Chairman’s statement

Lasting value for
customers and growing
returns for shareholders

‘Meeting these objectives is a
significant milestone and a testament
to our clear and well-understood
strategy and to the efforts of our
management team.’

Paul Manduca

It gives me great pleasure to introduce Prudential’s 2013 Annual Report. The Group has delivered an excellent performance, providing value to our customers and strong returns to our shareholders.

This performance is underpinned by a clear focus on our purpose as a Group. Our businesses stand or fall by the service that we provide to our customers and the wider contribution that we make to the communities and societies of which we are a part. It is this foundation that allows us to continue our track record of more than 165 years of creating value for our customers, our shareholders and, ultimately, the countries in which we operate. Moreover, this adherence to our founding principles of integrity, security and prudence, and our investment in building quality teams everywhere we are active, have helped us deliver one of the strongest performances in the FTSE over recent years.

By offering security to individuals and families, our products provide opportunities for customers to build better futures for themselves and their children. By pooling savings and investing capital in areas such as infrastructure, we help to stimulate the economic activity that drives growth and creates more savings and thus more investment, helping to propel a virtuous circle of growth and prosperity. Our commercial success is predicated on our ability to make a positive social and economic contribution.

It is this commitment to creating lasting value for customers that enables us to continue to deliver strong returns to our shareholders. I am delighted to report that all of our businesses have contributed to our excellent performance in 2013, with our Asia operations driving profitable growth, while our focused businesses in the US and the UK continue to make good contributions.

The year marked an important step for the Group. In 2010 we set ourselves six demanding objectives on growth and cash generation to reach by the end of 2013. Meeting these objectives is a significant milestone and a testament to our clear and well-understood strategy and to the efforts of our management team, led by Group Chief Executive Tidjane Thiam.

These objectives were achieved in a challenging global context, marked by volatile market conditions, an uncertain economic environment, heightened regulation and historically low interest rates. Low interest rates are not only a problem for us as an insurer, but also for many of our customers, particularly in the UK, where they have had a significant and negative impact on returns for savers. There are now signs that the world’s economy is recovering, but the picture is still not fully clear and we shall proceed, as ever, with care.

At our investor conference in London in December 2013, our executive team set themselves new objectives to reach by 2017. Like their predecessors, these are demanding objectives, but I am confident that, given our recent performance and the strength of our management team, we will achieve them.

We are a growing business and we live in a regulatory environment that has put financial services firms under increasing scrutiny in the wake of the financial crisis. We use the cash we generate both to fund our growth and to build the strength of our balance sheet, ensuring that we retain prudent capital levels on the various capital metrics that our regulators monitor. We also work hard to increase the return to our shareholders prudently in the form of dividends.

The Board applies strict affordability tests against a broad range of criteria before making its dividend recommendation. It is the results of these tests, combined with the Group’s exceptionally strong performance in the past five years, that has enabled the Board to take the unusual decision to recommend the rebase of the dividend in consecutive years, 2012 and 2013. The Board has proposed a final dividend of 23.84 pence per share, which brings the total dividend for the year to 33.57 pence per share, 4.38 pence or 15 per cent higher than the 2012 total dividend.

Since I became Chairman, I have been determined to ensure that we have a Board that provides a channel for discussion with shareholders, maintains a good relationship with regulators and sets the tone for everything the business does. A financial services board needs to be strong in relevant expertise, not only to support the management team, but also to provide appropriate challenge. We took a number of steps in 2013 to strengthen the Board and better position it to contribute to Prudential’s commercial success.

Philip Remnant CBE became Senior Independent Director on 1 January, replacing myself in that role. Anthony Nightingale CMG joined the Board on 1 June as a non-executive director and member of the Remuneration Committee, replacing Keki Dadiseth, who retired from the Board on 1 May after eight years of valuable service. I would like to thank Keki for his hard work and trusted advice during his time on the Board and for the insights he brought us on a very important region for our company, Asia.

On 10 June, Alice Schroeder joined as an independent non-executive director and member of the Audit Committee. Formerly a managing director and a senior adviser at Morgan Stanley, Alice is highly respected by the international investment community and brings considerable insight into all aspects of the global insurance industry.

We also gained a new executive Board member in September when Jackie Hunt joined as Chief Executive of Prudential UK and Europe. She came to us from Standard Life plc, where she was Chief Financial Officer, bringing with her a proven record of delivery in the highly competitive UK insurance market.

I am confident that these additions will ensure that we have a Board that is well placed to seize the opportunities presented by returning global growth.

Jackie Hunt succeeded Rob Devey. I would like to thank Rob for the contribution he has made to the positive progress of Prudential UK and Europe over the past four years.

On 31 August, Michael Garrett retired from the Board after almost nine years as an independent director. I would like to thank him for his long period of service to the Group, during which his international business experience was of considerable value.

Key figures 2013

full-year dividend

increase on 2012

Besides the significant benefits provided by our business activities, we undertake corporate responsibility programmes in partnership with charitable organisations in our communities, providing long-term funding and deploying the expertise of our people.

I am particularly proud of the fact that so many of our people are taking part in our corporate responsibility programmes. Last year 8,155 colleagues gave their time and expertise to help improve the lives of people around the world. This commitment makes a real and long-term difference to others and is a clear example of the important role we play in our communities.

Many of our employees take part in the Chairman’s Challenge, our flagship volunteering programme, which encourages colleagues to participate in projects initiated by our global charity partners. Every year the projects supported by the Chairman’s Challenge increase in scope and quality and the 2013 programme has been a great success – from Age UK’s ‘Call in time’ telephone well-being service, which helps older people build confidence and remain in their homes for longer, to Plan International’s programme to develop financial and life skills for school children in ethnic communities in Chiangmai, Thailand.

It is a record of which I think we can be justifiably proud. However, it is not one upon which we can rest. I, together with others, will continue to work with our outstanding corporate responsibility teams to ensure people think of Prudential when they look for best practice in this area.

I would like to thank all our employees for their contribution to another successful year for Prudential. With their commitment, our strong management and our clear strategy, I am confident that we can continue to provide our customers with value and our shareholders with growing returns into the future, and further strengthen the communities we serve.

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