Background
Founded in London in 1848, the company provides life and health insurance, retirement and asset management services. It has dual-primary listings in London and Hong Kong.
Over the last ten years of our engagement, we have seen various positive changes in the company’s business purpose and structure, and gender diversity at the board level.
Our engagement
Business purpose and structure
We first met with the company in 2013 to question how the group – which comprised three distinct businesses with very different profiles – could unite around core values, culture and approach to risk management; something increasingly expected by financial services regulators. We raised this with the chair of the board that year and he broadly agreed with the challenge, recognising that Prudential was acting as a financial holding company.
We continued to engage on this topic between 2013 and 2022, including a meeting with the board chair in 2018 where he explained that the demerger of the UK and European business (M&G) would enable greater focus on the respective regions.
We had another conversation with the chair in 2020, where we queried the company’s common values and culture as it relates to the company’s structure. At this time, Prudential had two main businesses in Asia and in the US, together with a UK-based corporate centre. The chair agreed that the rationale for maintaining these businesses together could be better articulated.
We followed up with a letter to the chair later that year. Prudential had made progress in separating from its US business, Jackson, by selling an 11% stake to a life insurance company, Athene. We welcomed this development but encouraged the board to ensure that the remaining separation was carried out as efficiently and expeditiously as possible.
We continued to engage on this topic between 2013 and 2022, including a meeting with the board chair in 2018.
We also suggested that the company takes advantage of the strategic clarity that this separation provides to ensure that the board focuses on answering what sustainability means in the remaining Asian business, noting that the US and Asia are very different markets with different channels of distribution and few synergies. We argued that a fundamental review was necessary, with consideration given to conduct and culture, as well as the company’s sense of purpose. We identified the following issues as critical: climate change, financial inclusion, and human capital management.
In a follow-up meeting with the lead independent director in 2021, he assure us the board was focused on improving its sustainability strategy and that it was securing the full divestment of the US business.
Gender diversity
We also raised concerns around gender diversity as there were only two women on the 16-strong board. We followed up on this prior to the 2019 AGM. We indicated that, due to the insufficient progress made on gender diversity, we would recommend a vote against the chair’s re-election. In 2019, our expectations were for companies to have achieved a minimum of 30% female representation on boards and for FTSE 100 companies to have made clear progress on increasing female representation amongst their executive committees and direct reports.
At Prudential, women comprised only 13% of the board at that time. Furthermore, there was no female representation on the executive committee. As such, we recommended a vote against the chair’s re-election. In 2020, the chair gave us confidence that gender diversity would be addressed at board level and noted the appointment of a woman to the executive committee (effective from 2021).
In 2020, the chair gave us confidence that gender diversity would be addressed at board level.
Changes at the company
Prudential has undergone extensive restructuring since our engagement began. In 2019, It demerged its UK and European business, M&G, and in 2021 its US business, Jackson. It is now an exclusively Asia and Africa-focused company, with a CEO and CFO based in Asia.
The board has been refreshed to reflect the new structure of the company. There is now a greater breadth of experience on the board, and greater knowledge of the Asian markets. The board also now meets our minimum expectations for gender diversity (up from 13% to 45%) following the appointment of a new female chair of the board. In a meeting with the board chair in 2022, we congratulated her for the work that had been done since she joined in 2021.
Finally, the company has worked to update its purpose, values and sustainability strategy. These are now more aligned, and focus on three priorities: simple and accessible health and financial protection, responsible investment, and sustainable business.
