Business
Prudential plc - HY21 Results - EEV
Prudential plc - HY21 Results - EEV.
About this update from Prudential Plc
[{"type":"text","content":"\n \n \n \n RNS Number : 2264I\n Prudential PLC\n 11 August 2021\n \n \n \n \n European Embedded Value (EEV) Basis Results\n \n \n \n \n \n BASIS OF PREPARATION\n \n \n \n \n \n IFRS profit for long-term business broadly reflects \n the aggregate of results on a traditional accounting basis. By contrast, EEV is a way of measuring the value of the in-force life insurance business.\n \n The value of future new business is excluded from the embedded value. \n The EEV Principles provide consistent definitions of the components of EEV, a framework for setting assumptions and an approach to the underlying methodology and disclosures. \n Results prepared under the EEV Principles represent \n the present value of the shareholders' interest in the post-tax \n future profits (on a local statutory basis) expected to arise from the current book of long-term \n business, after sufficient allowance has been made for the aggregate risks in the business. The shareholders' interest in the Group's long-term business is the sum of the shareholders' total net worth and the value of in-force business.\n \n \n \n \n \n For the purposes of preparing EEV basis results, insurance joint ventures and associates are included at the Group's proportionate share of their embedded value and not at their market value. Asset management and other non-insurance subsidiaries, joint ventures and associates are included in the EEV basis results at the Group's proportionate share of IFRS basis shareholders' equity, with central Group debt shown on a market value basis.\n \n \n \n \n \n Key features of the Group's EEV methodology include:\n \n \n \n - Economic assumptions:\n \n The projected post-tax profits assume a level of future investment return and are discounted using a risk discount rate. Both the risk discount rate and the investment return assumptions are updated at each valuation date to reflect current market risk-free rates, such that changes in market risk-free rates impact all projected future cash flows. Risk-free rates, and hence investment return assumptions, are based on observable market data, with current market risk-free rates assumed to remain constant throughout the projection, with no trending or mean reversion to longer-term assumptions. Different products will be sensitive to different assumptions, fo...