United Kingdom:


‘Our ability to deliver value to our customers and the resulting market franchise served us well in 2013 where, despite the impact of regulatory changes, retail new business profit was resilient, cash generation increased and our strong capital position was maintained.’

Jackie Hunt
Chief Executive Officer

To find out more about Prudential UK & Europe www.pru.co.uk

The strategy in the UK business continues to be one of ‘focus’:

  • Selective participation;
  • Capital discipline;
  • Sustainable cash generation;
  • Delivering value through cost and persistency management; and
  • Provision of market leading with-profits investment returns to our customers.

Performance highlights

New business profit

2013: £297m (£30m wholesale, £267m retail), compared to previous 5 years

IFRS operating profit

2013: £735m (£25m wholesale, £710m retail), compared to previous 5 years

Net cash remittances

2013: £355m, compared to previous 5 years

* One-off release of excess surplus

Inherited estate

2013: £8.0bn, compared to previous 5 years
  • 2013 cash objective of £350 million achieved
  • Two ‘Five Star’ ratings for excellent service1, achieved for third consecutive year
  • Winner of the Company of the Year award2
  • Robust performance despite significant regulatory change
  • Diversified distribution model focusing on intermediaries, Prudential Financial Planning (our direct advice service) and individual customers via mail, email and telephone
  • Continued strong performance of with-profits
  • Launch of Prudential Polska – 12 branches and 481 financial planning consultants

Market overview

People walking across the Millenium Bridge, London

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The changing face of saving in the UK

The UK market is characterised by an ageing population and a concentration of wealth in the 50+ age group, many of whom have built up substantial pension funds in employer-sponsored schemes and require help to convert their wealth into sustainable lifetime income. In contrast, the next generation of savers is typically under-funded as the responsibility for retirement provision has shifted substantially away from government and employers, and towards the individual. These customers, and helping them accumulate savings, constitutes a significant opportunity for long-term savings and retirement income providers at a time when the ability of the state to intervene is significantly diminished.

In the UK we focus on those areas of the market where we are able to bring superior value to our customers and where we enjoy a competitive advantage, primarily in with-profits and annuities.

Ageing population with 57 per cent of liquid assets held by over-55s

Old age dependecy ratio (%)3,4
2050: 55%, 2045: 53%, 2040: 51%, 2035: 49%, 2030: 45%, 2025: 40%, 2020: 37%, 2015: 35%, 2010: 32%, 2005: 31%, 2000: 30%, 1995: 31%
Liquid assets5,6 by age, total c£1tn
2013: 55+, 18-54

The changing regulatory landscape

The UK life and pensions industry has undergone considerable regulatory and market change in 2013, with the appointment of two new industry regulatory bodies, the phasing in of auto-enrolment for company pensions and the introduction of the ABI Code on Retirement Choices. The implementation of the recommendations of the Retail Distribution Review has changed the distribution landscape and providers, distributors, advisers and their clients continue to adjust to the new environment. The Financial Conduct Authority’s Thematic Review into the UK annuity market, which ran throughout 2013, concluded in February 2014 with the announcement that it was launching a further study to examine competition and choice in the retirement income market as a whole. We continue to support both regulatory and other initiatives to improve consumer experience and outcomes.

These new developments represent major changes to the way business is conducted in a number of areas of the markets in which we operate in the UK, and impact not only insurance and investments providers, but also distributors and consumers.

What we do and how we do it

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Valuable customer franchise

With a pedigree stretching back over more than 165 years the Prudential UK business has built the foundation of the Group’s iconic brand and its cash, capital and credit ratings performance. Our approach in the UK is driven by a focus on providing long-term value to our customers based on our longevity and experience, multi-asset investment capabilities and our financial strength. Our long-standing trusted brand favourably positions us to help risk-averse customers save with confidence and then to translate their accumulated wealth into dependable retirement income, through our range of market leading with-profits and annuity products. Our strong brand franchise has also been central to our successful health and protection associates – PruHealth and PruProtect.

We continue to focus on meeting customer needs:

  • Offering a range of ways to do business with us through intermediaries, through our Prudential Financial Planning partners providing advice to customers in their homes, or by telephone and internet;
  • Innovative products such as our Income Choice Annuity which provides an alternative to the traditional fixed income annuity and is especially attractive in a low-interest rate environment;
  • Our market leading PruFund investment range with optional guarantees to suit customers’ attitude to risk; and
  • Continuing to improve our service year-on-year for both customers and intermediaries. Prudential UK’s focus on continuing to deliver excellent customer service was recognised at the 2013 Financial Adviser Service Awards, where we retained our two 5-Star ratings in the Life & Pensions and Investment categories.

Strong product capability

Prudential is a leader in its chosen markets, benefiting from a strong investment track record, a financially strong with-profits fund and a recognised reputation for developing innovative products such as PruFund and Income Choice Annuity.

We have a competitive advantage in with-profits and we are confident that demand will remain strong as customers continue to seek products which mitigate the volatility of the market, while still providing a steady return over the medium to long term.

We have a well-established individual annuity business, sourced from maturing pension policy customers. The strength of our with-profits proposition also continues to drive good external demand for our Income Choice Annuity, which offers customers relatively attractive returns in the current sustained low interest rate environment, with the potential for income growth.

We provide a comprehensive range of risk managed investments, including with-profits bonds and pensions, which continue to outperform competitors’ propositions. We will continue to develop our with-profits proposition, enhancing the range of investment choices available to policyholders and developing our presence in the Individual Savings Account market.

In addition to our customers, our shareholders also continue to benefit from the steady performance of our with-profits based products and the cash they generate. The chart above shows the outperformance of our with-profit funds when compared to those of our peers. This performance has allowed us to add an estimated £2 billion to with-profits policies in the year. Policyholders will typically see year-on-year increases of between 5 per cent and 8 per cent in accumulating with-profits policy values over the past year.

In Corporate Pensions, we continue to focus on securing new members and incremental business from our current portfolio of customers and on additional voluntary contribution plans within the public sector, where we now provide schemes for 69 of the 99 public sector authorities in the UK.

Prudential has a solid track record and the core capabilities to succeed in the bulk annuity marketplace. Our ability to develop structures and bespoke solutions puts us at a distinct competitive advantage to develop our participation in a market that has around £1 trillion of liabilities where trustees are likely to be keen to de-risk their balance sheets.

We are selective in the transactions undertaken based on strict return on capital hurdle rates. Our preferred participation segment is at the large premium end of the market, where the added complexity and greater focus on financial strength is better suited to our strengths.

With-profits fund outperforming competitors

5, 10 and 15 year gross cumulative return to end 20137

Prudential WP, 15 years: 178%, 10 years: 119%, 5 years: 67%

Prudential WP

FTSE100 index, 15 years: 89%, 10 years: 117%, 5 years: 83%

FTSE 100 index

Company A WP, 15 years: 130%, 10 years: 101%, 5 years: 58%

Company A WP

Company B WP, 15 years: 130%, 10 years: 106%, 5 years: 59%

Company B WP

Company C WP, 15 years: 106%, 10 years: 88%, 5 years: 42%

Company C WP

Broad distribution

Prudential has developed a diversified distribution model focusing both on financial advisers and the individual customer through a direct non-advised channel and its own financial planning arm – Prudential Financial Planning. The advent of the Retail Distribution Review saw a significant structural shift away from the traditional routes to market such as bancassurance, which when combined with a 20 per cent reduction in the number of financial advisers operating in the UK8 , has resulted in lower access to advice, particularly for customers from lower wealth demographics. We prepared well in anticipation of these changes and are strongly placed to remain a key and active provider in our chosen markets, with our chosen distribution partners.

Our direct advice channel, Prudential Financial Planning, continues to establish its presence, focusing primarily on the financial planning needs of our existing direct customer base. By the end of 2013, two years from launch, adviser numbers reached 196.

Prudential Polska, our new life company, opened for business in March 2013. Poland is one of Europe’s fastest growing economies with an expanding middle class. Headquartered in Warsaw, the business now has 12 branches across the country and 481 financial planning consultants. The agency sales network will continue to be rolled out to more major Polish cities and towns during 2014.

Prudential UK & Europe will continue to focus on its core strengths of with-profits and annuities while utilising its highly regarded brand franchise in order to help its consumers transfer their accumulated wealth into dependable retirement income.


  1. Awarded in the Investment and Life and Pensions categories at the Financial Adviser Service Awards 2012 London.
  2. Awarded at the 23rd annual Money Marketing Financial Services Awards 2013.
  3. UN Population Statistics, Prudential analysis.
  4. Old Age Dependency Ratio = (Population Above the Age of 65)/(Population within the age bracket of 15 to 64)*100.
  5. HMRC UK Personal Wealth Statistics based on 2008-2010 ONS Wealth and Asset Survey WAVE 2, and ONS Population data statistics.
  6. Liquid wealth consists of the wealth held in cash, banks, building societies or shares; the 18 to 54 segment also includes liquid wealth not attributed to any particular age bracket.
  7. Prudential, Financial Express. All figures to 31 December 2013. The with-profits gross performance is gross of tax, charges and the effects of smoothing. Cumulative returns for company A, B and C have been calculated internally based on annual returns gathered from publicly available sources; these may differ from figures quoted by the company.
  8. Financial Services Authority December 2011 estimates and December 2012 figures.
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