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Chairman's introduction

Strong, effective and transparent governance

Paul Manduca

Dear Shareholder

I am pleased to introduce our 2016 Governance report, in which we update you on our governance of Prudential during the year.

Good governance ensures decisions are made in the interests of the business and take into account the views of stakeholders, including our employees and our customers. Our strategy aims to achieve just this by ensuring we have a responsive governance framework that supports and challenges our executives’ decision making.

Board operations

As Chairman, I have responsibility for ensuring the Board process operates effectively and that we establish an appropriate ethos and culture at Board level, which set the tone from the top around the Group.

Driving that culture means that, when we meet as a Board, I ensure that there is open debate and constructive and effective challenge of the issues under discussion. We test issues rigorously and we have a robust decision-making process. I am pleased to say that we have strong contribution from all Board members and challenge from our Non-executive Directors, and the diversity of experience in our Boardroom comes through in the discussions. This ensures our decisions are balanced and all the risks are considered.

Supporting our strategy

I also ensure that our governance supports our strategy and the long-term success of Prudential. This year specifically, the Board has overseen major transactions in support of our strategy: the initial public offering of our Indian joint venture, ICICI Prudential Life; commencing the divestment of our Korean life business; the launch of a global risk and portfolio management platform for our asset management businesses; and growing our African business to include Zambia. Every major transaction, including those in the smaller parts of our business such as Africa, is brought to the Board. In each case, management and the Board worked closely together to ensure the right information was provided and key risks were robustly challenged.

Governance

We keep our governance structures under constant review to ensure they suit the needs of our business and our stakeholders. This year we have increased the remit of the Nomination and Governance Committee to provide oversight of our material subsidiary boards. In 2015 we identified Prudential Corporation Asia Limited, The Prudential Assurance Company Limited, Jackson National Life Insurance Company (Jackson) and M&G Group Limited as material subsidiaries of our principal business units. Over the first half of 2016, we appointed independent non-executive directors to their boards, including board chairs and chairs of the subsidiary audit and risk committees. To support our new independent directors, we designed a reporting and governance framework. The focus in 2016 was on embedding this framework. Howard Davies, Ann Godbehere and I have established good communication links with our new material subsidiary chairs and material subsidiary risk and audit committee chairs. We continue to see benefits from the greater alignment of the governance within our subsidiary businesses.

Looking forward

We have also focused further on the quality of our Environmental, Social and Governance Reporting in 2016 and I am pleased to announce that we will be publishing our first dedicated ESG report later this year. This report provides important information on our approach to managing the business in a sustainable fashion. It explains the actions to support this approach and the benefits we bring to our customers and stakeholders. We firmly believe this information, coupled with stakeholder engagement, improves the quality of the decisions we make.

However, we need to remain vigilant not only to our internal needs but also to external factors that may require decisions from the Board. It remains critical for the Board to have an understanding of and respond to policy debates in all markets in which we operate.

Culture of the Group

While the Board can ensure good decision making at an executive level, it is important that the same approach is taken throughout the organisation. The best way to achieve this is to ensure that we have a culture where managers at every level are accountable, stakeholder views are taken seriously and colleagues feel free to challenge decision making. We firmly believe the Board determines culture and the Board aims to exhibit the behaviour we expect from all.

Stakeholders

I also oversee the balance of Board consideration between the interests of our shareholders, customers, employees and our other key stakeholders. An important part of this is the active shareholder engagement that we participate in every year. We were pleased to welcome 186 shareholders to our Annual General Meeting in 2016 as well as holding frequent meetings with our institutional investors. The quality of our people is a key driver of our success. At Prudential, we create an environment in which our people find value and meaning in their work, and create shared value for our customers, shareholders and communities. The financial peace of mind that we help to provide to our customers remains the focus of Prudential’s purpose as a business.

Finally, I believe that good governance is based on the right level of oversight and challenge. I hope that reading the reports of my Committee Chairs that follow will demonstrate to you the work we have done this year to ensure that oversight and challenge are in place, and, more importantly, the tangible and positive impact it has had on our business. The methodology and results of our 2016 Board evaluation are also set out in How we operate.

Paul Manduca
Chairman

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