FTSE100 financial services group Prudential has welcomed the introduction of a new solvency standard for insurers, despite taking a £115m hit to its shareholder funds because of its implementation.
Prudential’s group finance director, Philip Broadley, said the European embedded value (EEV) methodology, which requires insurers to disclose the premium value of their active book minus the cost of all options and guarantees, would provide shareholders with a clearer picture of overall performance.
‘We believe that the presentation of this information will enable investors to obtain a better understanding of the group’s capital position and profitability,’ Broadley said.
The EEV reduced Prudential’s shareholder’s funds by 1% to £8.5bn, although the company was able to mitigate a further reduction by undertaking a reclassification of each of its product lines.
In spite of the hit to its accounts, Prudential – the first UK life assurer to implement the methodology – said it was an improvement on the achieved profit measure used previously.
‘Prudential reiterates its belief that embedded value reporting provides investors with a truer measure of the underlying profitability of the group’s long-term businesses and is a valuable supplement to statutory accounts.’
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