Finance and Capital Management
Shareholder perspective
Solvency II impact
Capital requirement turning into surplus
SCR generated by PVST2 is based on a 1/200 shock to PruFund's assets
PruFund impact on Shareholder balance sheet assuming a £10bn cohort¹ (in £m)
Development over time
Year-on-year movements in the balance sheet
Own funds
Day-1 SCR
800
assumed at
600
c. 1.8% of flows³
New business
capital strain turns
into surplus4
400
200
(200)
-
PVST²
Cash paid to
shareholders
SCR generated
by PVST³
Balance of
PVST and SCR4,5
Unwind of the
1
discount rate
Realisation of
2
'real' returns
3
Payment of SHT
to shareholders
Illustrative¹
Always Positive (as long as
discount rates are not negative)
Positive but only if real returns
are greater than risk-free
PVST² becomes cash on the
balance sheet
Solvency Capital Requirement
4
Exposure to
market risk
SCR changes as PVST2 and/or
asset allocation move over time
1. For simplicity, the charts assume EGR of 5% and Annual Charges of 1% remaining unaltered over the entirety of the holding period with no Unit Price Adjustments; 2. Present Value of the Shareholder Transfer; 3. Day-1 SCR highly dependent on prevalent interest rates. Chart shown before the
impact of any hedging; 4. Balance of PVST and capital requirements highly dependent on prevalent interest rates and investment returns. Chart shown before the impact of any hedging; 5. Assumes Shareholders retain cash on balance sheet and do not pay it out
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