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Chairman's statement

A well balanced business creating
value for customers and shareholders

Paul Manduca

Paul Manduca
Chairman

I am pleased to introduce Prudential’s 2016 Annual Report. The Company has once again produced a strong set of results over a year of great change and challenge. Mike Wells has made substantial progress in his first full year as Group Chief Executive and, while economic and political events across the globe bring uncertainty to our operating environment, we will continue to focus on building a sustainable business by providing our customers around the world with quality products and services.

Global context

2016 was a year that saw volatile markets in China, the UK’s decision to leave the European Union and a change of administration in the US.

Against that backdrop, Prudential has demonstrated that we have the right strategy, management team, geographic mix and business diversity to succeed. Our robust governance and decision-making processes have enabled us to react swiftly to the unexpected and unpredictable. With strong customer propositions in the UK, Asia and the US, our business is well balanced and well placed to thrive.

Most importantly, it is during times of great uncertainty that Prudential adds most value for our customers. We look to provide financial peace of mind to customers, whatever the external environment. Our expertise in reducing risk allows customers to plan for the future with confidence; whether by protecting them against ill health in Asia, helping them save for retirement in the UK or managing their retirement income in the United States. The capital we generate from these activities then allows us to invest in companies across the globe, driving economic activity and growth. All of this is possible because the Board is focused on building a sustainable business. This focus ensures we are able to keep the vital promises that we have made to our customers.

Customers have been at the heart of Prudential for 168 years. It is by serving all our customers well that we are able to generate strong returns for our shareholders, provide rewarding roles for our people and invest in our local communities. Alongside acknowledging these benefits, the Board also ensures it engages with our regulators and wider civil society to promote the interests of our customers more broadly.

Performance and dividend

Despite the challenging global environment, Prudential has delivered another strong operating and financial performance, driven in particular by our Asian operations.

The Board has decided to increase the full-year ordinary dividend by 12 per cent to 43.5 pence per share, reflecting our strong 2016 financial performance and our confidence in the future prospects of the Group. In line with this, the Directors have approved a second interim ordinary dividend of 30.57 pence per share (2015: 26.47 pence per share). In 2015, a special dividend of 10 pence per share was also awarded.

Governance

In order to keep the promises we make to our customers Prudential needs to be well run, which means it must display robust governance in supporting an outstanding executive team. While this has long been the focus of our Board, policymakers have continued to highlight the importance of effective governance. We welcomed Anne Richards as Chief Executive of M&G in June 2016. The Chair of our Audit Committee, Ann Godbehere, is in her ninth year of service, and hence will not stand for re-election at this year’s AGM. Ann has been a valuable asset to the Board and we are most grateful for her contribution and wise counsel. We are delighted that David Law will be taking over as Audit Committee Chair from the next AGM.

The stability we have created at Board level has enabled us to continue to strengthen our governance framework – for example, by building closer relationships between our material subsidiary boards and the plc Board, with regular communication established between the newly appointed material subsidiary board, Risk and Audit Committee Chairs and their Group counterparts.

Our shareholders and stakeholders

A well governed company engages regularly and effectively with its shareholders. At Prudential, we have an active programme of engagement. It is important to us that we hear the views of our investors and have an open and constructive dialogue with them. As Chairman, I have found this regular engagement particularly helpful and receiving shareholders’ input has ensured high-quality and well informed Board discussions.

Regulators and policymakers remain important stakeholders for Prudential, and have a legitimate interest in how we treat our customers and run our business. Prudential engages regularly with our regulators around the world and we place great importance on having an effective relationship with those who supervise us and our markets. Our customers’ interests are best served when we work constructively with our regulators.

Our people

In each of our markets we have teams focused on delivering for our customers. It is the diligence, creativity and hard work of these teams that enable Prudential to succeed. Their contribution is vital and it is the responsibility of the Board to consider their interests in every decision we make. Our people ensure we can continue to respond to the changing external environment and in 2016, their resilience and enthusiasm were critical to our achieving the excellent set of results we have reported. Their commitment to our customers provides me with great confidence for the future.

Our communities

The most obvious benefits that result from Prudential’s activities are the peace of mind we bring to our customers and the long-term capital we provide to companies and governments. It is, however, also in our customers’ and shareholders’ interests for Prudential to be a responsible business which invests in and gives back to our local communities, alongside the jobs, growth and tax revenue we provide.

We are proud of our work in financial education, disaster preparedness and social inclusion. The Cha-Ching programme that we launched in Asia in 2011 is now the first truly global financial education programme. Cha-Ching has now been launched in Poland, the UK and Africa and will shortly launch in the US. The Prudence Foundation’s Safe Steps is a first-of-its-kind pan-Asian public service initiative to enhance disaster preparedness and awareness through the dissemination of educational survival tips for natural disasters – with a potential reach of 200 million people. In the UK, over the past four years, Prudential RideLondon has raised £41 million for charity and become one of the largest fundraising events in the country. In 2016 alone, more than 740 charities benefited from riders’ fundraising.

I am particularly proud of the direct contribution made by our people to the communities in which they live and participate. In 2016, Prudential colleagues volunteered over 80,000 hours of their time. I support this personally via our flagship international volunteering programme, the Chairman’s Challenge. The programme continues to appeal to colleagues, with the number of volunteers signing up increasing year-on-year. From its launch in 2006, when 2,603 employees signed up, volunteer numbers have increased by 208 per cent to 8,011 in 2016, benefiting 92,720 individuals across the world.

Chairman’s Challenge
Prudential Malaysia

The PRUkasih programme offers financial aid to the urban poor, covering the basic needs of food and shelter and providing social protection for families. Prudential volunteers are actively involved in manning information booths, undertaking door-to-door visits and assisting with financial literacy sessions. Over 8,000 children have benefited from the education sessions, and over 20,600 families from 12 communities have had access to PRUkasih’s unique protection plan. By 2018, the programme aims to equip 50,000 children with money management skills.

Gan Leong Hin, CEO of Prudential Assurance Malaysia Berhad, says, ‘Financial protection and education are very close to our hearts. We have first-hand experience of seeing how devastating the impact can be on the lives of families living without financial security when something unfortunate happens to the main breadwinners. That is what led us to create PRUkasih. We are also committed to promoting financial literacy and inculcating the right values to raise our next generation in becoming financially literate. This is in line with our mission of providing financial freedom and peace of mind to all Malaysians.’

In conclusion, while the events of 2016 caused some uncertainty in our operating environment around the world, Prudential’s performance has been strong. It is a testament to the commitment and calibre of our people and the quality of the products and services we provide to customers that we were able to achieve these results. As I look to the future, I am confident that our people, our customer proposition and our culture will enable us to continue to grow.

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