equity or property price risk, or
bonds, mortgages and cash deposits, the values of which are subject to interest rate risk. Alternative investments may
exhibit some or all of these risks depending on the type of investment. The amount of risk borne by the Group\u2019s
shareholders depends on the extent to which its customers share the investment risk through the structure of the Group\u2019s
products.
The split of the Group\u2019s investments between equity investments and interest-sensitive instruments depends principally on
the type of liabilities supported by those investments and the amount of capital the Group has available. This mix of liabilities
allows the Group to invest a substantial portion of its investment funds in equity and property investments that the Group
believes produce greater returns over the long term.
Market risk is managed through a robust market risk framework which includes: policies, risk appetite statements and risk limits
and triggers covering key market risk exposures; asset and liability management programmes; a quality of capital framework;
strategic asset allocations; investment and hedging strategies; and investment constraints
32.2.1 Interest rate risk and inflation risk
The majority of the Group\u2019s interest rate exposure arises from shareholder-backed annuities. The liabilities are exposed to interest
rate movements, but these are closely matched with assets of an appropriate duration. The matching of assets of appropriate
duration to the annuity liabilities is based on management of regulatory capital reporting requirements. The assets held in excess of
the liabilities, which back the capital requirements of the annuity business, result in an exposure to interest rate risk.
Exposure to interest rate risk also arises on the shareholders' share of the excess assets in the With-Profits Fund.
The assets and liabilities for the with-profits and unit-linked components of business are sensitive to interest rates, but the
shareholder is not directly exposed to changes in the value of these assets and liabilities. The shareholder is indirectly exposed to
interest rate risk through the value of future shareholder transfers from with-profits business and charges levied on unit-linked and
asset management business.
Inflation risk primarily arises from certain annuity contracts that have benefit escalation linked to a price index. The Group manages
this exposure by matching inflation-linked annuity liabilities with corresponding inflation-linked assets.
32.2.2 Equity and property risk
While the Group holds significant amounts of equity and property assets on its consolidated statement of financial position, the
shareholders' exposure to equity and property risk for the with-profits and unit-linked business is limited as the risk is
predominantly borne by the policyholder. For with-profits business, the impact of market risk is reduced due to the 'smoothed'
basis of bonus declaration, so the sensitivity to short-term investment performance is relatively low. However, long-term
investment performance may affect future shareholder transfers. The Group has entered into a partial equity hedge of the
shareholder transfers expected to emerge from the WPSF in order to mitigate this risk.
The Group\u2019s direct exposure to this risk arises from the 'annuities and other long-term business' component\u2019s holdings in equity
securities and property, which are not hedged or matched by corresponding liabilities.
32.2.3 Currency risk
The Group invests significant amounts of policyholder funds in overseas assets as part of its investment strategy. The direct
currency risk exposure to the shareholder from the with-profits and unit-linked components of business is minimal, although the
shareholder is indirectly exposed to currency risk in relation to the future value of shareholder transfers from with-profits business
and charges levied on unit-linked and asset management business. Currency risk exposure arising from overseas assets held by
the shareholder-backed annuity and other long-term business is mitigated through the use of derivatives.
The currency risk analysis for the year ended 31 December 2022 presented below has been restated to better reflect the currency
exposure of the Group's financial assets and financial liabilities.
As at 31\u00a0December 2023, the Group held 50% (2022: 48%) and 38% (2022: 38%) of its financial assets and financial liabilities
respectively, in currencies other than pounds sterling, the presentation currency of the Group. The non-sterling currencies are
primarily US dollar and euro.
Of these financial assets, as at 31\u00a0December 2023, 92 % (2022: 90%) are held by the With-Profits Fund, allowing the fund to obtain
exposure to foreign equity markets. Of these financial liabilities, as at 31\u00a0December 2023, 74% (2022: 88%) are held by the With-
Profits Fund, mainly relating to foreign currency borrowings. The exchange risks inherent in these exposures are mitigated through
the use of derivatives, mainly forward currency contracts.
For the year ended 31\u00a0December 2023, exchange losses of \u00a3126m (2022 restated: gains of \u00a3576m) were recognised in the
consolidated income statement; mainly arising on assets held by the With-Profits Fund, the majority of which are offset by changes
in with-profits and unit-linked liabilities. This excludes exchange gains and losses arising on foreign currency investments
measured at FVTPL, which are included as part of gains and losses included in investment return, which is shown in Note 5.
The Group is also exposed to structural currency translation risk as a result of overseas operations which contribute to equity. The
assets and liabilities of foreign operations are translated into the Group\u2019s presentational currency, pounds sterling. Foreign
exchange differences arising from this translation of foreign operations are reported as an item of other comprehensive income
and accumulated in the translation reserve.
", "dimensions": { "concept": "ifrs-full:DisclosureOfMarketRiskExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-687": { "value": "
32.3 Credit risk
The Group\u2019s exposure to credit risk primarily arises from the annuity funds, which hold substantial volumes of public and private
fixed income investments on which a certain level of defaults and downgrades are expected.
Exposure to the credit risk also arises on the shareholders' share of the excess assets in the With-Profits Fund.
While the with-profits and unit-linked funds have large holdings of assets subject to credit risk, the shareholder results of the
Group are not directly exposed to credit defaults on assets held in these components of business. However, the shareholder is
indirectly exposed to credit risk from these components of business in relation to the future value of shareholder transfers from
with-profits business and charges levied on unit-linked and asset management business. The direct exposure of the Group\u2019s
shareholders' equity to credit default risk in the 'other' component is small in the context of the Group.
Credit risk is managed through a robust credit and counterparty framework which includes: policies, standards, appetite
statements, limits and triggers (including relevant governance and controls); investment constraints and limits on the asset
portfolios, in relation to credit rating, seniority, sector and issuer, and counterparties in particular for derivatives, reinsurance and
cash; and a robust credit rating process.
32.3.1 Financial assets
The following tables provide an analysis of the quality of financial assets which are exposed to credit risk. The financial assets
below are analysed according to external credit ratings issued, with equivalent ratings issued by different ratings agencies
grouped together. Standard & Poor\u2019s ratings have been used where available. For securities where Standard & Poor\u2019s ratings are
not immediately available, those produced by Moody\u2019s and then Fitch have been used as an alternative.
2023
AAA
AA+ to AA-
A+ to A-
BBB+
to\u00a0BBB-
Below BBB-
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Reinsurance contract assets
\u2014
74
923
\u2014
\u2014
102
1,099
Loans
\u2014
\u2014
783
4
370
2,751
3,908
Debt Securities
6,604
17,340
16,919
14,213
4,930
10,677
70,683
Deposits
9
4,667
8,526
1,427
\u2014
1,695
16,324
Accrued investment income and other debtors
38
117
297
126
49
1,909
2,536
Cash and cash equivalents
826
1,058
3,644
18
17
27
5,590
Total financial assets
7,477
23,256
31,092
15,788
5,366
17,161
100,140
32 Risk management and\u00a0sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.1 Financial assets (continued)
Restatedi 2022
AAA
AA+ to AA-
A+ to A-
BBB+
to\u00a0BBB-
Below BBB-
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Reinsurance contract assets
\u2014
129
893
\u2014
\u2014
60
1,082
Loans
\u2014
\u2014
1,037
168
589
1,440
3,234
Debt Securities
6,651
12,632
11,774
16,147
4,377
11,240
62,821
Deposits
\u2014
2,011
14,952
3,594
\u2014
842
21,399
Accrued investment income and other debtors
38
82
140
155
64
1,925
2,404
Cash and cash equivalents
224
1,060
3,342
144
18
96
4,884
Total financial assets
6,913
15,914
32,138
20,208
5,048
15,603
95,824
iThe comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
The credit ratings, information or data contained in this report which are attributed and specifically provided by Standard & Poor\u2019s,
Moody\u2019s 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.
In the table above, 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- and are non-investment grade.
The Group is exposed to the risk of counterparty default on its reinsurance assets. The Group evaluates the financial condition of
its reinsurers and monitors concentration of credit risk to minimise its exposure from reinsurer insolvencies. The split of the
reinsurance asset by credit rating is shown above.
Loans that were impaired are not significant to the Group. Further information on the loans portfolio is provided in Note 18.
Debt securities with no external credit rating are classified as 'other'. The following table shows the majority of debt securities
shown as 'other' are allocated an internal rating and are considered to be of investment grade quality:
2023
2022
As at 31 December
\u00a3m
\u00a3m
AAA
188
43
AA+ to AA-
841
1,548
A+ to A-
4,721
3,844
BBB+ to BBB-
1,944
1,845
Below BBB-
1,138
786
Unrated
1,845
3,174
Total
10,677
11,240
32.3.2 Debt securities
The table below presents the Group's debt securities by asset category and external credit rating issued for each component of
business as set out in note 32.1.
2023
AAA
AA+ to AA-
A+ to A-
BBB+
to\u00a0BBB-
Below BBB-
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Government Sovereign debt
4,790
12,650
1,699
2,295
1,213
187
22,834
\u00a0 With-profits
3,365
9,297
1,670
2,220
1,213
80
17,845
\u00a0 Unit-linked
109
1,354
15
47
\u2014
107
1,632
\u00a0 Annuity and other long-term business
715
1,934
14
27
\u2014
\u2014
2,690
\u00a0 Other
601
65
\u2014
1
\u2014
\u2014
667
Quasi-sovereign and Public sector debt
202
1,572
204
397
873
300
3,548
\u00a0 With-profits
157
821
145
377
873
238
2,611
\u00a0 Unit-linked
1
58
13
2
\u2014
1
75
\u00a0 Annuity and other long-term business
44
693
46
18
\u2014
61
862
Corporate debt
1,242
2,875
14,587
11,268
2,755
8,544
41,271
\u00a0 With-profits
745
1,789
11,670
8,332
2,423
4,462
29,421
\u00a0 Unit-linked
27
110
1,239
1,209
257
23
2,865
\u00a0 Annuity and other long-term business
283
904
1,644
1,707
72
4,057
8,667
\u00a0 Other
187
72
34
20
3
2
318
Asset-backed securities
370
243
429
253
89
1,646
3,030
\u00a0 With-profits
217
161
203
153
89
1,539
2,362
\u00a0 Unit-linked
17
22
17
23
\u2014
\u2014
79
\u00a0 Annuity and other long-term business
85
60
209
77
\u2014
107
538
\u00a0 Other
51
\u2014
\u2014
\u2014
\u2014
\u2014
51
Total debt securities
6,604
17,340
16,919
14,213
4,930
10,677
70,683
\u00a0 With-profits
4,484
12,068
13,688
11,082
4,598
6,319
52,239
\u00a0 Unit-linked
154
1,544
1,284
1,281
257
131
4,651
\u00a0 Annuity and other long-term business
1,127
3,591
1,913
1,829
72
4,225
12,757
\u00a0 Other
839
137
34
21
3
2
1,036
32 Risk management and\u00a0sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.2 Debt securities (continued)
2022
AAA
AA+ to AA-
A+ to A-
BBB+
to\u00a0BBB-
Below BBB-
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Government Sovereign debt
4,325
7,641
1,379
2,194
1,062
187
16,788
With-profits
3,382
4,633
1,297
2,106
1,058
187
12,663
Unit-linked
211
923
81
58
\u2014
\u2014
1,273
Annuity and other long-term business
671
1,497
\u2014
26
\u2014
\u2014
2,194
Other
61
588
1
4
4
\u2014
658
Quasi-sovereign and Public sector debt
329
1,800
328
175
21
305
2,958
With-profits
257
942
250
172
21
261
1,903
Unit-linked
34
83
15
3
\u2014
2
137
Annuity and other long-term business
38
775
63
\u2014
\u2014
42
918
Corporate debt
1,368
2,952
9,623
13,527
3,250
9,235
39,955
With-profits
760
1,812
7,251
10,333
2,695
5,032
27,883
Unit-linked
87
180
772
1,473
382
53
2,947
Annuity and other long-term business
326
870
1,542
1,687
148
4,150
8,723
Other
195
90
58
34
25
\u2014
402
Asset-backed securities
629
239
444
251
44
1,513
3,120
With-profits
398
158
208
144
44
1,389
2,341
Unit-linked
30
21
18
31
\u2014
9
109
Annuity and other long-term business
95
60
218
76
\u2014
115
564
Other
106
\u2014
\u2014
\u2014
\u2014
\u2014
106
Total Debt Securities
6,651
12,632
11,774
16,147
4,377
11,240
62,821
With-profits
4,797
7,545
9,006
12,755
3,818
6,869
44,790
Unit-linked
362
1,207
886
1,565
382
64
4,466
Annuity and other long-term business
1,130
3,202
1,823
1,789
148
4,307
12,399
Other
362
678
59
38
29
\u2014
1,166
As at 31\u00a0December 2023 corporate debt exposure to banks amounted to \u00a3 8,884m (2022: \u00a38,273m).
The Group has holdings in asset-backed securities (ABS) which are presented within debt securities on the consolidated
statement of financial position. The Group\u2019s holdings in ABS, which comprise residential mortgage-backed securities (RMBS),
commercial mortgage-backed securities (CMBS), collateralised debt obligations (CDO) funds and other asset-backed securities
are shown within the table above.
32 Risk management and\u00a0sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.2 Debt securities (continued)
The Groups exposure to sovereign debt are analysed by issuer as follows:
2023
With-profits
Unit-linked
Annuity and
other long
term business
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Sovereign debt securities by country:
United Kingdom
5,195
1,338
1,910
606
9,049
Germany
601
16
140
\u2014
757
Other European countries
1,235
1
436
\u2014
1,672
Total Europe
7,031
1,355
2,486
606
11,478
United States
3,328
5
\u2014
10
3,343
Latin America Countries
425
19
27
\u2014
471
South Africa
922
105
\u2014
\u2014
1,027
South Korea
1,047
12
\u2014
\u2014
1,059
Indonesia
858
9
\u2014
\u2014
867
Malaysia
810
8
\u2014
\u2014
818
Singapore
491
5
\u2014
\u2014
496
Philippines
522
6
\u2014
\u2014
528
Thailand
499
6
\u2014
\u2014
505
India
450
5
\u2014
\u2014
455
Other
1,462
97
177
51
1,787
Total
17,845
1,632
2,690
667
22,834
2022
With-profits
Unit-linked
Annuity and
other long
term business
Other
Total
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Sovereign debt securities by country:
United Kingdom
2,290
947
1,239
578
5,054
Germany
503
39
201
\u2014
743
Other European countries
1,223
57
586
4
1,870
Total Europe
4,016
1,043
2,026
582
7,667
United States
1,990
6
\u2014
23
2,019
Latin America Countries
604
\u2014
26
\u2014
630
South Africa
90
98
\u2014
1
189
South Korea
760
12
\u2014
\u2014
772
Indonesia
891
12
\u2014
\u2014
903
Malaysia
566
8
\u2014
\u2014
574
Singapore
460
5
\u2014
\u2014
465
Philippines
477
7
\u2014
\u2014
484
Thailand
476
7
\u2014
\u2014
483
India
349
5
\u2014
\u2014
354
Other
1,984
70
142
52
2,248
Total
12,663
1,273
2,194
658
16,788
As at 31\u00a0December 2023 Other European Countries included \u00a31,232m (2022: \u00a31,403m) and Other included \u00a31,342m
(2022:\u00a0\u00a31,226m) of Supranational Government bonds.
32.3.3 Derecognition, collateral and offsetting
Securities lending and repurchase agreements
The Group has entered into securities lending and repurchase agreements whereby blocks of securities are transferred to third
parties, primarily major brokerage firms, in exchange for collateral. Typically, the value of collateral assets pledged to the Group in
these transactions is in excess of the value of securities transferred, with the excess determined by the quality of the collateral
assets granted. Collateral requirements are calculated on a daily basis. The securities lent and securities subject to repurchase
agreements are not derecognised from the Group\u2019s consolidated statement of financial position. Collateral typically consists of
cash, debt securities, equity securities and letters of credit. Cash collateral received is recognised on the consolidated statement of
financial position and a financial liability for the obligation for the Group to repay the cash is also recognised. Non-cash collateral
received is not recognised on the consolidated statement of financial position. Collateral pledged by the Group under reverse
repurchase arrangements, aside from cash, is not derecognised from the consolidated statement of financial position as the risks
and rewards are still retained by the Group. Cash collateral pledged is derecognised as it is pledged under right to use by the
counterparty and a financial asset is recognised for the obligation for the counterparty to repay the cash to the Group.
As at 31\u00a0December 2023, the Group had \u00a37,308m (2022: \u00a3 3,638m) of collateral pledged under securities lending and repurchase
agreements, primarily relating to the With-Profits Fund. The cash and securities collateral accepted under securities lending
agreements was \u00a36,961m (2022: \u00a35,471m). As at 31\u00a0December 2023, the Group had entered into reverse repurchase transactions
under which it purchased securities and had taken on the obligation to resell the securities. The fair value of the collateral held in
respect of these transactions was \u00a310,165m (2022: \u00a315,316m).
Collateral and pledges under derivative transactions
At 31\u00a0December 2023, the Group had pledged \u00a32,116m (2022: \u00a32,818m) for liabilities and held collateral of \u00a3468m (2022: \u00a31,318m)
in respect of over-the-counter derivative transactions.
These transactions are conducted under terms that are usual and customary to collateralised transactions including, where
relevant, standard securities lending and repurchase agreements.
Other collateral
At 31\u00a0December 2023, the Group had pledged collateral of \u00a3635m (2022: \u00a3552m) in respect of other transactions. This primarily
arises from collateral pledged in relation to consolidated funds held by the With-Profits Fund, in addition to deferred purchase
consideration on lifetime (equity release) mortgages.
Offsetting assets and liabilities
The Group\u2019s derivative instruments, repurchase agreements and securities lending agreements are subject to master netting
arrangements and collateral arrangements. A master netting arrangement with a counterparty creates a right of offset for amounts
due to and due from that same counterparty that is enforceable in the event of a default or bankruptcy. The Group recognises
amounts subject to master netting arrangements on a gross basis on the consolidated statement of financial position.
The following tables present the gross and net information about the Group\u2019s financial instruments subject to master netting
arrangements:
2023
Related amounts not offset in the consolidated
statement\u00a0of\u00a0financial position
Gross amount
included in the
consolidated
statement of
financial position
Financial
instruments
Cash collateral
Securities
collateral
Net amount
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial assets:
Derivative assets
1,280
(884)
(387)
(6)
3
Reverse repurchase agreements
13,615
\u2014
\u2014
(10,141)
3,474
Total financial assets
14,895
(884)
(387)
(10,147)
3,477
Financial liabilities:
Derivative liabilities
2,520
(884)
(29)
(1,548)
59
Securities lending and repurchase
agreements
726
\u2014
\u2014
(730)
(4)
Total financial liabilities
3,246
(884)
(29)
(2,278)
55
32 Risk management and\u00a0sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.3 Derecognition, collateral and offsetting (continued)
2022
Related amounts not offset in the consolidated
statement\u00a0of\u00a0financial position
Gross amount
included in the
consolidated
statement of
financial position
Financial
instruments
Cash collateral
Securities collateral
Net amount
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial assets:
Derivative assets
2,560
(1,293)
(1,309)
277
235
Reverse repurchase agreements
18,892
\u2014
\u2014
(15,295)
3,597
Total financial assets
21,452
(1,293)
(1,309)
(15,018)
3,832
Financial liabilities:
Derivative liabilities
3,705
(1,293)
(18)
(2,317)
77
Securities lending and repurchase
agreements
939
\u2014
\u2014
(938)
1
Total financial liabilities
4,644
(1,293)
(18)
(3,255)
78
In the tables above, the amounts of assets or liabilities included on the consolidated statement of financial position would be offset
first by financial instruments that have the right of offset under master netting or similar arrangements, with any remaining amount
reduced by the amount of cash and securities collateral. The actual amount of collateral may be greater than the amounts
presented in the tables. Reverse repurchase agreements shown in the tables above are included within deposits on the
consolidated statement of financial position.
32.3.4 Impairment of financial assets
Significant increase in credit risk
When determining whether the credit risk (ie risk of default) on a financial instrument has increased significantly since initial
recognition, the Group considers reasonable and supportable information that is relevant and available without undue cost or
effort. This includes both qualitative and quantitative information and analysis based on the Group\u2019s experience, expert credit
assessment and forward-looking information.
The Group primarily identifies whether a significant increase in credit risk has occurred for an exposure by comparing:
\u2013 the remaining lifetime probability of default (PD) as at the reporting date; with
\u2013 the remaining lifetime PD for this point in time that was estimated on initial recognition of the exposure.
The Group considers that a significant increase in credit risk occurs no later than when an asset is more than 30 days past due.
Days past due are determined by counting the number of days since the earliest elapsed due date in respect of which full payment
has not been received. Due dates are determined without considering any grace period that might be available to the debtor.
Some qualitative indicators of an increase in credit risk, such as delinquency or forbearance, may be indicative of an increased risk
of default that persists after the indicator itself has ceased to exist. In these cases, the Group determines a probation period during
which the financial asset is required to show a period of good payment behaviour.
If there is evidence that there is no longer a significant increase in credit risk relative to initial recognition, then the loss allowance
on an instrument returns to being measured as 12-month ECL.
32 Risk management and\u00a0sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.4 Impairment of financial assets (continued)
Low credit risk debt instruments
The Group has used the low credit risk exemption for financial instruments when they meet the following conditions:
\u2013 the financial instrument has a low risk of default;
\u2013 the borrower is considered to have a strong capacity to meet its obligations in the near term; and
\u2013 the Group expects, in the longer term, that adverse changes in economic and business conditions might, but will not necessarily,
reduce the ability of the borrower to fulfil its obligations.
The Group considers a financial asset to have low credit risk when its credit risk rating is equivalent to the globally understood
definition of \u2018investment grade\u2019. The Group considers this to be BBB- or higher based on Moody's ratings. The Group defines low
credit risk financial assets as financial assets that are BBB- investment grade at the reporting date, based on the Group\u2019s credit
grading policies. For such instruments, the significant increase in credit risk is not assessed, and the impairment allowance is
calculated and the financial asset is measured using the 12-month ECL, as long as the financial asset meets the criteria above.
Definition of default
The Group considers any exposure to financial assets in default to be credit impaired.
The impact of any collateral received will not be considered for the assessment of whether an asset is credit impaired. The
collateral is considered for the estimate of the related ECLs.
Write-off
Financial assets are written off either partially or in their entirety only when the Group has stopped pursuing the recovery. If the
amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the
allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to credit loss expense.
Modified financial assets
The contractual terms of a financial asset may be modified for a number of reasons, including changing market conditions and
other factors not related to a current or potential credit deterioration of the debtor. An existing financial asset whose terms have
been modified may be derecognised and the renegotiated asset recognised as a new financial asset at fair value plus eligible
transaction costs. The new asset is allocated to Stage 1 under IFRS 9 (assuming that it is not credit-impaired at the date of
modification).
When the terms of a financial asset are modified and the modification does not result in derecognition, the determination of
whether the asset\u2019s credit risk has increased significantly reflects a comparison of:
\u2013 its remaining lifetime PD as at the reporting date based on the modified terms; with
\u2013 the remaining lifetime PD estimated based on data on initial recognition and the original contractual terms.
Measurement of ECL
Where modelling of a parameter is carried out on a collective basis, the financial instruments are grouped on the basis of shared
risk characteristics, which include:
\u2013 instrument type;
\u2013 credit risk grade;
\u2013 collateral type;
\u2013 date of initial recognition;
\u2013 remaining term to maturity;
\u2013 industry; and
\u2013 geographic location of the borrower.
The groupings are subject to regular review to ensure that exposures within a particular group remain appropriately homogeneous.
32 Risk management and\u00a0sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.4 Impairment of financial assets (continued)
Loss allowance
The Group has used the low credit risk exemption for deposits and accrued investment income and other debtors and calculates
the loss allowance based on 12-month ECL.\u00a0 The carrying amounts and ECL allowances are shown in the following table:
2023
2022
12-month ECL
12-month ECL
Carrying amount
Related ECL
allowance
Carrying amount
Related ECL
allowance
Balance as at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Deposits
16,324
8
21,399
2
Accrued investment income and other debtors
2,536
2
2,404
41
There were no financial assets that were still subject to enforcement activity as at 31\u00a0December 2023 and 31\u00a0December 2022.
The table presenting an analysis of the credit risk exposure of financial instruments for which an ECL allowance is recognised is
included in Note 32.3.1. The carrying amount of financial assets above also represents the Group\u2019s maximum exposure to credit risk
on these assets.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-688": { "value": "
32.5 Liquidity risk
Liquidity risk is the risk of loss for the Group's business, or of adverse changes in the financial situation, resulting from the Group\u2019s
inability to meet financial obligations (for example, claims, creditors and collateral calls) as they fall due because they do not have or
are unable to generate sufficient liquid assets.
Fund liquidity risk is the risk of being unable to meet liabilities arising from a mismatch in liquidity of the underlying assets and the
frequency of liability requirements of the fund.
The Group\u2019s IFRS results are indirectly exposed to fund liquidity risk, for example, through reputational damage leading to lower
funds under management and lower revenue through charges collected. However, as the effect on the Group\u2019s IFRS results is
indirect, this risk is not discussed further and the remainder of this section refers to liquidity risk.
Liquidity management in the Group seeks to ensure that, even under adverse conditions, the Group has access to the funds
necessary to cover surrenders, withdrawals and maturing liabilities.
Liquidity risk is carefully managed, in particular in relation to: bank balances, cash flow forecasting, appropriate fund management
(to ensure that assets are not unduly concentrated in less liquid investments) and detailed cash flow matching for the annuity
business. Specific arrangements are also in place to manage liquidity in the unit-linked funds, particularly property funds where the
underlying assets are relatively illiquid.
32 Risk management and\u00a0sensitivity analysis (continued)
32.5 Liquidity risk (continued)
32.5.1 Contractual maturities of financial liabilities on an undiscounted cash flow basis
The following table sets out the contractual maturities for applicable classes of financial liabilities, excluding derivative liabilities
that are separately presented in section 32.5.2. The financial liabilities are included in the column relating to the contractual
maturities at the undiscounted cash flows (including contractual interest payments and expected benefit payments) due to be
paid, assuming conditions are consistent with those at the year end.
2023
Total
carrying
value
1 year or
less
After
1 year to
5 years
After
5 years
to 10 years
After
10 years
to 15 years
After
15 years to
20 years
Over
20 years
No stated
maturity
Total undis-
counted
value
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities:
Investment contracts
without DPF
12,535
12,535
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
12,535
Third party interest in
consolidated funds
9,893
521
463
190
\u2014
\u2014
13
8,706
9,893
Subordinated liabilities and
other borrowings
8,089
1,310
3,427
1,321
941
1,345
5,846
\u2014
14,190
Other financial liabilities
1,186
1,092
\u2014
\u2014
\u2014
\u2014
\u2014
94
1,186
Accruals, deferred income
and other liabilities
6,083
6,563
43
90
116
107
170
\u2014
7,089
Total
37,786
22,021
3,933
1,601
1,057
1,452
6,029
8,800
44,893
Restated i 2022
Total
carrying
value
1 year or
less
After
1 year to
5 years
After
5 years
to 10 years
After
10 years
to 15 years
After
15 years to
20 years
Over
20 years
No stated
maturity
Total undis-
counted
value
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial liabilities:
Investment contracts
without DPF
11,937
11,937
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
11,937
Third party interest in
consolidated funds
10,389
116
999
108
\u2014
\u2014
130
9,036
10,389
Subordinated liabilities and
other borrowings
7,537
995
2,993
1,585
965
1,281
6,080
\u2014
13,899
Other financial liabilities
2,172
2,039
\u2014
\u2014
\u2014
\u2014
\u2014
133
2,172
Accruals, deferred income
and other liabilities
6,649
6,190
110
87
114
109
191
\u2014
6,801
Total
38,684
21,277
4,102
1,780
1,079
1,390
6,401
9,169
45,198
i The comparative amounts have been restated for the first time adoption of IFRS 17 and IFRS 9. See Note 1.2.1 for further information.
Most investment contracts have options to surrender early, often subject to surrender or other penalties. Therefore, most
contracts can be said to have a contractual maturity of less than one year, but the additional charges and term of the contracts
mean surrenders are unlikely to be exercised in practice.
The vast majority of the Group\u2019s financial assets are held to back the Group\u2019s policyholder liabilities. Although asset/liability
matching is an important component of managing policyholder liabilities (both those classified as insurance and those classified as
investments), this profile is mainly relevant for managing market risk rather than liquidity risk. Within each business unit this asset/
liability matching is performed on a portfolio-by-portfolio basis.
In terms of liquidity risk, a large proportion of the policyholder liabilities contain discretionary surrender values or surrender
charges, meaning that many of the Group\u2019s liabilities are expected to be held for the long term. Many of the Group\u2019s investment
portfolios are in marketable securities, which can therefore be converted quickly to liquid assets. As a result, an analysis of the
Group\u2019s assets by contractual maturity is not considered appropriate to evaluate the nature and extent of the Group\u2019s liquidity risk.
32 Risk management and\u00a0sensitivity analysis (continued)
32.5 Liquidity risk (continued)
32.5.2 Maturity analysis of derivatives
The following table shows the gross and net derivative positions together with the maturity profile of the contractual undiscounted
cash flows:
2023
Total
carrying
value
1 year or
less
After
1 year to
5 years
After
5 years
to 10 years
After
10 years
to 15 years
After
15 years to
20 years
Over
20 years
No stated
maturity
Total undis-
counted
value
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivative assets
1,693
740
534
284
76
115
461
\u2014
2,210
Derivative liabilities
2,910
561
841
1,052
187
757
2,160
\u2014
5,558
Net derivative position
(1,217)
179
(307)
(768)
(111)
(642)
(1,699)
\u2014
(3,348)
2022
Total
carrying
value
1 year or
less
After
1 year to
5 years
After
5 years
to 10 years
After
10 years
to 15 years
After
15 years to
20 years
Over
20 years
No stated
maturity
Total undis-
counted
value
As at 31 December
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivative assets
2,850
384
816
722
526
554
1,258
\u2014
4,260
Derivative liabilities
4,185
772
1,066
821
1,164
934
1,662
\u2014
6,419
Net derivative position
(1,335)
(388)
(250)
(99)
(638)
(380)
(404)
\u2014
(2,159)
32.5.3 Maturity analysis of insurance contracts
The following tables provide a maturity analysis of the Group\u2019s insurance and reinsurance contract liabilities, which reflects the
dates on which the cash flows are expected to occur. The Group has elected to analyse the estimates of the present value of the
future cash flows by estimated timing. It excludes the release of the CSM which is in Note 24.4.
For reinsurance contracts held 98% (2022: 99%) relates to annuity and other long-term business contracts and so analysis by each
line of business are not presented.
Insurance contractsi
2023
As at 31 December
With-profits
sub-funds
Unit-linked
insurance
Annuity and
other long-
term business
Total
0 to 1 year
11%
15%
9%
11%
1 to 2 years
9%
12%
9%
9%
2 to 3 years
8%
10%
8%
8%
3 to 4 years
7%
9%
7%
7%
4 to 5 years
7%
8%
7%
7%
5 to 10 years
24%
26%
27%
25%
10 to 15 years
15%
12%
17%
15%
15 to 20 years
9%
5%
9%
9%
20 to 25 years
5%
2%
4%
5%
Over 25 years
5%
1%
3%
4%
Total
100%
100%
100%
100%
32 Risk management and\u00a0sensitivity analysis (continued)
32.5 Liquidity risk (continued)
32.5.3 Maturity analysis of insurance contracts (continued)
Insurance contractsi
2022
As at 31 December
With-profits
sub-funds
Unit-linked
insurance
Annuity and
other long-term
business
Total
0 to 1 year
11%
14%
9%
11%
1 to 2 years
8%
12%
8%
9%
2 to 3 years
8%
10%
8%
8%
3 to 4 years
7%
8%
7%
7%
4 to 5 years
6%
7%
7%
6%
5 to 10 years
25%
28%
28%
25%
10 to 15 years
16%
13%
17%
15%
15 to 20 years
9%
5%
9%
9%
20 to 25 years
5%
2%
4%
5%
Over 25 years
5%
1%
3%
5%
Total
100%
100%
100%
100%
", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-689": { "value": "
32.6 Derivatives and hedging
The Group uses derivatives for the purpose of efficient portfolio management or the reduction in investment risk. In doing so, the
Group obtains cost-effective and efficient exposure to various markets and manages exposure to equity, interest rate, currency,
credit and other business risks. The Group has opted not to apply hedge accounting to derivatives.
The Group uses various interest rate derivative instruments such as interest rate swaps and swap options to reduce exposure to
interest rate volatility. The Group also uses various currency derivatives in order to limit volatility due to foreign currency exchange
rate fluctuations arising on securities denominated in currencies other than pounds sterling.
All over-the-counter (OTC) derivative transactions are conducted under standardised International Swaps and Derivatives
Association Inc (ISDA) master agreements and Credit Support Annexes (CSA). The Group has collateral agreements between the
individual entities in the Group, of which the Company is one, and relevant counterparties in place under each of these market
master agreements. The Group also has the ability to enter into cleared derivative positions under European Market Infrastructure
Regulation (EMIR).
The total fair value balances of derivative assets and liabilities are shown in Note 18.
There are hedging arrangements in place for the with-profits liabilities, including some product-specific arrangements. The actual
and required hedging positions are monitored at least monthly and rebalanced if required.
Under Article 11 of the European Market Infrastructure Regulation on derivatives, central counterparties and trade repositories
EMIR and Commission Delegated Regulation (EU) 2016/2251 supplementing EMIR, market participants transacting in non-cleared
OTC derivatives are required to exchange collateral to cover variation and initial margin. However, trades between counterparties
belonging to the same group are exempt from these margin requirements subject to certain criteria.
Prudential Capital Plc (Legal Entity Identifier reference (LEI) CHW8NHK268SFPTV63Z64) has entered into such derivative
agreements with the following group entities. These counterparties pairings meets the criteria to be eligible for intra-group
exemptions to the margin requirements:
As at 31 December
2023
2022
Counterparty
Legal Entity Identifier
Relationship between parties
Type of
exemption
Aggregate notional
of OTC derivatives
contract
Aggregate notional
of OTC derivatives
contract
\u00a3m
\u00a3m
Prudential Lifetime
Mortgages Limited
5493001GSK4HF84IOB02
M&G plc is the ultimate Parent
Company for both parties
Full
\u2014
37
M&G FA Limited
213800TFNC2ZYHSGTN11
M&G plc is the ultimate Parent
Company for both parties
Full
392
255
32.6.1 Hedges in respect of shareholder transfers arising from the with-profits business
The shareholders' exposure to market risk from with-profits business arises from the shareholder transfers which depend on
investment return of the funds. These shareholder transfers, while smoothed, are particularly exposed to equity risk.
The Group has entered into a partial equity hedge of the shareholder transfers expected to emerge from the WPSF in order to
mitigate this risk. The effect for the year ended 31\u00a0December 2023 was an unrealised loss of \u00a38m (2022: unrealised gain of \u00a3121m)
and a realised loss of \u00a3109m (2022: realised loss of \u00a3119m).
PAC's shareholder fund had also previously entered into a risk management arrangement with the WPSF in relation to the
shareholder transfers expected to emerge from the WPSF, specifically with regard to the PruFund new business written during
2018 to 2020. This arrangement was designed to protect the shareholders against extremely weak market returns. This
arrangement was terminated in 2023. The arrangement resulted in a \u00a39m realised loss for the year ended 31\u00a0December 2023
(2022: unrealised loss of \u00a38m).
In 2023, PAC's shareholder fund entered into a further arrangement with the WPSF in relation to the shareholder transfers
expected to emerge from PruFund business written to 31\u00a0December 2022. The shareholder fund accepted a one-off cash
payment in lieu of 20% of future shareholder transfers. This arrangement is mutually beneficial since it generates certainty and
cash for the shareholder while reducing the WPSF exposure to a potential mismatch between the value of the shareholder
transfers and the fixed charges taken to cover those transfers. In addition, under the arrangement the shareholder paid the WPSF
for a higher share of future surplus from certain cohorts of business. For the year ended 31\u00a0December 2023 this arrangement
resulted in a loss of \u00a336m (2022: n/a).
32 Risk management and\u00a0sensitivity analysis (continued)
32.6 Derivatives and hedging (continued)
32.6.2 Other shareholder hedging arrangements
The Group\u2019s shareholder fund has purchased interest rate swap instruments to protect the capital position against interest rate
movements. For the year ended 31\u00a0December 2023, these instruments resulted in an unrealised gain of \u00a3116m (2022: unrealised
loss of \u00a3803 m) and a realised loss of \u00a336m (2022 unrealised loss of: \u00a3186m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-690": { "value": "
33 Contingencies and\u00a0related\u00a0obligations
33.1 Litigation, tax and regulatory matters
In addition to the matters set out in Note 10.3 regarding the portfolio dividend tax litigation, the Group is involved in various
litigation and regulatory issues. While the outcome of such litigation and regulatory issues cannot be predicted with certainty, the
Directors believe that their ultimate outcome will not have a material adverse effect on the Group\u2019s financial condition, results of
operations, or cash flows.
33.2 Guarantees
Guarantee funds provide for payments to be made to policyholders on behalf of insolvent life insurance companies and are
financed by payments levied on solvent insurance companies based on location, volume and types of business. The estimated
reserve for future guarantee fund assessments is not significant, and adequate reserves are available for all anticipated payments
for known insolvencies.
M&G plc acts as guarantor for certain property leases where a Group company is a lessee. The most material of these is the
guarantee provided in respect of the 10 Fenchurch Avenue lease between Saxon Land B.V. and M&G Corporate Services Limited.
The Group has also received guarantees in respect of subleasing arrangements, entered into in the normal course of business.
On acquisition of a controlling interest in MGSA, M&G Group Limited provided a guarantee in respect of an existing loan facility
between Thesele, the seller of MGSA, and Nedbank, a third party bank amounting to ZAR 220m. The guarantee is secured on 7% of
the shares that Thesele retains in MGSA.
On acquisition of 49.9% holding in My Continuum Financial Limited (MCFL) Limited, the holding company Continuum (Financial
Services) LLP (CFSL) and My Continuum Wealth (MCW), M&G Regulated Entity Holding Company Limited (M&G REH) provided a
guarantee in respect of the obligations under the Sale and Purchase agreement up to a maximum value of \u00a333m.
M&G REH is guarantor for the obligations of M&G Corporate Services Limited to make payments under the Scottish Amicable Staff
Pension Scheme.
The Group has also provided other guarantees and commitments to third parties entered into in the normal course of business, but
the Group does not consider that these would result in a significant unprovisioned loss.
33.3 Support for the With-Profits Fund by shareholders
PAC is liable to meet its obligations to with-profits policyholders even if the assets of the with-profits sub-funds are insufficient to
do so. The assets in excess of amounts expected to be paid for future terminal bonuses and related shareholder transfers ('the
excess assets') in the with-profits sub-funds could be materially depleted over time by, for example, a significant or sustained
equity market downturn. In the unlikely circumstance that the depletion of the excess assets within the with-profits sub-funds was
such that the Group\u2019s ability to satisfy policyholders\u2019 reasonable expectations was adversely affected, it might become necessary
to restrict the annual distribution to shareholders or to contribute shareholders\u2019 funds to the with-profits sub-funds to provide
financial support.
There are a number of additional arrangements between the shareholder and the With-Profits Fund as follows:
\u2013 The With-Profits Fund contributed to the costs of establishing the Polish branch of PAC, and receives repayment through
income from charges levied on the business. There is an obligation on the shareholders to ensure that the with-profits fund will
be repaid in full with interest, and an amount is recognised for the estimated cost to the shareholder of any shortfall at the end of
the term of the agreement. The policyholders share of the impact is included in the insurance contract liabilities for the with-
profits fund, with changes in value recognised in finance income or expenses from insurance contracts issued in the
consolidated income statement. The amount held within insurance contract liabilities is \u00a356m as at 31 December 2023
(2022:\u00a0\u00a332m).
\u2013 Part of the acquisition costs incurred in the early years of M&G Wealth Advice Limited (formerly Prudential Financial Planning
Limited) were funded by the With-Profits Fund. In return, M&G Wealth Advice Limited is required to deliver cost savings to the
With-Profits Fund. In the event of closure of M&G Wealth Advice or, the cost savings not being delivered and M&G Wealth
Advice stops writing new business, the shareholder will reimburse the With-Profits Fund for any remaining shortfall. The time
period for repayment is not defined.
\u2013 Transformation costs associated with with-profits new business will be recovered in the pricing of future new business (subject
to a shareholder underpin whereby the shareholder will compensate the With-Profits Fund if any of these costs are not fully
recovered at the end of the term of the agreement). The policyholders\u2019 share of the impact is included in the insurance contract
liabilities for the With-Profits Fund, with changes in value recognised in finance income or expenses from insurance contracts
issued in the consolidated income statement. The amount held within insurance contract liabilities is \u00a36m as at 31\u00a0December
2023 (2022: \u00a3nil).
33 Contingencies and\u00a0related\u00a0obligations (continued)
33.3 Support for the With-Profits Fund by shareholders (continued)
\u2013 PAC has undertaken a project to rationalise fund structures (The Target Investment Model programme) achieved by combining
existing, smaller funds with the main With-Profits asset share fund in a fund umbrella structure, and is expected to yield various
benefits for the business over time. If expected benefits do not materialise to the With-Profits Fund, the shareholder is
committed to compensate the fund for any implementation costs borne which were not fully recouped. The assessment period
for the underpin arrangement is five years, running to the end of 2025.
\u2013 PAC has priced new with-profits business on a basis that is expected to be financially self-supporting or, where this has not been
the case, the shareholder is required to cover the cost (known as the New Business Supportability Test (NBST)). The
policyholders share of the impact is included in the insurance contract liabilities for the With-Profits Fund, with changes in value
recognised in finance income or expenses from insurance contracts issued in the consolidated income statement. The amount
held within insurance contract liabilities is \u00a315m as at 31\u00a0December 2023 (2022: \u00a36m).
The following matters are of relevance with respect to the With-Profits Fund:
33.3.1 Pension mis-selling review
The Pensions mis-selling review covers customers who were sold personal pensions between 29 April 1988 and 30 June 1994, and
who were advised to transfer out, not join, or opt out of their employer's Defined Benefit Pension Scheme. During the initial review
some customers were issued with guarantees that redress will be calculated on retirement or transfer of their policies. The
expense to cover these customers continues to be recognised within insurance contract liabilities.
While PAC believed it met the requirements of the FSA (the UK insurance regulator) to issue offers of redress to all impacted
customers by 30 June 2002, there is a population of customers who, while an attempt was made at the time to invite them to
participate in the review, may not have received their invitation. These customers have been re-engaged, to ensure they have the
opportunity to take part in the review. The liability also covers this population. Currently, an expense amounting to \u00a3140m as at
31\u00a0December 2023 (2022: \u00a3226m) is being held in relation to this within insurance contract liabilities.
The key assumptions underlying the liability are:
\u2013 average cost of redress per customer;
\u2013 proportion of liability (reserve rate) held for soft close cases (where all reasonable steps have been taken to contact the
customer but the customer has not engaged with the review).
Sensitivities of the value of the liability to a change in assumptions are as follows:
Change in assumption
2023
2022
Assumption
\u00a3m
\u00a3m
Average cost of redress
increase/decrease by 10%
+/-5
+/-10
Reserve rate for soft closed cases
increase/decrease by 10%
+/-31
+/-30
Changes in the value of the pension mis-selling liability would not immediately impact profit or loss as the changes would be offset
by changes in the allowance for mutualisation and the CSM.
Costs arising from this review are met by the excess assets of the with-profits sub-fund and hence have not been charged to the
asset shares used in the determination of policyholder bonus rates. An assurance was given that these deductions from excess
assets would not impact PAC's bonus or investment policy for policies within the with-profits sub-funds that were in force at 31
December 2003. This assurance does not apply to new business since 1 January 2004. In the unlikely event that such deductions
would affect the bonus or investment policy for the relevant policies, the assurance provides that support would be made available
to the sub-fund from PAC's shareholder resources for as long as the situation continued, so as to ensure that PAC's policyholders
were not disadvantaged. PAC\u2019s comfort in its ability to make such support available was supported by related intra-group
arrangements between Prudential plc and PAC, which formalised the circumstances in which capital support would be made
available to PAC by Prudential plc. These intra-group arrangements terminated on 21 October 2019, following the demerger of
M&G plc from Prudential plc, at which time intra-group arrangements formalising the circumstances in which M&G plc would make
capital support available to PAC became effective.
33.3.2 With-profits options and guarantees
Certain policies within the With-Profits Fund give potentially valuable guarantees to policyholders, or options to change policy
benefits which can be exercised at the policyholders\u2019 discretion. These options and guarantees are valued as part of the
policyholder liabilities. Please refer to Note 24 for further details on these options and guarantees.
", "dimensions": { "concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-691": { "value": "
34 Commitments
The Group leases various offices to conduct its business. In line with the requirements of IFRS 16, the Group has recognised a lease
liability in respect of these leases representing the obligation to make future lease payments. For further information on the lease
liability see Note 27.
In addition, the Group has provided, from time to time, certain guarantees and commitments to third parties including funding the
purchase or development of land and buildings and other related matters. The contractual obligations to purchase or develop
investment property as at 31\u00a0December 2023 were \u00a3 711m (2022: \u00a3805m). Commitments also arise in relation to the refurbishment
of investment properties, however these would not be material to the financial statements, either individually or in aggregate.
As at 31\u00a0December 2023, the Group had undrawn commitments of \u00a33,773m to third parties (2022: \u00a34,027m) of which \u00a3 2,618m
(2022: \u00a32,566m) was committed by its private equity and infrastructure funds. These commitments were entered into in the normal
course of business and no material adverse impact on the operations is expected to arise.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-692": { "value": "
35 Related party transactions
The Group and its related parties comprise members of the M&G plc Group, as well as the Group\u2019s joint ventures and associates,
and any entity controlled by those parties.
35.1 Transactions with the Group\u2019s joint ventures and associates
The Group received dividends of \u00a389m for the year ended 31\u00a0December 2023 (2022: \u00a391 m) from joint ventures or associates
accounted for using the equity method. In addition, the Group had balances due from joint ventures or associates accounted for
using the equity method of \u00a343m as at 31\u00a0December 2023 ( 2022: \u00a388m). There were no balances due to joint ventures or
associates accounted for using the equity method at 31 December 2023 or 31 December 2022.
Furthermore, in the normal course of business a number of investments into and divestment from investment vehicles managed by
the Group were made. This includes investment vehicles which are classified as investments in associates and joint ventures
measured at FVTPL. The Group entities paid amounts for the issue of shares or units and received amounts for the cancellation of
shares or units. These transactions are not considered to be material to the Group.
35.2 Compensation of key management personnel
The members of the Board and the Group Executive Committee are deemed to have power to influence the direction, planning and
control the activities of the Group, and hence are also considered to be key management personnel.
Key management personnel of the Company may from time to time purchase insurance, asset management or annuity products
marketed by the Group companies in the ordinary course of business on substantially the same terms as those prevailing at the
time for comparable transactions with other persons.
Other transactions with key management personnel are not deemed to be significant either by virtue of their size or in the context
of the key management personnel\u2019s respective financial positions. All of these transactions are on terms broadly equivalent to
those that prevail in arm\u2019s length transactions.
The summary of compensation of key management personnel is as follows:
2023
2022
As at 31 December
\u00a3m
\u00a3m
Salaries and short-term benefits
13.2
11.4
Post-employment benefits
0.5
0.5
Share-based payments
3.2
4.8
Total
16.9
16.7
Information concerning individual Directors\u2019 emoluments, interests and transactions are provided in the single figure tables in the
Remuneration Report on pages 133 and 139.
", "dimensions": { "concept": "ifrs-full:DisclosureOfTransactionsBetweenRelatedPartiesExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-693": { "value": "
35.2 Compensation of key management personnel
The members of the Board and the Group Executive Committee are deemed to have power to influence the direction, planning and
control the activities of the Group, and hence are also considered to be key management personnel.
Key management personnel of the Company may from time to time purchase insurance, asset management or annuity products
marketed by the Group companies in the ordinary course of business on substantially the same terms as those prevailing at the
time for comparable transactions with other persons.
Other transactions with key management personnel are not deemed to be significant either by virtue of their size or in the context
of the key management personnel\u2019s respective financial positions. All of these transactions are on terms broadly equivalent to
those that prevail in arm\u2019s length transactions.
The summary of compensation of key management personnel is as follows:
2023
2022
As at 31 December
\u00a3m
\u00a3m
Salaries and short-term benefits
13.2
11.4
Post-employment benefits
0.5
0.5
Share-based payments
3.2
4.8
Total
16.9
16.7
Information concerning individual Directors\u2019 emoluments, interests and transactions are provided in the single figure tables in the
Remuneration Report on pages 133 and 139.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-694": { "value": "
36 Capital management
36.1 Capital regulations of entities within the Group
The Group is regulated under Solvency II and supervised as an insurance group by the Prudential Regulation Authority. The Group
manages Solvency II own funds as its measure of capital. As at 31\u00a0December 2023 estimated and unaudited Group Solvency II own
funds are \u00a311.3bn (2022: \u00a311.8bn).
The Solvency II surplus represents the aggregated capital (own funds) held by the Group less the solvency capital requirement
(SCR). Own funds is the Solvency II measure of capital available to meet losses, and is based on the assets less liabilities of the
Group, subject to certain restrictions and adjustments. The SCR is calculated using the Group's Internal Model, which calculates
the SCR as the 99.5th percentile (or 1-in-200) worst outcome over the coming year, out of 100,000 equally likely scenarios,
allowing for the dependency between the risks the business is exposed to.
The regulated entities within the Group are also subject to local capital regulations. Capital is actively managed to ensure that local
regulatory requirements are met. The main regulated entities in the Group and the regulatory framework to which they must
adhere are listed below:
Entity
Main activity
Regulatory framework
M&G plc
Insurance
Solvency II
The Prudential Assurance Company Limited
Insurance
Solvency II
Prudential International Assurance plc
Insurance
Solvency II
Prudential Pensions Limited
Insurance
Solvency II
M&G Group Limited (including subsidiaries)
Investment management
IFPRi
Investment Funds Direct Limited
Investment services
IFPRi
i Investment Firms Prudential Regime under MIFIDPRU \u2013 Prudential Sourcebook for MiFID Investment Firms.
All Group entities that were subject to externally imposed regulatory capital requirements complied with them throughout the year.
36.2 Group capital position
In 2020, the Government announced that it would undertake a review of the Solvency II regime. Following a consultation process,
His Majesty's Treasury (HMT) has published the final proposed Solvency II reform package and plans for implementing the changes
to the UK\u2019s prudential regime.
The reforms to the risk margin, moving to a modified cost of capital approach with a reduction in the cost of capital from 6% to 4%,
have been implemented as at 31 December 2023. The lower cost of capital and increase in the rate at which the risk margin runs off
have resulted in a reduction in risk margin of c.\u00a3800m (unaudited). This is largely offset by a corresponding reduction in the
Transitional Measure on Technical Provisions (TMTP); the net impact is a c.\u00a374m (unaudited) increase in surplus, largely arising
because there is no TMTP in respect of the PIA business. As part of the reform package, the PRA also invited firms to apply for
removal of the Financial Resources Requirement (FRR) restriction, which limits the amount of TMTP benefit. PAC received approval
to remove the restriction as at 31 December 2023, resulting in an increase in surplus of \u00a3103m (unaudited). The total impact of
implementing the Solvency II reforms is \u00a3177m (unaudited).
Reforms of the matching adjustment (MA) are expected to come into force as at 30 June 2024. The proposals include greater
investment flexibility, revised MA eligibility rules, and more flexibility in processes. They also cover a requirement for senior
manager attestations on the level of Fundamental Spread and MA, and changes to the way the MA is calculated (eg requiring a
greater level of granularity in the calculation) and reported (eg the introduction of a new regular Matching Adjustment Asset and
Liability Information Return).
The remainder of the new reforms are expected to come into force as at 31 December 2024.
Furthermore, the impact of the UK Government's consultation on residential ground rents has been reflected in the capital position.
The overall impact is a decrease in own funds due to the fall in the valuation of the underlying residential ground rent asset which is
offset partly by a fall in the value of the technical provisions due to the changes in portfolio yield.
In addition, incremental capital has been held in the SCR to reflect the implementation of the \u2018peppercorn cap\u2019 in a stand-alone 1-
in-200 event. However, there is significant diversification against the Group\u2019s existing risk exposure, which results in the diversified
risk capital being materially lower than the full loss amount and therefore, reflects the diversified impact of the possible outcomes
set out in the consultation.
This net impact of the items stated above is a reduction in surplus of \u00a3264m.
36 Capital management (continued)
36.2 Group capital position (continued)
36.2.1 Regulatory capital position
The regulatory capital position of the Group takes into account all Group exposures, including that of the With-Profits Fund. This
view of capital recognises the ring-fenced nature of the With-Profits Fund, and on consolidation, surplus in the fund can only be
recognised to the level of associated SCR with any excess surplus being eliminated as a ring-fenced fund restriction, effectively
restricting the solvency coverage ratio of the With-Profits Fund to 100%. As such, the combined 'regulatory' solvency coverage
ratio is highly resilient to movements in the With-Profits Fund's own funds.
The estimated and unaudited Solvency II capital position for the Group as at 31\u00a0December 2023 and 31\u00a0December 2022 is shown below:
2023
2022
As at 31 December
\u00a3bn
\u00a3bn
Solvency II eligible own funds
11.3
11.8
Solvency II SCR
(6.8)
(7.2)
Solvency II surplus
4.5
4.6
Solvency II coverage ratio i
167%
164%
i Solvency II coverage ratio has been calculated using unrounded figures.
The results include transitional measures, which are presented assuming a recalculation as at the valuation date, using
management\u2019s estimate of the impact of operating and market conditions. As at 31 December 2022, the recalculated transitional
measures did not align to the latest approved regulatory position and therefore the estimated and unaudited Solvency II capital
position differed from the position disclosed in the formal regulatory Quantitative Reporting Templates and Group Solvency and
Financial Condition Report of the same date. As at 31\u00a0December 2023, the recalculation has been approved for the reporting date
and the positions are aligned.
36.2.2 Shareholder capital position
The Group focuses on a shareholder view of the Solvency II capital position, which is considered to provide a more relevant
reflection of the capital strength of the Group. The Group's shareholder Solvency II capital position excludes the contribution to
own funds and SCR from the ring-fenced With-Profits Fund. Further information on the ring-fenced With-Profits Fund's capital
position is provided in Section 1.5 of Supplementary Information. Shareholder Solvency II own funds also assume transitional
measures on technical provisions which have been recalculated using management\u2019s estimate of the impact of operating and
market conditions at the reporting date (regardless as to whether the recalculation was approved for the reporting date).
The estimated and unaudited shareholder Solvency II capital position for the Group is shown below.
2023
2022
As at 31 December
\u00a3bn
\u00a3bn
Shareholder Solvency II eligible own funds
8.9
9.3
Shareholder Solvency II SCR
(4.4)
(4.7)
Solvency II surplus
4.5
4.6
Shareholder Solvency II coverage ratio i
203%
199%
i Shareholder Solvency II coverage ratio has been calculated using unrounded figures.
36 Capital management
36.3 Meeting of capital management objectives
The Group manages its capital on a Solvency II basis to ensure that sufficient own funds are available on an ongoing basis to meet
regulatory capital requirements. This is achieved by targeting a capital buffer significantly in excess of regulatory capital
requirements. This buffer is intended to absorb the impact of stressed market conditions and thus make the Solvency II balance
sheet under the regulatory view resilient to stresses that affect the Group\u2019s business.
A range of stress and scenario testing is carried out across the business, including certain scenarios mandated by the regulator.
The sensitivity of liabilities and other components of total capital vary, depending upon the type of business concerned, and this
influences the approach to asset/liability management.
In addition, projections are performed to understand how the own funds and capital position is expected to develop and how this
might be affected by adverse events taking place. Informed by the results of these projections there are a number of actions
available to management to strengthen the own funds position.
As well as holding sufficient capital to meet regulatory requirements, the Group also closely manages the cash it holds so that it can:
\u2013 maintain flexibility, fund new opportunities and absorb shock events;
\u2013 meet liabilities to policyholders and other obligations;
\u2013 fund dividends; and
\u2013 cover central costs and debt payments.
", "dimensions": { "concept": "ifrs-full:DisclosureOfObjectivesPoliciesAndProcessesForManagingCapitalExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-695": { "value": "
37 Share-based payments
The Group operates various share-based payment schemes that award M&G plc shares to participants upon meeting the required
vesting conditions. Details of those schemes are stated below:
37.1 Description of the plans
Discretionary schemes initiated prior to demerger:
Scheme
Description
Long-term
Incentive Plan
(LTIP)
The LTIP is a conditional share plan: the shares awarded will ordinarily be released to participants after three
years to the extent that performance conditions have been met.
If performance conditions are not achieved in full, the unvested portion of any award lapses.
The\u00a0performance conditions attached to LTIP awards include market performance conditions; Relative
Total\u00a0Shareholder Return (TSR); and other non-market conditions, including measures linked to profit.
The\u00a0performance conditions attached to each award are dependent on the role of the participants.
Threshold and maximum achievement levels will be set at the beginning of the performance periods in line
with the business plan. The last of these awards vested in 2022.
Annual Incentive
Plan (AIP)
Certain senior executives participate in the AIP where a portion of the individual's bonus is delivered
in\u00a0the\u00a0form of shares that are released after three years. There are no performance conditions associated
with the plan. The last of these awards vested in 2022.
Group Deferred
Bonus Plan (GDBP)
Under these plans, part of the participant\u2019s annual bonus is paid in the form of a share award that vests after
three years. Other than the service condition, there are no other performance conditions associated with
this plan. The last of these awards vested in 2022.
Restricted Share
Plan (RSP)
Awards under this plan are discretionary and ad hoc, and the vesting of awards may be subject to
performance conditions. These awards may be retention awards, new joiner awards and promotion
related\u00a0awards. The last of these awards vested in 2023.
Prior to demerger, all discretionary schemes mentioned above were based on Prudential plc awards. At the point of demerger and
subsequent listing of M&G plc, all outstanding discretionary awards were replaced with equivalent awards based on M&G plc
shares. The scheme rules for the awards remain the same in principle, except for the LTIP awards, for which the relevant metrics
would be based on M&G plc as opposed to Prudential plc performance.
In accordance with IFRS 2, the replacement awards have been accounted for as a modification of the previous scheme and the
expense in relation to the scheme will continue to be recorded over the remaining vesting period.
37 Share-based payments (continued)
37.1 Description of the plans (continued)
Discretionary schemes initiated post-demerger:
Scheme
Description
Performance
Share Plan (PSP)
The PSP is a conditional share plan: the shares awarded will ordinarily be released to participants after a
predetermined period, usually three years, to the extent that performance conditions have been met.
If performance conditions are not achieved in full, the unvested portion of any award lapses. The
performance conditions attached to PSP awards include market performance conditions; Relative Total
Shareholder Return (TSR); and other non-market conditions, including measures linked to profit as well as
sustainability-related measures. The performance conditions attached to each award are dependent on the
role of the participants. Threshold and maximum achievement levels will be set at the beginning of the
performance periods in line with the business plan.
Deferred Incentive
Plan (DIP)
Under these plans, part of the participant\u2019s Annual Bonus is paid in the form of a share award that vests
after three or four years. Other than the service condition, there are no other performance conditions
associated with this plan.
Approved schemes:
Share scheme
Description
Save As You Earn
(SAYE) plans
The Group operates SAYE plans, which allow eligible employees the opportunity to save a monthly amount
from their salaries, over either a three or five-year period, which can be used to purchase shares in M&G plc
at a predetermined price subject to the employee remaining in employment for three years after the grant
date of the options and satisfying the monthly savings requirement.
Share Incentive
Plan (SIP)
The Group operates SIPs, which allow eligible employees to invest a monthly or annual amount from their
salaries in M&G plc shares; M&G plc will then contribute a share for every two the employee purchases.
All approved and discretionary schemes are accounted for as equity-settled as the awards would be settled in M&G plc shares
37.2 Outstanding options and awards
Movements in outstanding options and awards under the Group's share-based compensation are as follows:
2023
Outstanding options under
SAYE schemes
Awards outstanding under
incentive plans
Outstanding as at 1 January
23,265,327
87,565,318
Granted
7,266,101
34,246,494
Exercised
(9,599,874)
(41,104,260)
Forfeited/Expired
(1,355,605)
(6,425,515)
Outstanding at 31 December
19,575,949
74,282,037
Options/awards immediately exercisable at 31 December
2,181,057
10,711,591
2022
Outstanding options under
SAYE schemes
Awards outstanding under
incentive plans
Outstanding as at 1 January
23,299,399
82,892,380
Granted
3,085,857
25,900,361
Exercised
(568,529)
(11,523,658)
Forfeited/Expired
(2,551,400)
(9,703,765)
Outstanding at 31 December
23,265,327
87,565,318
Options/awards immediately exercisable at 31 Decemberi
99,162
2,419,090
iThe comparative amount for awards outstanding under incentive plans has been restated to include Free Shares as immediately exercisable.
Options are exercised throughout the year; the average share price over 2023 was \u00a32.00 (2022: \u00a32.01).
37 Share-based payments (continued)
37.2 Outstanding options and awards (continued)
The following tables provide a summary of the range of exercise prices and average remaining contractual life for the SAYE options
and discretionary option awards.
2023
As at 31 December
Exercise price
Number outstanding
Weighted average
remaining contractual life
(years)
Weighted average
exercise price (\u00a3)
Number exercisable
SAYE options
Between \u00a31 and \u00a32
19,575,949
2.02
1.52
2,181,057
Discretionary option
awards
\u2014
38,430,160
1.00
\u2014
8,690,729
2022 (Restated)
As at 31 December
Exercise Price
Number outstanding
Weighted average
remaining contractual life
(years)
Weighted average
exercise price (\u00a3)
Number exercisable
SAYE options
Between \u00a31 and \u00a32
23,265,327
1.63
1.45
99,162
Discretionary option
awardsi
\u2014
42,818,764
0.93
\u2014
78,872
i The 2022 comparative has been restated to include the PSP nil cost option awards.
37.3 Fair value of options and awards
The fair value of all awards is based on the M&G plc share price at the date of grant: \u00a31.98 for 2023 (2022: between \u00a31.95 and
\u00a32.23), except for the following:
\u2013 Awards with market performance conditions based on Total Shareholder Returns (TSR awards), these include certain PSP
awards;
\u2013 SAYE options.
The determination of the fair value of these awards requires the use of various assumptions which are disclosed below:
Awards granted in
2023
2022
As at 31 December
PSP TSR
award
SAYE
options
PSP TSR
award
SAYE
options
Dividend yield (%)
N/A
9.88
N/A
11.37
Expected pay-off (%)
41.67
N/A
100.00
N/A
Expected volatility (%)
N/A
20.97
N/A
48.51
Risk-free interest rate (%)
N/A
4.40
N/A
4.37
Expected option life (years)
N/A
3.25
N/A
3.45
Weighted average exercise price (\u00a3)
N/A
1.63
N/A
1.61
Weighted average share price at grant date (\u00a3)
1.88
2.01
2.17
1.67
Weighted average fair value at grant date (\u00a3)
1.69
0.25
2.17
0.33
The Group uses the Black-Scholes model to value the SAYE options. In determining the fair value of options granted, the historic
volatility of the share price of suitable peers and a risk-free rate determined by reference to swap rates was also considered.
37.4 Share-based payment expense charged to the consolidated income statement
Total expenses recognised in the year in the consolidated financial statements relating to equity-settled share-based
compensation as at 31\u00a0December 2023 was \u00a332m (2022: \u00a334m). The Group has no outstanding liabilities at the year end relating to
awards which are settled in cash.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-696": { "value": "32000000", "decimals": -6, "dimensions": { "concept": "mgplc:ExpenseRecognisedInRespectOfShareBasedPayments", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:EquityAttributableToOwnersOfParentMember", "unit": "iso4217:GBP" } }, "f-697": { "value": "34000000", "decimals": -6, "dimensions": { "concept": "mgplc:ExpenseRecognisedInRespectOfShareBasedPayments", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:EquityAttributableToOwnersOfParentMember", "unit": "iso4217:GBP" } }, "f-698": { "value": "
38 Post-balance sheet events
On 27 February 2024, the With-Profits Fund declared a distribution of \u00a33.5bn to the policyholders comprised of the annual with-
profits bonus declaration, and an extra distribution to eligible policyholders.
On 19 March 2024, the Group, via M&G Wealth Advice Limited, a wholly-owned subsidiary of the Group, acquired a further 25.05%
stake in My Continuum Financial Limited (MCFL), the holding company of Continuum (Financial Services) LLP and My Continuum
Wealth, collectively referred to as 'Continuum', a fast-growing in-house discretionary Model Portfolio Service. The execution of this
second tranche increases the Group\u2019s holding from 49.90% to 74.95% and results in the Group gaining control over MCFL. The
results of Continuum will be consolidated in the Group\u2019s financial statements going forward.
", "dimensions": { "concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-699": { "value": "
39 Related undertakings
In accordance with Section 409 of the Companies Act 2006, a list of the Group's subsidiaries, joint ventures, associates and
significant holdings (being holdings of more than 20%), along with the classes of shares held, the registered office address and the
country of incorporation and the effective percentage of equity owned at 31\u00a0December 2023 is disclosed below.
The definitions of a subsidiary undertaking, joint venture and associate in accordance with the Companies Act 2006 are different
from the definition under IFRS. As a result, the related undertakings included within the list below may not be the same as the
undertakings consolidated in the Group IFRS statements. The Group's consolidation policy is described in Note 1.5.
Direct subsidiary undertakings of the Parent Company, M&G plc (shares held directly or via nominees)
Key to classes of shares held: Limited by guarantee (LBG), Limited partnership interest (LPI), Ordinary shares (OS), Preference
shares (PS), Units (U).
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
M&G Group Regulated Entity Holding Company
Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Corporate Holdings Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Capital Holding Company Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Capital Public Limited Company
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Financial Services Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Property Services Limited
(In liquidation)
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
Aldwych LP
LPI
100%
2711 Centerville Road, Suite 400, Wilmington, DE
19808, USA
Aqua GP LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W\u00a07LT, UK
BWAT Retail Nominee (1) Limited
OS
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
BWAT Retail Nominee (2) Limited
OS
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Caisson (Jersey) Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Canada Property (Trustee) No 1 Limited
OS
100%
47 Esplanade, St Helier,JE1 0BD, Jersey
Canada Property Holdings Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Carraway Guildford (Nominee A) Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Carraway Guildford (Nominee B) Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Carraway Guildford General Partner Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Carraway Guildford Investments Unit Trust
OS
100%
13 Castle Street, St Helier, JE4 5UT, Jersey
Carraway Guildford Limited Partnership
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Cathedral Approach Estate Management Company
Limited
OS
50%
7 Albemarle Street, London, W1S 4HQ, UK
Centaurus Retail LLP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
CJPT Real Estate Inc.
OS
100%
180 Dundas Street West, Toronto, M5G 1Z8, Canada
CJPT Real Estate No. 1 Trust
U
100%
180 Dundas Street West, Toronto, M5G 1Z8, Canada
CJPT Real Estate No. 2 Trust
U
100%
180 Dundas Street West, Toronto, M5G 1Z8, Canada
Clear\u00a0View\u00a0Assured\u00a0Limited
OS
100%
5th Floor, 30 Market Street, Huddersfield,
HD1 2HG, UK
Condor F3 GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3\u00a09WJ, UK
Cribbs Causeway JV Limited
OS
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Cribbs Causeway Merchants Association Limited
LBG
20%
Management Offices, The Mall at Cribbs Causeway,
Bristol, BS34 5DG, UK
Cribbs Mall Nominee (1) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Debt Investments Opportunities IV
U
26%
Fourth Floor, 76 Lower Baggot Street, Dublin 2, Ireland
Digital Infrastructure Investment Partners GP LLP
LPI
65%
First Floor, 85 Great Portland Street, London,
W1W\u00a07LT, UK
Digital Infrastructure Investment Partners GP1
Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W\u00a07LT, UK
Digital Infrastructure Investment Partners SLP GP
LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3\u00a09WJ, UK
Digital Infrastructure Investment Partners SLP GP1
Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W\u00a07LT, UK
Digital Infrastructure Investment Partners SLP GP2
Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W\u00a07LT, UK
Dudok\u00a0GP\u00a0LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W\u00a07LT, UK
Dudok\u00a0GP1\u00a0Ltd
OS
100%
First Floor, 85 Great Portland Street, London,
W1W\u00a07LT, UK
Dudok\u00a0GP2\u00a0Ltd
OS
100%
First Floor, 85 Great Portland Street, London,
W1W\u00a07LT, UK
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
Eastspring Investments - China Bond Fund
U
100%
26, Boulevard Royal, L-2449, Luxembourg
Eastspring Investments SICAV-FIS Africa Equity
Fund
U
100%
26, Boulevard Royal, L-2449, Luxembourg
Edger Investments Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
EF IV Schoolhill GP Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Elle 14 S.\u00e0 r.l. company
OS
45%
Via Alessandro Manzoni 38, Milan, 20121, Italy
Embankment GP Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Embankment Nominee 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Embankment Nominee 2 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Episode Inc
LPI
93%
c/o Intertrust Cayman Islands, 190 Elgin Avenue,
George Town, Grand Cayman, KY1-9005, Cayman
Islands
EUREV CI GP S.\u00e0 r.l.
OS
100%
Rue de la Poste\u00a020, 2346, Luxembourg
Fashion Square ECO LP
LPI
50%
1209 Orange Street, Wilmington, DE 19801, USA
Folios III Designated Activity Company
OS
49%
Fourth Floor, 76 Lower Baggot Street, Dublin 2, Ireland
Folios IV Designated Activity Company
OS
65%
Fourth Floor, 76 Lower Baggot Street, Dublin 2, Ireland
Fort Kinnaird GP Limited
OS
50%
York House, 45 Seymour Street, London,
W1H\u00a07LX, UK
Fort Kinnaird Limited Partnership
LPI
50%
York House, 45 Seymour Street, London,
W1H\u00a07LX, UK
Foundry Properties Limited
OS
50%
Clearwater Court, Vastern Road,
Reading RG1 8DB, UK
Fundsdirect ISA Nominees Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Fundsdirect Nominees Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Genny GP 1 LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Genny GP 2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Genny GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
George Digital GP 1 LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
George Digital GP 2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
George Digital GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
GGE GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Green GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
GTA W21 GP Inc.
OS
50%
22 Adelaide Street West, Suite 2600, Toronto,
Ontario, M5H 4E3, Canada
GTA W21 Inc.
OS
50%
22 Adelaide Street West, Suite 2600, Toronto,
Ontario, M5H 4E3, Canada
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
GTA W21 LP
LPI
90%
22 Adelaide Street West, Suite 2600, Toronto,
Ontario, M5H 4E3, Canada
HCR Canary Fund
LPI
99%
300 Atlantic Street, Suite 600, Stamford,
CT 06901, USA
Highcross Leicester (GP) Limited
OS
50%
Marble Arch House, 66 Seymour Street, London,
W1H 5BX, UK
ICP\u00a0(Finch)\u00a0GP\u00a01\u00a0Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
ICP\u00a0(Finch)\u00a0GP\u00a02\u00a0Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
ICP\u00a0(Finch)\u00a0GP\u00a0LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
IFDL Personal Pensions Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital (AIRI) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Belmond) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Bio) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Churchill) GP 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital (Churchill) GP LLP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital (GC) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Gigaclear) GP 1 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Gigaclear) GP 2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Gigaclear) GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (IT PPP) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Leo) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Novos) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Sense) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (TLSB) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital DF II GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital DF II Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Employee Feeder GP 1 LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Employee Feeder GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital F1 GP2 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
Infracapital F2 GP Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital F2 GP1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital GP 1 LLP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital GP Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital Greenfield DF GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Greenfield Partners 1 SLP GP1 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Greenfield Partners 1 SLP GP2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Greenfield Partners I Employee Feeder LP
LPI
76%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Greenfield Partners I GP Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Infracapital Greenfield Partners I LP
LPI
22%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Infracapital Greenfield Partners I SLP EF GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Greenfield Partners I SLP LP
LPI
36%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Greenfield Partners I SLP2 LP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Greenfield Partners I Subholdings GP
Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Greenfield Partners II GP S.\u00e0 r.l
OS
100%
6, Rue Eug\u00e8ne Ruppert, L-2453, Luxembourg
Infracapital Greenfield Partners II Subholdings
(Euro) GP LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Infracapital Greenfield Partners II Subholdings
(Sterling) GP LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Infracapital Greenfield Partners II Subholdings GP1
Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital Greenfield Partners II Subholdings GP2
Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital Partners II LP
LPI
26%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Infracapital Partners II Subholdings GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Partners III GP S.\u00e0 r.l
OS
100%
6, Rue Eug\u00e8ne Ruppert, L-2453, Luxembourg
Infracapital Partners III Subholdings (Euro) GP LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Infracapital Partners III Subholdings (Sterling) GP LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Infracapital Partners III Subholdings GP1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital Partners III Subholdings GP2 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital Partners IV G.P S.\u00e0\u00a0r.l.
OS
100%
5 Heienhaff, Nidderaanwen, 1736, Luxembourg
Infracapital Partners IV SCSp
LPI
50%
Fourth Floor, 76 Lower Baggot Street, Dublin 2, Ireland
Infracapital Partners IV Subholdings GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Partners IV Subholdings GP1 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
Infracapital Partners IV Subholdings GP2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Partners IV Subholdings Nominee Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Partners IV Subholdings SLP LP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Partners LP
LPI
33%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital SLP II LP
LPI
40%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital SLP Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Innisfree M&G PPP LLP
LPI
35%
1st Floor, Boundary House, 91-93 Charterhouse
Street, London, EC1M 6HR, UK
Investment Funds Direct Group Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Investment Funds Direct Holdings Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Investment Funds Direct Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
KESTREL F4 GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
LB Professional Investors Private Real Estate Fund
No. 10
U
25%
20th\u00a0floor, 136, Sejong-daero, Jung-gu, Seoul,
Republic of Korea
LB Professional Investors Private Real Estate Fund
No. 10 (Centropolis)
U
25%
20th\u00a0floor, 136, Sejong-daero, Jung-gu, Seoul,
Republic of Korea
Leadenhall Unit Trust
U
100%
IFC 5, St Helier, JE1 1ST, Jersey, UK
Lion Credit Opportunity Fund Public Limited
Company - Credit Opportunity Fund XV
U
100%
35 Shelbourne Road, Ballsbridge, Dublin 4,
D04 A4EO, Ireland
Lion Credit Opportunity Fund Public Limited
Company - M&G SRT Fund II
U
52%
35 Shelbourne Road, Ballsbridge, Dublin 4,
D04 A4EO, Ireland
London Fenchurch Employee Feeder F4 SP LP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Fenchurch F4 Employee Feeder SP GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Fenchurch GP1 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Fenchurch GP2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Fenchurch SLP LP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Green Investments II SLP GP1 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Green Investments II SLP GP2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Green Investments II SLP1 Employee Feeder
GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Green Investments II SLP2 GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Green Investments SLP GP1 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Green Investments SLP GP2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
London Stone Investments F3 Employee Feeder GP
LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Stone Investments F3 I Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Stone Investments F3 II Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Stone Investments F3 SP GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Luxembourg Specialist Investment Funds (2) FCP -
M&G Private Equity Opportunities Fund
U
100%
16, Boulevard Royal, L-2449, Luxembourg
Luxembourg Specialist Investment Funds (3) SICAV
M&G Corporate Credit Opportunities ELTIF
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G (ACS) BlackRock Japan Equity Fund
U
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) BlackRock UK All Share Equity Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) BlackRock US Equity Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) China Equity Fund
U
98%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) China Fund
U
98%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) Earnest Partners US Small Cap Value
Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) Granahan US Small Cap Growth Fund
U
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) Japan Equity Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) Japan Smaller Companies Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) UK Listed Equity Fund
U
96%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) UK Listed Mid Cap Equity Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (Guernsey) Limited
OS
100%
Dorey Court, Admiral Park, St Peter Port,
GY1 2HT, Guernsey
M&G (Lux) Emerging Markets Corporate ESG Bond
Fund
U
57%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Euro ex UK Index Fund
U
99%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Europe ex UK Equity Fund
U
99%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Global Enhanced Equity Premia Fund
U
99%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Global Funds - M&G (Lux) Asian
Corporate Bond Fund
U
97%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Global Funds - M&G (Lux) Asian Local
Currency Bond Fund
U
97%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Global Funds - M&G (Lux) Asian Total
Return Bond Fund
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Investment Funds 1 - M&G (Lux) Better
Health Solutions Fund
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Investment Funds 1 - M&G (Lux) Climate
Solutions Fund
U
93%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Investment Funds 1 - M&G (Lux) Diversity
and Inclusion Fund
U
89%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Investment Funds 1 - M&G (Lux)
Emerging Markets Hard Currency Bond Fund
U
92%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Investment Funds 1 - M&G (Lux) Global
Artificial Intelligence Fund
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Investment Funds 1 - M&G Lux Emerging
Markets Bond Fund
U
59%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Managed Cautious (Euro) Fund
U
100%
16, Boulevard Royal, L-2449, Luxembourg
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
M&G (Lux) Managed Growth (Euro) Fund
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Pan European Smaller Comp Fund
U
98%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Reserved Investment Fund (2), SCA
SICAV-RAIF
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Reserved Investment Funds (2) GP S.\u00e0 r.l.
OS
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Sterling Liquidity Fund
U
86%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Sustainable Emerging Markets
Corporate Bond Fund
U
21%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Sustainable Optimal Income Bond Fund
U
98%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux)\u00a0Global\u00a0Funds
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G Alternatives CV SCSp
LPI
100%
8, Rue Lou Hemmer, L-1748, Senningerberg,
Luxembourg
M&G Alternatives GP S.\u00e0 r.l.
OS
100%
8, Rue Lou Hemmer, L-1748, Senningerberg,
Luxembourg
M&G Alternatives Investment Management Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Asia Property Fund
U
44%
16, Boulevard Royal, L-2449, Luxembourg
M&G Black\u00a0Seed\u00a0GP\u00a0LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G BlackRock Canada Equity Fund
U
98%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G BlackRock UK 200 Equity Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Catalyst Capital Fund
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G Catalyst Credit Fund
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G Catalyst Sustainable Agriculture GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G Catalyst\u00a0Sustainable\u00a0Agriculture
GP\u00a0Member\u00a0No.1\u00a0Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G Catalyst\u00a0Sustainable\u00a0Agriculture\u00a0
GP\u00a0Member\u00a0No.2\u00a0Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G Catalyst\u00a0Sustainable\u00a0Agriculture\u00a0LP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G Corporate Services Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Corporate\u00a0Credit\u00a0Opportunities\u00a0S.\u00e0\u00a0r.l.
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Credit Income Investment Trust plc
OS
23%
Beaufort House, 51 New North Road, Exeter,
EX4 4EP, UK
M&G Emerging Markets Monthly Income Fund
U
93%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G European High Yield Credit Investment Fund
U
27%
80, Route d'Esch, L-1470, Luxembourg
M&G European Living Property Fund SCSP,
SICAV-RAIF
LPI
71%
16, Boulevard Royal, L-2449, Luxembourg
M&G European Property Fund SICAV-FIS
U
29%
16, Boulevard Royal, L-2449, Luxembourg
M&G European Secured Property Income Fund
FCP\u2010FIS
OS
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G European\u00a0Value\u00a0Add\u00a0GP\u00a0S.\u00e0\u00a0r.l.
OS
100%
Rue de la Poste 20, 2346, Luxembourg
M&G European\u00a0Value\u00a0Add\u00a0Partnership\u00a0SCSp
LPI
67%
Rue de la Poste 20, 2346, Luxembourg
M&G FA Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Feeder of Property Portfolio
U
57%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Financial Services Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Fitzrovia GP Limited
OS
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Fitzrovia Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
M&G Fitzrovia Limited Partnership
LPI
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Fitzrovia Nominee 1 Limited
OS
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Fitzrovia Nominee 2 Limited
OS
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Founders 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) Asia Pacific (ex Japan) Equity Fund
U
96%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) Blackrock Asia Pacific (ex Japan)
Equity Fund
U
96%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) Blackrock Emerging Markets Equity
Fund
U
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) GSAM Global Emerging Market
Equity Fund
U
99%
16, Boulevard Royal, L-2449, Luxembourg
M&G Funds (1) Invesco Global Emerging Markets
Equity Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) Lazard Global Emerging Markets
Equity Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) MFS Global Emerging Markets
Equity Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) Sterling Investment Grade Corporate
Bond Fund
U
84%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) US Corporate Bond Fund
U
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) US Short Duration Corporate Bond
Fund
U
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) Wellington Impact Bond Fund
U
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G General Partner Inc.
OS
100%
190 Elgin Avenue, George Town, Grand Cayman,
KYI-9005, Cayman Islands
M&G Global Services Private Limited
OS
100%
1st floor Prudential House, Central Avenue,
Hiranandani Business Park, Mumbai-400076, India
M&G Group Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Group PCC Limited
OS
100%
PO Box 155, Mill Court, La, Charroterie, St Peter Port,
GY1 4ET, Guernsey
M&G IMPPP 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G International Investments Nominees Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G International Investments Switzerland AG
OS
100%
Zollstrasse 17, 8005 Z\u03cbrich, Switzerland
M&G Investment Funds (1) - M&G European Sustain
Paris Aligned Fund
U
64%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (10) - M&G Better Health
Solutions Fund
U
90%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (10) - M&G Climate
Solutions Fund
U
56%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (10) - M&G Global AI
Themes Fund
U
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (10) - M&G Global High Yield
ESG Bond Fund
U
43%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (10) - M&G Positive Impact
Fund
U
30%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (2) - M&G Gilt & Fixed
Interest Income Fund
U
54%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (2) - M&G Global High Yield
Bond
U
55%
10 Fenchurch Avenue, London, EC3M 5AG, UK
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
M&G Investment Funds (3) - M&G Dividend Fund
U
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (4) - M&G Episode
Allocation Fund
U
24%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (4) - M&G Sustainable Multi
Asset Balanced Fund
U
31%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (4) - M&G Sustainable Multi
Asset Cautious Fund
U
49%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (4) - M&G Sustainable Multi
Asset Fund
U
41%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (4) - M&G Sustainable Multi
Asset Growth Fund
U
67%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (7) - M&G Global
Convertibles Fund
U
80%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Management Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investments (Americas) Inc.
OS
100%
251 Little Falls Drive, Wilmington, DE 19801, USA
M&G Investments (Australia) Pty Limited
OS
100%
Level 6, 60 Martin Place, Sydney NSW 2000, Australia
M&G Investments (Hong Kong) Limited
OS
100%
6th Floor, Alexander House, 18 Chater Road, Central,
Hong Kong
M&G Investments (Singapore) Pte. Limited
OS
100%
138 Market Street, CapitaGreen #35-01,
048946, Singapore
M&G Investments (Taiwan) Limited
OS
100%
Floor.33 (Unit B-1), No.7, Sec.5, Road.Xinyi,110, Taipei,
Ta, Taiwan
M&G Investments (USA) Inc
OS
100%
251 Little Falls Drive, Wilmington, DE 19801, USA
M&G Investments Japan Co., Limited
OS
100%
Tokyo Toranomon Global Square 13F, 1-3-1
Toranomon, Minatoku, Tokyo 105-0001, Japan
M&G Luxembourg S.A.
OS
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G Management Services Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Nominees Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Pan African Bond Fund
U
100%
PO Box 44813, Claremont, Western Cape, 7735,
South Africa
M&G PFI 2018 GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G PFI 2018 GP1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G PFI 2018 GP2 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G PFI Carry Partnership 2016 LP
LPI
25%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G Platform Nominees Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Property Portfolio
U
89%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G RE Espana, 2016, S.L.
OS
100%
Calle Fortuny, 6 - 4 A, 28010, Madrid, Spain
M&G RE UKEV (GP1) LLP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G RE UKEV 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G RE UKEV 1-A LP
LPI
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Real Estate Asia Holding Company Pte Limited
OS
67%
138 Market Street, CapitaGreen #35-01,
048946, Singapore
M&G Real Estate Asia PTE Limited
OS
67%
138 Market Street, CapitaGreen #35-01,
048946, Singapore
M&G Real Estate Debt Carried Interest GP S.\u00e0 r.l
OS
100%
5 Heienhaff, Nidderaanwen, 1736, Luxembourg
M&G Real Estate France SAS
OS
100%
8 Avenue Hoche, 75008, Paris, France
M&G Real Estate Funds Management S.\u00e0 r.l.
OS
100%
16, Boulevard Royal, L-2449, Luxembourg
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
M&G Real Estate Japan Co Limited
OS
67%
Tokyo Toranomon Global Square 13F, 1-3-1
Toranomon, Minatoku, Tokyo 105-0001, Japan
M&G Real Estate Korea Co Limited
OS
67%
Jongno 1-ga, Kyobo Building, Seoul, Korea
M&G Real Estate Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Real Estate UK Enhanced Value LP
LPI
50%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G Real Estate UKEV (GP) LLP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Real\u00a0Estate\u00a0Debt\u00a0Carried\u00a0Interest\u00a0GP\u00a0S.\u00e0\u00a0r.l.
OS
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G RED II Employee Feeder GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G RED II GP Limited (In liquidation)
OS
100%
1 Royal Plaza, Royal Avenue, St Peter Port,
GY1 2HL, Guernsey
M&G RED II SLP GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G RED II SLP LP
LPI
28%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G RED III Employee Feeder GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G RED III GP Limited (In liquidation)
OS
100%
1 Royal Plaza, Royal Avenue, St Peter Port,
GY1 2HL, Guernsey
M&G RED III SLP GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G RED III SLP LP
LPI
25%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G RPF GP Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G RPF Nominee 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G RPF Nominee 2 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G SA Equity Fund
U
95%
PO Box 44813, Claremont, Western Cape,
7735, South Africa
M&G Secure Income S.\u00e0 r.l.
OS
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G Securities Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G SFF (CIP GP) S.\u00e0 r.l.
OS
100%
Heienhaff 5, 1736 Senningerberg, Luxembourg
M&G SFF (GP) S.\u00e0 r.l.
OS
100%
Heienhaff 5, 1736 Senningerberg, Luxembourg
M&G SFF\u00a02\u00a0(CIP\u00a0GP)\u00a0S.\u00e0\u00a0r.l.
OS
100%
5 Heienhaff, Nidderaanwen, 1736, Luxembourg
M&G SFF\u00a02\u00a0(GP)\u00a0S.\u00e0\u00a0r.l.
OS
100%
5 Heienhaff, Nidderaanwen, 1736, Luxembourg
M&G Shared Ownership LP
LPI
46%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G SIF Management Company (Ireland) Limited
OS
100%
IPC House, 35 Shelbourne Road, Dublin,
D, D04 A4E0, Ireland
M&G Specialty Finance Fund 2 GBP SCSp
LPI
47%
5, Heienhaff, L-1736, Senningerberg, Luxembourg
M&G Sustainable Loan Fund Limited
OS
63%
35 Shelbourne Road, Ballsbridge, Dublin, Ireland
M&G Trustee Company Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G UK Mortgage Income Fund
U
62%
16, Boulevard Royal, L-2449, Luxembourg
M&G UK Property Fund
U
98%
16, Boulevard Royal, L-2449, Luxembourg
M&G UK Property GP Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G UK Property Nominee 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G UK Property Nominee 2 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G UK Residential Property Fund
LPI
28%
16 Boulevard Royal, L-2449 Luxembourg
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
M&G UK Shared Ownership Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G UKEV (SLP) General Partner LLP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G UKEV (SLP) LP
LPI
80%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G Wealth Advice Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G\u00a0Wealth\u00a0Investments\u00a0LLP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G\u00a0Wealth\u00a0Solutions\u00a0Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Manchester JV Limited
OS
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Manchester Nominee (1) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
MandG Investment Managers (Pty) Limited
OS
100%
Protea Place, 40 Dreyer Street, Claremont,
7708, South Africa
MandG Investments (Namibia) (Pty) Limited
OS
100%
Unit 3, 2nd Floor, Ausspann Plaza, Dr Agostinho Neto
Road, Private Bag 12012, Ausspannplatz, Windhoek,
Namibia
MandG Investments Life South Africa (RF) Limited
OS
100%
Protea Place, 40 Dreyer Street, Claremont,
7708, South Africa
MandG Investments Southern Africa (Pty) Limited
OS
50%
Protea Place, 40 Dreyer Street, Claremont,
7708, South Africa
MandG Investments Unit Trusts (Namibia) Limited
OS
100%
Unit 3, 2nd Floor, Ausspann Plaza, Dr Agostinho Neto
Road, Private Bag 12012, Ausspannplatz, Windhoek,
Namibia
MandG Investments Unit Trusts South Africa
(RF) Limited
OS
100%
Protea Place, 40 Dreyer Street, Claremont,
7708, South Africa
MCF S.r.l.
OS
45%
Via Alessandro Manzoni 38, Milan, 20121, Italy
Merlin D5 GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Minster Court Estate Management Limited
OS
56%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Mole GP1 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Mole GP2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
My Continuum Financial Limited
OS
50%
Prydis Accounts Ltd, The Parade, Liskeard, Cornwall,
England, PL14 6AF, UK
NAPI REIT, Inc
OS
99%
300 E Lombard Street, Baltimore, MD 21202, USA
NB Gemini Fund LP
LPI
99%
Maples Corporate Services Limited, Ugland House,
P.O. Box 309, Grand Cayman, KY1-1104, Cayman
Islands
Oaktree Business Park Limited
OS
14%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Old Kingsway LP
LPI
100%
2711 Centerville Road, Suite 400, Wilmington,
DE 19808, USA
Optimus Point Management Company Limited
OS
52%
Barratt House, Cartwright Way, Bardon Hill, Coalville,
LE67 1UF, UK
Ox\u00a0GP\u00a0LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Pacus (UK) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
PAP Trusty Pty Limited
OS
100%
Suite 201, Level 2, 5 Berry Street, North Sydney NSW
2060, Australia
Pesca\u00a0GP\u00a0LLP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
PGDS (UK One) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
PPM America Private Equity Fund III LP
LPI
50%
874 Walker Road, Suite C, City of Dover,
County of Kent, State of Delaware 19904, USA
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
PPM America Private Equity Fund IV LP
LPI
50%
874 Walker Road, Suite C, City of Dover,
County of Kent, State of Delaware 19904, USA
PPM America Private Equity Fund V LP
LPI
50%
874 Walker Road, Suite C, City of Dover,
County of Kent, State of Delaware 19904, USA
PPM America Private Equity Fund VI LP
LPI
40%
874 Walker Road, Suite C, City of Dover,
County of Kent, State of Delaware 19904, USA
PPM America Private Equity Fund VII LP
LPI
46%
874 Walker Road, Suite C, City of Dover,
County of Kent, State of Delaware 19904, USA
PPM Capital (Holdings) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
PPM Managers GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
PPM Managers Partnership CI VII (A) LP
LPI
25%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
PPM Ventures (Asia) Limited (In liquidation)
OS
100%
13/F, One International Finance Centre,
1 Harbour View Street, Central, Hong Kong
PPMC First Nominees Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Property Partners (Two Rivers) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Pru Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudence Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Corporate Pensions Trustee Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Distribution Limited
OS
100%
5 Central Way, Kildean Business Park, Stirling,
FK8 1FT, UK
Prudential Equity Release Mortgages Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Financial Planning Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential GP Limited
OS
100%
5 Central Way, Kildean Business Park, Stirling,
FK8 1FT, UK
Prudential Greenfield GP LLP
LPI
100%
c/o Buckingham Corporate Services Limited,
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Prudential Greenfield GP1 Limited
OS
100%
c/o Buckingham Corporate Services Limited,
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Prudential Greenfield GP2 Limited
OS
100%
c/o Buckingham Corporate Services Limited,
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Prudential Greenfield LP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Prudential Holborn Life Limited (In liquidation)
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential International Assurance plc
OS
100%
Fitzwilliam Court, Leeson CI, Dublin 2, Dublin,
D02 TC95, Ireland
Prudential International Management Services Limited
OS
100%
Fitzwilliam Court, Leeson CI, Dublin 2, Dublin,
D02 TC95, Ireland
Prudential Investment (Luxembourg) 2 S.\u00e0.r.l.
OS
100%
Citco Fund Services (Luxembourg) S.A.,
20 Rue de la Poste, 2346, Luxembourg
Prudential Lifetime Mortgages Limited
OS
100%
5 Central Way, Kildean Business Park, Stirling,
FK8 1FT, UK
Prudential Loan Investments 1 S.\u00e0 r.l.
OS
100%
5 Heienhaff, L-1736 Senningerberg, Luxembourg
Prudential Loan Investments GP S.\u00e0 r.l.
OS
100%
5 Heienhaff, L-1736 Senningerberg, Luxembourg
Prudential Loan Investments SCSp
LPI
100%
1, Rue Hildegard von Bingen, L-1282, Luxembourg
Prudential Pensions Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Polska sp. z.o.o
OS
100%
02-670 Warszawa, Pulawska 182, Poland
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
Prudential Portfolio Management Group Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Property Investment Managers Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Real Estate Investments 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Real Estate Investments 2 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Real Estate Investments 3 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Staff Pensions Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential UK Real Estate General Partner Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential UK Real Estate Limited Partnership
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential UK Real Estate Nominee 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential UK Real Estate Nominee 2 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential UK Services Limited
OS
100%
5 Central Way, Kildean Business Park, Stirling,
FK8 1FT, UK
Prudential Unit Trusts Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prutec Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
PVM Partnerships Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Radler GP LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Radler GP1 Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Radler GP2 Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Rads Omega Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Rads\u00a0Gamma\u00a0Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Randolph Street LP
LPI
100%
2711 Centerville Road, Suite 400, Wilmington,
DE 19808, USA
RD Park (Hoddesdon Phase 1) Management
Company Limited
OS
64%
10 Fenchurch Avenue, London, EC3M 5AG, UK
responsAbility Agriculture Partners SLP
OS
61%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility Global Micro and SME Finance Fund
LPI
25%
Zollstrasse 17, 8005 Z\u03cbrich, Switzerland
responsAbility Next Billion Growth I (GP), S.\u00e0 r.l.
OS
100%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility Singapore Pte. Ltd.
OS
100%
80 Robinson Road 2-00, Singapore
responsAbility Sustainable Food - Asia II (GP), S.\u00e0 r.l.
OS
100%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility Sustainable Food \u2013 Asia II, SLP
LPI
87%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility Sustainable Food \u2013 Latam I (GP), S.\u00e0 r.l.
OS
100%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility Sustainable Food - Latam I, SLP
LPI
100%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility Sustainable Food Asia II Partners SLP
OS
100%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility Sustainable Food Latam I Partners SLP
OS
100%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility\u00a0Africa\u00a0Limited
OS
100%
Merchant Square, Block D, 5th Floor, Riverside Drive,
Westlands, P.O. 29300623 Nairobi, Kenya
responsAbility\u00a0Agriculture\u00a0(GP)\u00a0S.\u00e0 r.l.
OS
100%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility\u00a0America\u00a0Latina\u00a0SAC
OS
100%
Av. 28 de Julio 753, Miraflores, Provincia de Lima,
15074, Peru
responsAbility\u00a0BOP\u00a0S.\u00e0 r.l.
OS
50%
5 Rue Jean Monnet, L-2180, Luxembourg
responsAbility\u00a0France\u00a0SAS
OS
100%
8 Rue Lamennais, 75008, Paris, France
responsAbility\u00a0Georgia\u00a0LLC
OS
100%
4 Tamar Chovelidze Street, T'bilisi, Tbilisi,
0108, Georgia
responsAbility\u00a0India\u00a0Business\u00a0Advisors\u00a0Pvt Limited
OS
100%
31 Green Acre, Union Park Road Number 5, Mumbai,
Mumbai Suburban, MH, 400052, India
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
responsAbility\u00a0Investments\u00a0AG
OS
100%
Zollstrasse 17, Z\u00fcrich, ZH, 8005, Switzerland
responsAbility\u00a0Thailand\u00a0Limited
OS
100%
62 Thaniya BTS Building, Silom Road, Suriyawongse,
Bangrak, Bangkok, 10500, Thailand
responsAbility\u00a0Ventures\u00a0I\u00a0Services\u00a0AG
OS
100%
Zollstrasse 17, Z\u00fcrich, ZH, 8005, Switzerland
Sandringham\u00a0Financial\u00a0Partners\u00a0Limited
OS
PS
61%
39%
5th Floor, 30 Market Street, Huddersfield,
HD1 2HG, UK
Schoolhill S.\u00e0 r.l.
OS
100%
20, Rue de la Poste, Luxembourg
ScotAm Pension Trustees Limited
OS
100%
5 Central Way, Kildean Business Park, Stirling,
FK8 1FT, UK
Selly Oak Shopping Park (General Partner) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Selly Oak Shopping Park (Nominee 1) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Selly Oak Shopping Park (Nominee 2) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Selly Oak Shopping Park Limited Partnership
LPI
63%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Silverfleet Capital 2004 LP
LPI
100%
1 Royal Plaza, Royal Avenue, St Peter Port,
GY1 2HL, Guernsey
Silverfleet Capital 2009 LP
LPI
100%
1 Royal Plaza, Royal Avenue, St Peter Port,
GY1 2HL, Guernsey
Silverfleet Capital 2011/12 LP
LPI
100%
1 Royal Plaza, Royal Avenue, St Peter Port,
GY1 2HL, Guernsey
Silverfleet Capital II WPLF LP
LPI
100%
1 Carter Lane, London, EC4V 5ER, UK
Sky Fund V Onshore LP
LPI
26%
559 Pacific Avenue, San Francisco, CA 94133, USA
Smithfield Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
SMLLC
LPI
100%
2711 Centerville Road, Suite 400, Wilmington,
DE 19808, USA
SOFA Holding LP
LPI
100%
2711 Centerville Road, Suite 400, Wilmington,
DE 19808, USA
Specialist Investment Funds (2) ICAV - M&G Real
Impact Fund
U
100%
35 Shelbourne Road, Ballsbridge,
Dublin D04 A4EO, Ireland
St Edward Homes Limited
OS
50%
Berkeley House, 19 Portsmouth Road, Surrey,
KT11 1JG, UK
St Edward Homes Partnership
OS
50%
Berkeley House, 19 Portsmouth Road, Surrey,
KT11 1JG, UK
St Edward Strand Partnership
OS
50%
Berkeley House, 19 Portsmouth Road, Surrey,
KT11 1JG, UK
Stableview Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
StepStone Scorpio Infrastructure Opportunities
Fund, L.P.
LPI
100%
Maples Corporate Services Limited, Ugland House,
P.O. Box 309, Grand Cayman, KY1-1104, Cayman
Islands
The Car Auction Unit Trust
U
50%
Dorey Court, Admiral Park, St Peter Port,
GY1 2HT, Guernsey
The First British Fixed Trust Company Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
The Project Hoxton LP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
The Prudential Assurance Company Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
The Strand Property Unit Trust
U
50%
28 Esplanade, Jersey, Channel Islands, JE2 3QA, UK
The Two Rivers Trust
U
100%
IFC1, The Esplanade, Saint Helier, JE1 4BP, Jersey
Three Snowhill Birmingham S.\u00e0 r.l.
OS
100%
5, Heienhaff, L-1736, Senningerberg, Luxembourg
Two Rivers LP
LPI
100%
Bow Bells House, 1 Bread Street, London,
EC4M 9HH, UK
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
Two Snowhill Birmingham S.\u00e0 r.l.
OS
100%
5, Heienhaff, L-1736, Senningerberg, Luxembourg
Vanquish I Unit Trust
U
100%
IFC 5, St Helier, JE1 1ST, Jersey
Vanquish II Unit Trust
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Vanquish Properties (UK) Limited Partnership
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Vanquish Properties GP Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Vanquish Properties GP Nominee 1 Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Vanquish Properties GP Nominee 2 Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Vanquish Properties GP Nominee 3 Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Vanquish Properties GP Nominee 4 Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Vanquish Properties GP Nominee A Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Vanquish Properties LP Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Wessex Gate Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
West\u00a0Station\u00a01\u00a0SCI
OS
100%
8 Avenue Hoche, 75008, Paris, France
West\u00a0Station\u00a02\u00a0SCI
OS
100%
8 Avenue Hoche, 75008, Paris, France
West\u00a0Station\u00a0SAS
OS
100%
8 Avenue Hoche, 75008, Paris, France
Westwacker Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Wrap IFA Services Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
WS Prudential Risk Managed Active 1
U
20%
6th Floor, 65, Gresham Street, London EC2V 7NQ, UK
WS Prudential Risk Managed Active 2
U
23%
6th Floor, 65, Gresham Street, London EC2V 7NQ, UK
WS Prudential Risk Managed Active 3
U
24%
6th Floor, 65, Gresham Street, London EC2V 7NQ, UK
WS Prudential Risk Managed Active 4
U
31%
6th Floor, 65, Gresham Street, London EC2V 7NQ, UK
WS Prudential Risk Managed Active 5
U
30%
6th Floor, 65, Gresham Street, London EC2V 7NQ, UK
WS Prudential Risk Managed Passive Fund 1
U
41%
6th Floor, 65, Gresham Street, London EC2V 7NQ, UK
", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:254900TWUJUQ44TQJY84", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-700": { "value": "
Direct subsidiary undertakings of the Parent Company, M&G plc (shares held directly or via nominees)
Key to classes of shares held: Limited by guarantee (LBG), Limited partnership interest (LPI), Ordinary shares (OS), Preference
shares (PS), Units (U).
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
M&G Group Regulated Entity Holding Company
Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Corporate Holdings Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Capital Holding Company Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Capital Public Limited Company
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Financial Services Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Property Services Limited
(In liquidation)
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
Aldwych LP
LPI
100%
2711 Centerville Road, Suite 400, Wilmington, DE
19808, USA
Aqua GP LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W\u00a07LT, UK
BWAT Retail Nominee (1) Limited
OS
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
BWAT Retail Nominee (2) Limited
OS
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Caisson (Jersey) Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Canada Property (Trustee) No 1 Limited
OS
100%
47 Esplanade, St Helier,JE1 0BD, Jersey
Canada Property Holdings Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Carraway Guildford (Nominee A) Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Carraway Guildford (Nominee B) Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Carraway Guildford General Partner Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Carraway Guildford Investments Unit Trust
OS
100%
13 Castle Street, St Helier, JE4 5UT, Jersey
Carraway Guildford Limited Partnership
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Cathedral Approach Estate Management Company
Limited
OS
50%
7 Albemarle Street, London, W1S 4HQ, UK
Centaurus Retail LLP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
CJPT Real Estate Inc.
OS
100%
180 Dundas Street West, Toronto, M5G 1Z8, Canada
CJPT Real Estate No. 1 Trust
U
100%
180 Dundas Street West, Toronto, M5G 1Z8, Canada
CJPT Real Estate No. 2 Trust
U
100%
180 Dundas Street West, Toronto, M5G 1Z8, Canada
Clear\u00a0View\u00a0Assured\u00a0Limited
OS
100%
5th Floor, 30 Market Street, Huddersfield,
HD1 2HG, UK
Condor F3 GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3\u00a09WJ, UK
Cribbs Causeway JV Limited
OS
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Cribbs Causeway Merchants Association Limited
LBG
20%
Management Offices, The Mall at Cribbs Causeway,
Bristol, BS34 5DG, UK
Cribbs Mall Nominee (1) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Debt Investments Opportunities IV
U
26%
Fourth Floor, 76 Lower Baggot Street, Dublin 2, Ireland
Digital Infrastructure Investment Partners GP LLP
LPI
65%
First Floor, 85 Great Portland Street, London,
W1W\u00a07LT, UK
Digital Infrastructure Investment Partners GP1
Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W\u00a07LT, UK
Digital Infrastructure Investment Partners SLP GP
LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3\u00a09WJ, UK
Digital Infrastructure Investment Partners SLP GP1
Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W\u00a07LT, UK
Digital Infrastructure Investment Partners SLP GP2
Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W\u00a07LT, UK
Dudok\u00a0GP\u00a0LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W\u00a07LT, UK
Dudok\u00a0GP1\u00a0Ltd
OS
100%
First Floor, 85 Great Portland Street, London,
W1W\u00a07LT, UK
Dudok\u00a0GP2\u00a0Ltd
OS
100%
First Floor, 85 Great Portland Street, London,
W1W\u00a07LT, UK
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
Eastspring Investments - China Bond Fund
U
100%
26, Boulevard Royal, L-2449, Luxembourg
Eastspring Investments SICAV-FIS Africa Equity
Fund
U
100%
26, Boulevard Royal, L-2449, Luxembourg
Edger Investments Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
EF IV Schoolhill GP Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Elle 14 S.\u00e0 r.l. company
OS
45%
Via Alessandro Manzoni 38, Milan, 20121, Italy
Embankment GP Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Embankment Nominee 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Embankment Nominee 2 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Episode Inc
LPI
93%
c/o Intertrust Cayman Islands, 190 Elgin Avenue,
George Town, Grand Cayman, KY1-9005, Cayman
Islands
EUREV CI GP S.\u00e0 r.l.
OS
100%
Rue de la Poste\u00a020, 2346, Luxembourg
Fashion Square ECO LP
LPI
50%
1209 Orange Street, Wilmington, DE 19801, USA
Folios III Designated Activity Company
OS
49%
Fourth Floor, 76 Lower Baggot Street, Dublin 2, Ireland
Folios IV Designated Activity Company
OS
65%
Fourth Floor, 76 Lower Baggot Street, Dublin 2, Ireland
Fort Kinnaird GP Limited
OS
50%
York House, 45 Seymour Street, London,
W1H\u00a07LX, UK
Fort Kinnaird Limited Partnership
LPI
50%
York House, 45 Seymour Street, London,
W1H\u00a07LX, UK
Foundry Properties Limited
OS
50%
Clearwater Court, Vastern Road,
Reading RG1 8DB, UK
Fundsdirect ISA Nominees Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Fundsdirect Nominees Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Genny GP 1 LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Genny GP 2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Genny GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
George Digital GP 1 LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
George Digital GP 2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
George Digital GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
GGE GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Green GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
GTA W21 GP Inc.
OS
50%
22 Adelaide Street West, Suite 2600, Toronto,
Ontario, M5H 4E3, Canada
GTA W21 Inc.
OS
50%
22 Adelaide Street West, Suite 2600, Toronto,
Ontario, M5H 4E3, Canada
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
GTA W21 LP
LPI
90%
22 Adelaide Street West, Suite 2600, Toronto,
Ontario, M5H 4E3, Canada
HCR Canary Fund
LPI
99%
300 Atlantic Street, Suite 600, Stamford,
CT 06901, USA
Highcross Leicester (GP) Limited
OS
50%
Marble Arch House, 66 Seymour Street, London,
W1H 5BX, UK
ICP\u00a0(Finch)\u00a0GP\u00a01\u00a0Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
ICP\u00a0(Finch)\u00a0GP\u00a02\u00a0Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
ICP\u00a0(Finch)\u00a0GP\u00a0LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
IFDL Personal Pensions Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital (AIRI) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Belmond) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Bio) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Churchill) GP 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital (Churchill) GP LLP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital (GC) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Gigaclear) GP 1 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Gigaclear) GP 2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Gigaclear) GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (IT PPP) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Leo) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Novos) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (Sense) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital (TLSB) GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital DF II GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital DF II Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Employee Feeder GP 1 LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Employee Feeder GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital F1 GP2 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
Infracapital F2 GP Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital F2 GP1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital GP 1 LLP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital GP Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital Greenfield DF GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Greenfield Partners 1 SLP GP1 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Greenfield Partners 1 SLP GP2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Greenfield Partners I Employee Feeder LP
LPI
76%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Greenfield Partners I GP Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Infracapital Greenfield Partners I LP
LPI
22%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Infracapital Greenfield Partners I SLP EF GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Greenfield Partners I SLP LP
LPI
36%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Greenfield Partners I SLP2 LP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Greenfield Partners I Subholdings GP
Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Greenfield Partners II GP S.\u00e0 r.l
OS
100%
6, Rue Eug\u00e8ne Ruppert, L-2453, Luxembourg
Infracapital Greenfield Partners II Subholdings
(Euro) GP LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Infracapital Greenfield Partners II Subholdings
(Sterling) GP LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Infracapital Greenfield Partners II Subholdings GP1
Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital Greenfield Partners II Subholdings GP2
Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital Partners II LP
LPI
26%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Infracapital Partners II Subholdings GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Partners III GP S.\u00e0 r.l
OS
100%
6, Rue Eug\u00e8ne Ruppert, L-2453, Luxembourg
Infracapital Partners III Subholdings (Euro) GP LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Infracapital Partners III Subholdings (Sterling) GP LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Infracapital Partners III Subholdings GP1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital Partners III Subholdings GP2 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital Partners IV G.P S.\u00e0\u00a0r.l.
OS
100%
5 Heienhaff, Nidderaanwen, 1736, Luxembourg
Infracapital Partners IV SCSp
LPI
50%
Fourth Floor, 76 Lower Baggot Street, Dublin 2, Ireland
Infracapital Partners IV Subholdings GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Partners IV Subholdings GP1 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
Infracapital Partners IV Subholdings GP2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Partners IV Subholdings Nominee Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Partners IV Subholdings SLP LP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital Partners LP
LPI
33%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Infracapital SLP II LP
LPI
40%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Infracapital SLP Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Innisfree M&G PPP LLP
LPI
35%
1st Floor, Boundary House, 91-93 Charterhouse
Street, London, EC1M 6HR, UK
Investment Funds Direct Group Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Investment Funds Direct Holdings Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Investment Funds Direct Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
KESTREL F4 GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
LB Professional Investors Private Real Estate Fund
No. 10
U
25%
20th\u00a0floor, 136, Sejong-daero, Jung-gu, Seoul,
Republic of Korea
LB Professional Investors Private Real Estate Fund
No. 10 (Centropolis)
U
25%
20th\u00a0floor, 136, Sejong-daero, Jung-gu, Seoul,
Republic of Korea
Leadenhall Unit Trust
U
100%
IFC 5, St Helier, JE1 1ST, Jersey, UK
Lion Credit Opportunity Fund Public Limited
Company - Credit Opportunity Fund XV
U
100%
35 Shelbourne Road, Ballsbridge, Dublin 4,
D04 A4EO, Ireland
Lion Credit Opportunity Fund Public Limited
Company - M&G SRT Fund II
U
52%
35 Shelbourne Road, Ballsbridge, Dublin 4,
D04 A4EO, Ireland
London Fenchurch Employee Feeder F4 SP LP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Fenchurch F4 Employee Feeder SP GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Fenchurch GP1 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Fenchurch GP2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Fenchurch SLP LP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Green Investments II SLP GP1 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Green Investments II SLP GP2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Green Investments II SLP1 Employee Feeder
GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Green Investments II SLP2 GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Green Investments SLP GP1 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Green Investments SLP GP2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
London Stone Investments F3 Employee Feeder GP
LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Stone Investments F3 I Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Stone Investments F3 II Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
London Stone Investments F3 SP GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Luxembourg Specialist Investment Funds (2) FCP -
M&G Private Equity Opportunities Fund
U
100%
16, Boulevard Royal, L-2449, Luxembourg
Luxembourg Specialist Investment Funds (3) SICAV
M&G Corporate Credit Opportunities ELTIF
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G (ACS) BlackRock Japan Equity Fund
U
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) BlackRock UK All Share Equity Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) BlackRock US Equity Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) China Equity Fund
U
98%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) China Fund
U
98%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) Earnest Partners US Small Cap Value
Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) Granahan US Small Cap Growth Fund
U
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) Japan Equity Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) Japan Smaller Companies Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) UK Listed Equity Fund
U
96%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (ACS) UK Listed Mid Cap Equity Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G (Guernsey) Limited
OS
100%
Dorey Court, Admiral Park, St Peter Port,
GY1 2HT, Guernsey
M&G (Lux) Emerging Markets Corporate ESG Bond
Fund
U
57%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Euro ex UK Index Fund
U
99%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Europe ex UK Equity Fund
U
99%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Global Enhanced Equity Premia Fund
U
99%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Global Funds - M&G (Lux) Asian
Corporate Bond Fund
U
97%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Global Funds - M&G (Lux) Asian Local
Currency Bond Fund
U
97%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Global Funds - M&G (Lux) Asian Total
Return Bond Fund
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Investment Funds 1 - M&G (Lux) Better
Health Solutions Fund
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Investment Funds 1 - M&G (Lux) Climate
Solutions Fund
U
93%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Investment Funds 1 - M&G (Lux) Diversity
and Inclusion Fund
U
89%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Investment Funds 1 - M&G (Lux)
Emerging Markets Hard Currency Bond Fund
U
92%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Investment Funds 1 - M&G (Lux) Global
Artificial Intelligence Fund
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Investment Funds 1 - M&G Lux Emerging
Markets Bond Fund
U
59%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Managed Cautious (Euro) Fund
U
100%
16, Boulevard Royal, L-2449, Luxembourg
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
M&G (Lux) Managed Growth (Euro) Fund
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Pan European Smaller Comp Fund
U
98%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Reserved Investment Fund (2), SCA
SICAV-RAIF
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Reserved Investment Funds (2) GP S.\u00e0 r.l.
OS
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Sterling Liquidity Fund
U
86%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Sustainable Emerging Markets
Corporate Bond Fund
U
21%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux) Sustainable Optimal Income Bond Fund
U
98%
16, Boulevard Royal, L-2449, Luxembourg
M&G (Lux)\u00a0Global\u00a0Funds
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G Alternatives CV SCSp
LPI
100%
8, Rue Lou Hemmer, L-1748, Senningerberg,
Luxembourg
M&G Alternatives GP S.\u00e0 r.l.
OS
100%
8, Rue Lou Hemmer, L-1748, Senningerberg,
Luxembourg
M&G Alternatives Investment Management Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Asia Property Fund
U
44%
16, Boulevard Royal, L-2449, Luxembourg
M&G Black\u00a0Seed\u00a0GP\u00a0LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G BlackRock Canada Equity Fund
U
98%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G BlackRock UK 200 Equity Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Catalyst Capital Fund
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G Catalyst Credit Fund
U
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G Catalyst Sustainable Agriculture GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G Catalyst\u00a0Sustainable\u00a0Agriculture
GP\u00a0Member\u00a0No.1\u00a0Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G Catalyst\u00a0Sustainable\u00a0Agriculture\u00a0
GP\u00a0Member\u00a0No.2\u00a0Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G Catalyst\u00a0Sustainable\u00a0Agriculture\u00a0LP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G Corporate Services Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Corporate\u00a0Credit\u00a0Opportunities\u00a0S.\u00e0\u00a0r.l.
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Credit Income Investment Trust plc
OS
23%
Beaufort House, 51 New North Road, Exeter,
EX4 4EP, UK
M&G Emerging Markets Monthly Income Fund
U
93%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G European High Yield Credit Investment Fund
U
27%
80, Route d'Esch, L-1470, Luxembourg
M&G European Living Property Fund SCSP,
SICAV-RAIF
LPI
71%
16, Boulevard Royal, L-2449, Luxembourg
M&G European Property Fund SICAV-FIS
U
29%
16, Boulevard Royal, L-2449, Luxembourg
M&G European Secured Property Income Fund
FCP\u2010FIS
OS
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G European\u00a0Value\u00a0Add\u00a0GP\u00a0S.\u00e0\u00a0r.l.
OS
100%
Rue de la Poste 20, 2346, Luxembourg
M&G European\u00a0Value\u00a0Add\u00a0Partnership\u00a0SCSp
LPI
67%
Rue de la Poste 20, 2346, Luxembourg
M&G FA Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Feeder of Property Portfolio
U
57%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Financial Services Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Fitzrovia GP Limited
OS
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Fitzrovia Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
M&G Fitzrovia Limited Partnership
LPI
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Fitzrovia Nominee 1 Limited
OS
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Fitzrovia Nominee 2 Limited
OS
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Founders 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) Asia Pacific (ex Japan) Equity Fund
U
96%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) Blackrock Asia Pacific (ex Japan)
Equity Fund
U
96%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) Blackrock Emerging Markets Equity
Fund
U
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) GSAM Global Emerging Market
Equity Fund
U
99%
16, Boulevard Royal, L-2449, Luxembourg
M&G Funds (1) Invesco Global Emerging Markets
Equity Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) Lazard Global Emerging Markets
Equity Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) MFS Global Emerging Markets
Equity Fund
U
99%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) Sterling Investment Grade Corporate
Bond Fund
U
84%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) US Corporate Bond Fund
U
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) US Short Duration Corporate Bond
Fund
U
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Funds (1) Wellington Impact Bond Fund
U
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G General Partner Inc.
OS
100%
190 Elgin Avenue, George Town, Grand Cayman,
KYI-9005, Cayman Islands
M&G Global Services Private Limited
OS
100%
1st floor Prudential House, Central Avenue,
Hiranandani Business Park, Mumbai-400076, India
M&G Group Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Group PCC Limited
OS
100%
PO Box 155, Mill Court, La, Charroterie, St Peter Port,
GY1 4ET, Guernsey
M&G IMPPP 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G International Investments Nominees Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G International Investments Switzerland AG
OS
100%
Zollstrasse 17, 8005 Z\u03cbrich, Switzerland
M&G Investment Funds (1) - M&G European Sustain
Paris Aligned Fund
U
64%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (10) - M&G Better Health
Solutions Fund
U
90%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (10) - M&G Climate
Solutions Fund
U
56%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (10) - M&G Global AI
Themes Fund
U
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (10) - M&G Global High Yield
ESG Bond Fund
U
43%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (10) - M&G Positive Impact
Fund
U
30%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (2) - M&G Gilt & Fixed
Interest Income Fund
U
54%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (2) - M&G Global High Yield
Bond
U
55%
10 Fenchurch Avenue, London, EC3M 5AG, UK
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
M&G Investment Funds (3) - M&G Dividend Fund
U
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (4) - M&G Episode
Allocation Fund
U
24%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (4) - M&G Sustainable Multi
Asset Balanced Fund
U
31%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (4) - M&G Sustainable Multi
Asset Cautious Fund
U
49%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (4) - M&G Sustainable Multi
Asset Fund
U
41%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (4) - M&G Sustainable Multi
Asset Growth Fund
U
67%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Funds (7) - M&G Global
Convertibles Fund
U
80%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investment Management Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Investments (Americas) Inc.
OS
100%
251 Little Falls Drive, Wilmington, DE 19801, USA
M&G Investments (Australia) Pty Limited
OS
100%
Level 6, 60 Martin Place, Sydney NSW 2000, Australia
M&G Investments (Hong Kong) Limited
OS
100%
6th Floor, Alexander House, 18 Chater Road, Central,
Hong Kong
M&G Investments (Singapore) Pte. Limited
OS
100%
138 Market Street, CapitaGreen #35-01,
048946, Singapore
M&G Investments (Taiwan) Limited
OS
100%
Floor.33 (Unit B-1), No.7, Sec.5, Road.Xinyi,110, Taipei,
Ta, Taiwan
M&G Investments (USA) Inc
OS
100%
251 Little Falls Drive, Wilmington, DE 19801, USA
M&G Investments Japan Co., Limited
OS
100%
Tokyo Toranomon Global Square 13F, 1-3-1
Toranomon, Minatoku, Tokyo 105-0001, Japan
M&G Luxembourg S.A.
OS
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G Management Services Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Nominees Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Pan African Bond Fund
U
100%
PO Box 44813, Claremont, Western Cape, 7735,
South Africa
M&G PFI 2018 GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G PFI 2018 GP1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G PFI 2018 GP2 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G PFI Carry Partnership 2016 LP
LPI
25%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G Platform Nominees Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Property Portfolio
U
89%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G RE Espana, 2016, S.L.
OS
100%
Calle Fortuny, 6 - 4 A, 28010, Madrid, Spain
M&G RE UKEV (GP1) LLP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G RE UKEV 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G RE UKEV 1-A LP
LPI
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Real Estate Asia Holding Company Pte Limited
OS
67%
138 Market Street, CapitaGreen #35-01,
048946, Singapore
M&G Real Estate Asia PTE Limited
OS
67%
138 Market Street, CapitaGreen #35-01,
048946, Singapore
M&G Real Estate Debt Carried Interest GP S.\u00e0 r.l
OS
100%
5 Heienhaff, Nidderaanwen, 1736, Luxembourg
M&G Real Estate France SAS
OS
100%
8 Avenue Hoche, 75008, Paris, France
M&G Real Estate Funds Management S.\u00e0 r.l.
OS
100%
16, Boulevard Royal, L-2449, Luxembourg
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
M&G Real Estate Japan Co Limited
OS
67%
Tokyo Toranomon Global Square 13F, 1-3-1
Toranomon, Minatoku, Tokyo 105-0001, Japan
M&G Real Estate Korea Co Limited
OS
67%
Jongno 1-ga, Kyobo Building, Seoul, Korea
M&G Real Estate Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Real Estate UK Enhanced Value LP
LPI
50%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G Real Estate UKEV (GP) LLP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Real\u00a0Estate\u00a0Debt\u00a0Carried\u00a0Interest\u00a0GP\u00a0S.\u00e0\u00a0r.l.
OS
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G RED II Employee Feeder GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G RED II GP Limited (In liquidation)
OS
100%
1 Royal Plaza, Royal Avenue, St Peter Port,
GY1 2HL, Guernsey
M&G RED II SLP GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G RED II SLP LP
LPI
28%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G RED III Employee Feeder GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G RED III GP Limited (In liquidation)
OS
100%
1 Royal Plaza, Royal Avenue, St Peter Port,
GY1 2HL, Guernsey
M&G RED III SLP GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G RED III SLP LP
LPI
25%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G RPF GP Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G RPF Nominee 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G RPF Nominee 2 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G SA Equity Fund
U
95%
PO Box 44813, Claremont, Western Cape,
7735, South Africa
M&G Secure Income S.\u00e0 r.l.
OS
100%
16, Boulevard Royal, L-2449, Luxembourg
M&G Securities Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G SFF (CIP GP) S.\u00e0 r.l.
OS
100%
Heienhaff 5, 1736 Senningerberg, Luxembourg
M&G SFF (GP) S.\u00e0 r.l.
OS
100%
Heienhaff 5, 1736 Senningerberg, Luxembourg
M&G SFF\u00a02\u00a0(CIP\u00a0GP)\u00a0S.\u00e0\u00a0r.l.
OS
100%
5 Heienhaff, Nidderaanwen, 1736, Luxembourg
M&G SFF\u00a02\u00a0(GP)\u00a0S.\u00e0\u00a0r.l.
OS
100%
5 Heienhaff, Nidderaanwen, 1736, Luxembourg
M&G Shared Ownership LP
LPI
46%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G SIF Management Company (Ireland) Limited
OS
100%
IPC House, 35 Shelbourne Road, Dublin,
D, D04 A4E0, Ireland
M&G Specialty Finance Fund 2 GBP SCSp
LPI
47%
5, Heienhaff, L-1736, Senningerberg, Luxembourg
M&G Sustainable Loan Fund Limited
OS
63%
35 Shelbourne Road, Ballsbridge, Dublin, Ireland
M&G Trustee Company Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G UK Mortgage Income Fund
U
62%
16, Boulevard Royal, L-2449, Luxembourg
M&G UK Property Fund
U
98%
16, Boulevard Royal, L-2449, Luxembourg
M&G UK Property GP Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G UK Property Nominee 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G UK Property Nominee 2 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G UK Residential Property Fund
LPI
28%
16 Boulevard Royal, L-2449 Luxembourg
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
M&G UK Shared Ownership Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G UKEV (SLP) General Partner LLP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G UKEV (SLP) LP
LPI
80%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
M&G Wealth Advice Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G\u00a0Wealth\u00a0Investments\u00a0LLP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G\u00a0Wealth\u00a0Solutions\u00a0Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Manchester JV Limited
OS
50%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Manchester Nominee (1) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
MandG Investment Managers (Pty) Limited
OS
100%
Protea Place, 40 Dreyer Street, Claremont,
7708, South Africa
MandG Investments (Namibia) (Pty) Limited
OS
100%
Unit 3, 2nd Floor, Ausspann Plaza, Dr Agostinho Neto
Road, Private Bag 12012, Ausspannplatz, Windhoek,
Namibia
MandG Investments Life South Africa (RF) Limited
OS
100%
Protea Place, 40 Dreyer Street, Claremont,
7708, South Africa
MandG Investments Southern Africa (Pty) Limited
OS
50%
Protea Place, 40 Dreyer Street, Claremont,
7708, South Africa
MandG Investments Unit Trusts (Namibia) Limited
OS
100%
Unit 3, 2nd Floor, Ausspann Plaza, Dr Agostinho Neto
Road, Private Bag 12012, Ausspannplatz, Windhoek,
Namibia
MandG Investments Unit Trusts South Africa
(RF) Limited
OS
100%
Protea Place, 40 Dreyer Street, Claremont,
7708, South Africa
MCF S.r.l.
OS
45%
Via Alessandro Manzoni 38, Milan, 20121, Italy
Merlin D5 GP LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Minster Court Estate Management Limited
OS
56%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Mole GP1 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Mole GP2 Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
My Continuum Financial Limited
OS
50%
Prydis Accounts Ltd, The Parade, Liskeard, Cornwall,
England, PL14 6AF, UK
NAPI REIT, Inc
OS
99%
300 E Lombard Street, Baltimore, MD 21202, USA
NB Gemini Fund LP
LPI
99%
Maples Corporate Services Limited, Ugland House,
P.O. Box 309, Grand Cayman, KY1-1104, Cayman
Islands
Oaktree Business Park Limited
OS
14%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Old Kingsway LP
LPI
100%
2711 Centerville Road, Suite 400, Wilmington,
DE 19808, USA
Optimus Point Management Company Limited
OS
52%
Barratt House, Cartwright Way, Bardon Hill, Coalville,
LE67 1UF, UK
Ox\u00a0GP\u00a0LLP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Pacus (UK) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
PAP Trusty Pty Limited
OS
100%
Suite 201, Level 2, 5 Berry Street, North Sydney NSW
2060, Australia
Pesca\u00a0GP\u00a0LLP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
PGDS (UK One) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
PPM America Private Equity Fund III LP
LPI
50%
874 Walker Road, Suite C, City of Dover,
County of Kent, State of Delaware 19904, USA
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
PPM America Private Equity Fund IV LP
LPI
50%
874 Walker Road, Suite C, City of Dover,
County of Kent, State of Delaware 19904, USA
PPM America Private Equity Fund V LP
LPI
50%
874 Walker Road, Suite C, City of Dover,
County of Kent, State of Delaware 19904, USA
PPM America Private Equity Fund VI LP
LPI
40%
874 Walker Road, Suite C, City of Dover,
County of Kent, State of Delaware 19904, USA
PPM America Private Equity Fund VII LP
LPI
46%
874 Walker Road, Suite C, City of Dover,
County of Kent, State of Delaware 19904, USA
PPM Capital (Holdings) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
PPM Managers GP Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
PPM Managers Partnership CI VII (A) LP
LPI
25%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
PPM Ventures (Asia) Limited (In liquidation)
OS
100%
13/F, One International Finance Centre,
1 Harbour View Street, Central, Hong Kong
PPMC First Nominees Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Property Partners (Two Rivers) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Pru Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudence Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Corporate Pensions Trustee Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Distribution Limited
OS
100%
5 Central Way, Kildean Business Park, Stirling,
FK8 1FT, UK
Prudential Equity Release Mortgages Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Financial Planning Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential GP Limited
OS
100%
5 Central Way, Kildean Business Park, Stirling,
FK8 1FT, UK
Prudential Greenfield GP LLP
LPI
100%
c/o Buckingham Corporate Services Limited,
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Prudential Greenfield GP1 Limited
OS
100%
c/o Buckingham Corporate Services Limited,
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Prudential Greenfield GP2 Limited
OS
100%
c/o Buckingham Corporate Services Limited,
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Prudential Greenfield LP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Prudential Holborn Life Limited (In liquidation)
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential International Assurance plc
OS
100%
Fitzwilliam Court, Leeson CI, Dublin 2, Dublin,
D02 TC95, Ireland
Prudential International Management Services Limited
OS
100%
Fitzwilliam Court, Leeson CI, Dublin 2, Dublin,
D02 TC95, Ireland
Prudential Investment (Luxembourg) 2 S.\u00e0.r.l.
OS
100%
Citco Fund Services (Luxembourg) S.A.,
20 Rue de la Poste, 2346, Luxembourg
Prudential Lifetime Mortgages Limited
OS
100%
5 Central Way, Kildean Business Park, Stirling,
FK8 1FT, UK
Prudential Loan Investments 1 S.\u00e0 r.l.
OS
100%
5 Heienhaff, L-1736 Senningerberg, Luxembourg
Prudential Loan Investments GP S.\u00e0 r.l.
OS
100%
5 Heienhaff, L-1736 Senningerberg, Luxembourg
Prudential Loan Investments SCSp
LPI
100%
1, Rue Hildegard von Bingen, L-1282, Luxembourg
Prudential Pensions Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Polska sp. z.o.o
OS
100%
02-670 Warszawa, Pulawska 182, Poland
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
Prudential Portfolio Management Group Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Property Investment Managers Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Real Estate Investments 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Real Estate Investments 2 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Real Estate Investments 3 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential Staff Pensions Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential UK Real Estate General Partner Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential UK Real Estate Limited Partnership
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential UK Real Estate Nominee 1 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential UK Real Estate Nominee 2 Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prudential UK Services Limited
OS
100%
5 Central Way, Kildean Business Park, Stirling,
FK8 1FT, UK
Prudential Unit Trusts Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Prutec Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
PVM Partnerships Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Radler GP LLP
LPI
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Radler GP1 Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Radler GP2 Limited
OS
100%
First Floor, 85 Great Portland Street, London,
W1W 7LT, UK
Rads Omega Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Rads\u00a0Gamma\u00a0Limited
OS
100%
50 Lothian Road, Festival Square, Edinburgh,
EH3 9WJ, UK
Randolph Street LP
LPI
100%
2711 Centerville Road, Suite 400, Wilmington,
DE 19808, USA
RD Park (Hoddesdon Phase 1) Management
Company Limited
OS
64%
10 Fenchurch Avenue, London, EC3M 5AG, UK
responsAbility Agriculture Partners SLP
OS
61%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility Global Micro and SME Finance Fund
LPI
25%
Zollstrasse 17, 8005 Z\u03cbrich, Switzerland
responsAbility Next Billion Growth I (GP), S.\u00e0 r.l.
OS
100%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility Singapore Pte. Ltd.
OS
100%
80 Robinson Road 2-00, Singapore
responsAbility Sustainable Food - Asia II (GP), S.\u00e0 r.l.
OS
100%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility Sustainable Food \u2013 Asia II, SLP
LPI
87%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility Sustainable Food \u2013 Latam I (GP), S.\u00e0 r.l.
OS
100%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility Sustainable Food - Latam I, SLP
LPI
100%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility Sustainable Food Asia II Partners SLP
OS
100%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility Sustainable Food Latam I Partners SLP
OS
100%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility\u00a0Africa\u00a0Limited
OS
100%
Merchant Square, Block D, 5th Floor, Riverside Drive,
Westlands, P.O. 29300623 Nairobi, Kenya
responsAbility\u00a0Agriculture\u00a0(GP)\u00a0S.\u00e0 r.l.
OS
100%
15, Boulevard F.W. Raiffeisen, L-2411, Luxembourg
responsAbility\u00a0America\u00a0Latina\u00a0SAC
OS
100%
Av. 28 de Julio 753, Miraflores, Provincia de Lima,
15074, Peru
responsAbility\u00a0BOP\u00a0S.\u00e0 r.l.
OS
50%
5 Rue Jean Monnet, L-2180, Luxembourg
responsAbility\u00a0France\u00a0SAS
OS
100%
8 Rue Lamennais, 75008, Paris, France
responsAbility\u00a0Georgia\u00a0LLC
OS
100%
4 Tamar Chovelidze Street, T'bilisi, Tbilisi,
0108, Georgia
responsAbility\u00a0India\u00a0Business\u00a0Advisors\u00a0Pvt Limited
OS
100%
31 Green Acre, Union Park Road Number 5, Mumbai,
Mumbai Suburban, MH, 400052, India
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
responsAbility\u00a0Investments\u00a0AG
OS
100%
Zollstrasse 17, Z\u00fcrich, ZH, 8005, Switzerland
responsAbility\u00a0Thailand\u00a0Limited
OS
100%
62 Thaniya BTS Building, Silom Road, Suriyawongse,
Bangrak, Bangkok, 10500, Thailand
responsAbility\u00a0Ventures\u00a0I\u00a0Services\u00a0AG
OS
100%
Zollstrasse 17, Z\u00fcrich, ZH, 8005, Switzerland
Sandringham\u00a0Financial\u00a0Partners\u00a0Limited
OS
PS
61%
39%
5th Floor, 30 Market Street, Huddersfield,
HD1 2HG, UK
Schoolhill S.\u00e0 r.l.
OS
100%
20, Rue de la Poste, Luxembourg
ScotAm Pension Trustees Limited
OS
100%
5 Central Way, Kildean Business Park, Stirling,
FK8 1FT, UK
Selly Oak Shopping Park (General Partner) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Selly Oak Shopping Park (Nominee 1) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Selly Oak Shopping Park (Nominee 2) Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Selly Oak Shopping Park Limited Partnership
LPI
63%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Silverfleet Capital 2004 LP
LPI
100%
1 Royal Plaza, Royal Avenue, St Peter Port,
GY1 2HL, Guernsey
Silverfleet Capital 2009 LP
LPI
100%
1 Royal Plaza, Royal Avenue, St Peter Port,
GY1 2HL, Guernsey
Silverfleet Capital 2011/12 LP
LPI
100%
1 Royal Plaza, Royal Avenue, St Peter Port,
GY1 2HL, Guernsey
Silverfleet Capital II WPLF LP
LPI
100%
1 Carter Lane, London, EC4V 5ER, UK
Sky Fund V Onshore LP
LPI
26%
559 Pacific Avenue, San Francisco, CA 94133, USA
Smithfield Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
SMLLC
LPI
100%
2711 Centerville Road, Suite 400, Wilmington,
DE 19808, USA
SOFA Holding LP
LPI
100%
2711 Centerville Road, Suite 400, Wilmington,
DE 19808, USA
Specialist Investment Funds (2) ICAV - M&G Real
Impact Fund
U
100%
35 Shelbourne Road, Ballsbridge,
Dublin D04 A4EO, Ireland
St Edward Homes Limited
OS
50%
Berkeley House, 19 Portsmouth Road, Surrey,
KT11 1JG, UK
St Edward Homes Partnership
OS
50%
Berkeley House, 19 Portsmouth Road, Surrey,
KT11 1JG, UK
St Edward Strand Partnership
OS
50%
Berkeley House, 19 Portsmouth Road, Surrey,
KT11 1JG, UK
Stableview Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
StepStone Scorpio Infrastructure Opportunities
Fund, L.P.
LPI
100%
Maples Corporate Services Limited, Ugland House,
P.O. Box 309, Grand Cayman, KY1-1104, Cayman
Islands
The Car Auction Unit Trust
U
50%
Dorey Court, Admiral Park, St Peter Port,
GY1 2HT, Guernsey
The First British Fixed Trust Company Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
The Project Hoxton LP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
The Prudential Assurance Company Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
The Strand Property Unit Trust
U
50%
28 Esplanade, Jersey, Channel Islands, JE2 3QA, UK
The Two Rivers Trust
U
100%
IFC1, The Esplanade, Saint Helier, JE1 4BP, Jersey
Three Snowhill Birmingham S.\u00e0 r.l.
OS
100%
5, Heienhaff, L-1736, Senningerberg, Luxembourg
Two Rivers LP
LPI
100%
Bow Bells House, 1 Bread Street, London,
EC4M 9HH, UK
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc or its nominees) (continued)
Name of entity
Classes of
shares held
Proportion
held
Registered office address and country of incorporation
Two Snowhill Birmingham S.\u00e0 r.l.
OS
100%
5, Heienhaff, L-1736, Senningerberg, Luxembourg
Vanquish I Unit Trust
U
100%
IFC 5, St Helier, JE1 1ST, Jersey
Vanquish II Unit Trust
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Vanquish Properties (UK) Limited Partnership
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Vanquish Properties GP Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Vanquish Properties GP Nominee 1 Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Vanquish Properties GP Nominee 2 Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Vanquish Properties GP Nominee 3 Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Vanquish Properties GP Nominee 4 Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Vanquish Properties GP Nominee A Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Vanquish Properties LP Limited
OS
100%
IFC 5, St Helier, JE1 1ST, Jersey
Wessex Gate Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
West\u00a0Station\u00a01\u00a0SCI
OS
100%
8 Avenue Hoche, 75008, Paris, France
West\u00a0Station\u00a02\u00a0SCI
OS
100%
8 Avenue Hoche, 75008, Paris, France
West\u00a0Station\u00a0SAS
OS
100%
8 Avenue Hoche, 75008, Paris, France
Westwacker Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
Wrap IFA Services Limited
OS
100%
10 Fenchurch Avenue, London, EC3M 5AG, UK
WS Prudential Risk Managed Active 1
U
20%
6th Floor, 65, Gresham Street, London EC2V 7NQ, UK
WS Prudential Risk Managed Active 2
U
23%
6th Floor, 65, Gresham Street, London EC2V 7NQ, UK
WS Prudential Risk Managed Active 3
U
24%
6th Floor, 65, Gresham Street, London EC2V 7NQ, UK
WS Prudential Risk Managed Active 4
U
31%
6th Floor, 65, Gresham Street, London EC2V 7NQ, UK
WS Prudential Risk Managed Active 5
U
30%
6th Floor, 65, Gresham Street, London EC2V 7NQ, UK
WS Prudential Risk Managed Passive Fund 1
U
41%
6th Floor, 65, Gresham Street, London EC2V 7NQ, UK
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