Prudential PLC and M&G PLC on Thursday became the latest London-listed insurers to publish restated 2022 results, as the industry adopted new accounting rules.
Aviva PLC on Wednesday had done the same, while also providing updated earnings and dividend guidance for 2023 and beyond.
Prudential on Thursday said that applying the IFRS 17 accounting rule to 2022 results resulted in an increase in shareholder equity as of January 1, 2022 of $1.8 billion to $18.9 billion. Adjusted operating profit for 2022, however, was reduced by $653 million to $2.72 billion. Both changes were in line with guidance the company provided back in March.
As of December 31, 2022, the contract service margin balance was $20.0 billion, which Prudential said represents ‘a significant stock of future profit’. New business written in 2022 added $2.1 billion to CSM, it said.
Put into effect from January 1 this year, IFRS 17 introduces the concepts of contractual service margin and risk adjustment. CSM is related to profit recognition and timing, while risk adjustment is more focused on the certainty surrounding the amount and timing of cash flows from insurance contracts.
‘While IFRS 17 is an important accounting change, resulting in changes to the timing of profit recognition compared with the previous IFRS4 approach, it does not change the total level of profit generated. As a result, it does not change the economics of our business,’ Prudential explained on Thursday.
For its part, M&G said CSM at the end of 2022 was £5.1 billion, ‘demonstrating the sizeable discounted future value from M&G insurance operations’. Adjusted operating profit for 2022 was £552 million, increased by 4% by the restatement. IFRS shareholder equity at the end of 2022 increased by more than 50% to £4.3 billion.
Looking ahead, the company said: ‘The implementation of IFRS 17 will not change M&G’s strategy, solvency position, capital management framework, or dividend policy.’
M&G said it remained committed to the financial targets for the end of 2025 that it set out in March. These include generating more than 50% of earnings from asset management and wealth operations. M&G continues to target generating £2.5 billion in operating capital over the 2022 to 2024 period.
Prudential will release its interim results on August 30, while M&G will release its on September 20.
Prudential shares were up 1.2% at 1,076.50 pence on Thursday morning in London. M&G was up 2.7% to 204.80p. Aviva was up 1.4% to 402.15p; it had risen 1.9% on Wednesday.
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