Corporate responsibility review

Corporate Responsibility (CR) is a philosophy that is firmly embedded in Prudential’s business, and has become an integral part of how we think and behave.

Our strong commitment to CR reflects our recognition that stakeholders – including customers, employees, shareholders and communities – increasingly favour companies that embrace sound values around trust, ethics and environmental responsibility. Prudential’s own stakeholders take the same view. As we strive to meet this need, we are helped by the fact that these values have been fundamental to Prudential throughout the past 160 years, underpinning our long-established brand values of reliability and stability.

At the same time, we recognise that our performance in key areas of CR such as corporate governance, environmental management and employment practices can have a significant and positive impact on the Group’s financial performance.

Prudential’s main focus in 2008 was to ensure that our CR strategy continued to align with our business objectives and with our stakeholders’ concerns and interests.

Stakeholder dialogue

Our stakeholder engagement programme enables our employees and relevant external groups to play a part in shaping Prudential’s activities, and ensures that their reasonable expectations are translated into business value. This means listening to and working with our stakeholders on an ongoing basis, and being very clear about our intentions and priorities.

To gain useful feedback from our stakeholders and ensure our brand values are maintained, Prudential conducts surveys periodically on a range of topics including how our company is perceived, what things we are regarded as doing well, and where we could improve.

Customer focus

Prudential has over 11 million customers in Asia, nearly 2.8 million policies and contracts in force across the US through Jackson, over seven million customers in the UK through Prudential UK and around 0.5 million customers through M&G Investments.

Customers are at the heart of our business. Over 160 years on from our foundation, we remain committed to treating all of our customers fairly and believe that honesty, openness and transparency in all our dealings with customers are vital, both before and after they buy from us. We maintain effective relationships through regularly monitoring customers’ satisfaction levels and responding accordingly.

We never underestimate how important the customer is to us. We work hard to make sure we understand the individual needs of our customers around all of our markets.

A demonstration of this commitment to customers is Prudential Corporation Asia’s continued efforts to improve customer satisfaction. In 2008 we conducted a study on customer behaviour and perceptions of Prudential Corporation Asia across 11 markets, in particular assessing whether existing customers would be inclined to recommend its products and services to others, and areas where service could be improved. The study reaffirmed our focus on extensive agency training, as customers told us they attached a high priority to the provision of informed advice and guidance in assisting them with their financial objectives.

In the UK, the financial services industry is working with the UK regulator, government and consumers to improve the way it treats customers. To support these efforts, Prudential UK has signed up to the Association of British Insurers’ Customer Impact Scheme. This scheme is part of the industry’s commitment to driving continuous improvement in customers’ experiences, and as part of it we will participate in an annual customer survey, to measure changes in our customers’ experiences and attitudes.

Jackson’s commitment to achieving continuous improvement in the service and experience that we offer customers was recognised in 2008 in a leading annual study of call centres. The Service Quality Management Group (SQMG) gave Jackson the 2008 award for highest customer satisfaction in the financial services industry in North America in its annual survey. SQMG carries out benchmarking surveys covering more than 250 of North America’s leading call centres in various industries. Jackson also achieved ‘World Class’ status in the survey – the fourth year out of five that we have received the highest possible designation. For World Class status to be awarded to a provider, at least 80 per cent of all its customers in the survey have to rate themselves as ‘very satisfied’ with their experience.

Building financial capability

In 2008, the Group’s core financial education programme continued to focus on the need to play our part in enabling consumers to make the right decisions for their individual financial/savings needs. The decisions people face in this area range from debt management to saving for retirement. Informing and empowering consumers to make better decisions on key issues such as these will, we believe, build better and more permanent relationships between consumers and providers, as well as benefiting the wellbeing of both parties in the long term.

We began developing our financial capability programme in the United Kingdom in 2001 and are continuing to see significant progress, both in the UK and – increasingly – internationally.

In the UK, we work through partnerships with a diverse range of organisations such as Citizens Advice, the Personal Finance Education Group (pfeg), the Specialist Schools and Academies Trust, and the National Institute of Adult Continuing Education. As a result of these collaborative initiatives, thousands of adults and children are now benefiting from learning how to make decisions that will have a profound effect on their financial wellbeing.

We extended our financial literacy programme to Asia in 2004, starting with an innovative programme called ‘Investing in Your Future’. This community-based financial training initiative provides vital education to women, who are often responsible for planning their family’s financial needs. This was launched in China and rolled out in Vietnam and India. To date, more than 18,000 women have benefited from the programme.

Investing in our communities

In 2008, Prudential invested £5.3 million in a wide range of projects to benefit communities in which we do business, supporting education, welfare and environmental initiatives. This total investment includes a significant contribution made by many of the employees around the Group through volunteering, often linked with professional skills development. It also includes direct donations of £3.5 million to charitable organisations.

We recognise that many employees already make a significant contribution to charities as volunteers in their own free time. The Chairman’s Award programme was set up to recognise this considerable involvement in the local community. It also gives all the Group’s employees the opportunity to get involved with a local charitable project.

The charities that Prudential supports through The Chairman’s Award programme were selected following a Group-wide survey of employees. This identified our employees’ preference for projects that address the needs of children and the elderly within their local community. In line with this, we have identified sustainable projects which, where possible, have education at their core. This focus lies at the heart of our CR programme to raise levels of financial capability worldwide. In 2008, over 2,200 employees registered to engage in volunteering, and The Chairman’s Award programme supported over 50 projects around the world.

Similarly, Jackson has a strong tradition of giving back to the communities in which it operates. The Jackson National Community Fund was launched in 2007 and makes numerous grants to charities focused on children and the elderly.

In 2008, Jackson donated US$297,000 and more than US$25,000 as in-kind donations to a range of charities focused on the needs of elderly people and children. The volunteering programme for employees – Jackson in Action – saw Jackson employees volunteer more than 3,900 hours, a 62 per cent increase on the previous year. Volunteering activities included teaching financial literacy programmes to high-school children. Jackson also matched employee donations with more than US$400,000 to organisations on the Jackson National Community Fund list for 2008.

Employee practices

At Prudential, we do all we can to create an environment that enables us to attract and retain the right people – those who are committed and able to deliver top performance for our customers and shareholders. To achieve our aim of being a leading international retail financial services company, and to sustain the relative outperformance we achieved in our chosen markets in 2008, we need to have the right talent in the right places at the right time.

With this requirement in mind, our primary objective in Human Resources (HR) is to deliver the leaders and leadership the Prudential Group needs – and will continue to need – now and into the future. Our HR Strategy is to achieve this by focusing on five key challenges:

• Getting the right people into the business;
• building and rewarding performance;
• growing a strong talent pipeline;
• developing credible successors; and
• developing an organisation that works.

We will now look at how we continued to tackle each of these challenges during 2008.

Diversity

Our view of diversity complements our equal opportunities policy, which embodies the core principles of treating people fairly and reasonably according to their individual merits and capabilities. We strive to ensure that Prudential employees work in an environment where everyone is respected and treated equally on merit. We therefore fully recognise the value that a diverse workforce brings to our organisation. It is Group policy to give full and fair consideration and encouragement to the employment of applicants with suitable aptitudes and abilities, and to continuing the employment of staff who become disabled, and to providing training and career development opportunities to disabled employees.

Our diversity programme has particular application to international operations in areas where the equal opportunities culture is less well embedded than in the UK. Our Business Units also continued to drive numerous diversity initiatives. For example, ICICI Prudential Life in India built on the successful launch of EGDE, its diversity initiative, with new policies on flexible working including part-time employment and additional maternity leave. In the UK, PRUPIM employees provided mentoring to students as part of the Ethnic Minority Undergraduate Scheme run by the National Mentoring Consortium (NMC). Also, in the US, Jackson participated in the Gateway Leadership Programme through the Money Management Institute.

Building and rewarding performance

As part of our reward practices we believe it is important to enable employees to share in the success of the Group through share ownership. In the UK we operate two all employee share plans; a share investment plan and a ‘save as you earn’ (SAYE) scheme. Over 55 per cent of eligible employees in the UK participate in the SAYE scheme and nearly 30 per cent in the share investment plan. In Asia we operate two SAYE schemes similar to the UK scheme; one for employees and one for agents. Over 23 per cent of eligible employees and almost 10 per cent of eligible agents participate in these schemes.

In 2008 we continued to refine our reward policies to help us deliver a fair and transparent reward system to all our employees. We believe employees should be rewarded for the contribution they make to our business as a whole and we are committed to rewarding both the ‘what’ (results) and the ‘how’ (behaviour and competencies). As part of our reward practices, we regularly review and update our remuneration policies and procedures to ensure they are competitive against the market and support the growth of our businesses. We continued to do this in 2008.

Growing a strong talent pipeline

The talent and knowledge of our people is the key to Prudential’s future success – and in 2008 we continued to invest strongly in employee Learning and Development. Initiatives during the year included the launch in November 2008 by Prudential UK and ICICI Prudential Asset Management in India of ‘Managing for Success’, a comprehensive new programme to raise the confidence and capability of our managers.

Designed and launched in response to the findings of the 2008 employee survey, the programme provides managers with the knowledge, skills and tools they will need to manage their people effectively and help us achieve our strategic ambitions. November 2008 saw the launch of the first part of the programme to coincide with end-of-year reviews. Each element of the programme has diversity built into the content.

Developing credible successors

Identifying and developing Prudential’s future leaders is critical to our ability to sustain the success of our business over the long term. In 2008, as in previous years, we undertook a review of talent across the Group, identifying, developing and rewarding people with leadership potential. We also continue the series of Group-wide management development programmes we launched in 2007, assessing senior talent and identifying the development they need to be credible successors to future leadership roles.

A further key part of our efforts to grow our talent pipeline is the Momentum Programme. Launched in 2007, this aims to identify high-potential individuals early in their careers and provide them with opportunities to develop the skills needed to manage an international business. Momentum has a strong diversity focus and is open to people both within and outside Prudential. In 2008 it continued to attract a wide diversity of applicants from across the world.

Developing an effective organisation structure

Having engaged and committed staff is key to the smooth operation and success of our business, and effective communication is invaluable in achieving this goal. Each of our Business Units runs its own intranet site to keep staff up to date, and provides staff with an opportunity to pose questions to the Chief Executive of their business. There are also a number of employee consultation forums, such as the M&G staff Consultative Committee and the UK Insurance Operations’ Employee Forum.

To monitor our people’s level of engagement with Prudential as an employer, and identify areas for improvement, we conduct employee surveys in our businesses around the world. These show us how effectively our organisational elements are working, and help us take a ‘temperature-check’ of our culture to chart our progress towards embedding our four target behaviours – deliver, inspire, challenge and connect.

In 2008, these initiatives included employee satisfaction surveys at seven of Jackson’s subsidiaries in the US. The results were used at employee focus groups to gather input on possible improvements, resulting in the development of action plans including employee recognition, increased training opportunities, and career planning. Another example is M&G, which completed an employee survey for the fifth year running in 2008, and found that over 90 per cent of employees were proud to work at M&G.

Reducing our environmental footprint

Protecting the environment is essential to sustaining the quality of life of current and future generations. The challenge is to combine continuing economic growth with long-term sustainable development. Prudential is committed to ensuring that its policies and business actions promote the consideration of the environment.

Under the European Union Energy Performance of Buildings Directive, Energy Performance Certificates (EPCs) will be required for any building that is constructed, sold, or rented. EPCs will rate the energy performance of a building, enabling both property investors and prospective occupiers to consider energy efficiency ratings and levels of carbon emissions. We will be introducing EPCs, initially in the UK, for our commercial investment property portfolio and our occupied property portfolio. We will also implement the directive elsewhere in accordance with national regulations.

Sustainability is critical to our business model and we are in the process of formally integrating it into our investment process. PRUPIM was one of the first property companies to achieve the international environment management standard ISO14001 for its UK portfolio. In 2007, PRUPIM set up an innovative project called the Improver Portfolio to examine ways it can reduce a ‘typical’ property portfolio’s carbon footprint while maintaining or even enhancing investment returns. The Improver Portfolio consists of 25 PRUPIM managed properties covering all sectors.

In the US, Jackson has carefully monitored and worked to minimise any negative environmental impact since it moved to its current headquarters in 2000, working with state and local authorities on new projects which protect the environment. In 2008, all of Prudential’s North America operations – including Jackson, PPM America and PRUPIM’s investment properties – formally joined the US Climate Leaders programme, an Environmental Protection Agency (EPA) industry/government partnership that works with companies to develop comprehensive climate change strategies.

In Asia, we are currently in the process of grading our buildings using a clear and transparent environmental classification system. Where opportunities arise, we then intend to improve our overall environmental performance by migrating to properties in the highest category for environmental performance.

Responsible investment (RI)

Prudential is committed to responsible investment (RI), which involves focusing on the way the entities we invest in manage their own CR issues. M&G’s approach to RI is described in the booklet ‘Issues Arising from Share Ownership’, available at www.mandg.co.uk. To date, RI has tended to focus principally on equity markets, but its scope is now expanding to other types of investment, including property. With around £15 billion of funds under management as at 31 December 2008, PRUPIM is one of the UK’s largest commercial property investment managers and accounts for over 75 per cent of Prudential’s direct environmental impact in the UK. Through its participation in the Institutional Investor’s Group on climate change and the property working group of the United Nations Environment Programme Finance Initiative (UNEP FI), PRUPIM is helping to boost awareness of the implications of climate change for property investment, while also providing us with valuable insights into how Prudential can constructively address this important issue.

Supply chain management

Prudential recognises that its own social, environmental and economic impacts go beyond the products and services it supplies to include the performance of its suppliers and contractors.

With this in mind, our policy is to work in partnership with our suppliers who operate with policies and procedures consistent with the standards set out in our Group Code of Business Conduct, and to help them reduce their impact on the environment. Procurement practices in Prudential UK have been successfully accredited with the Chartered Institute of Purchasing and Supply (CIPS) certification, an industry benchmark of recognised good practice.

Payment policy

It is the policy of the Group to agree terms of payment when orders for goods and services are placed and to pay in accordance with those terms. Trade creditor days, based on the ratio of amounts which were owed to trade creditors at the year-end to the aggregate of the amounts invoiced by trade creditors during the year, were 21 days.

Donations

Prudential is committed to supporting the communities where it is an employer. In 2008, our Group spent £5.3 million in support of our various communities. Our direct donations to charitable organisations amounted to £3.5 million, of which approximately £1.9 million came from EU operations.

This is broken down as follows: Education £1,040,000; Social and Welfare £419,000; Environment and Regeneration £88,000; Cultural Activities £83,000 and Staff Volunteering £313,000. The aggregate figure for charitable donations from Prudential’s non-EU subsidiaries (Jackson National Life and Prudential Corporation Asia) amounted to £1.6 million.

It is our Group policy not to make donations to political parties nor to incur political expenditure, within the meaning of those expressions as defined in the UK Political Parties, Elections and Referendums Act 2000. In line with this policy, we did not make any such donations or incur any such expenditure in 2008.

2009 developments

In late 2008, we developed a new CR Framework to drive improved sustainability performance across our current activities, provide greater focus to our programmes and enable a more consistent approach to our reporting.

Under this framework, seven CR priorities have been developed as a basis for guiding and planning our activities.

1. Giving consumers in each country where we operate the confidence and tools they need to protect and nurture their financial security through building their financial capability.
2. Giving customers fair, transparent financial products through a variety of trusted distribution channels.
3. Supporting ageing populations and changing demographics by providing products that meet evolving customer needs.
4. Understanding and reducing our direct and indirect environmental footprint.
5. Being an employer of choice.
6. Investing to benefit the communities in which we operate.
7. Being open and transparent about our responsibility priorities, reporting challenges as well as achievements.

The approach we take to delivering against these priorities is closely aligned with our operating model. This means our CR activities are managed by our businesses, locally, since it is they who are closest to their customers and communities and therefore best positioned to deliver the most positive impact possible. Meanwhile, the Group sets the overarching strategy and governance, provides support tools and advice, manages external reporting and benchmarking, and drives Group-wide programmes such as The Chairman’s Award.

Importantly, we do not impose a one-size-fits-all approach to CR. Instead, our new framework ensures a common approach across the Group while allowing our businesses the flexibility they need to devise and implement programmes that best meet the needs of their local environment and stakeholder expectations.

In 2009, as part of the process of embedding the new framework, we are developing a new set of key performance indicators and assessment processes for each of our seven CR priorities. We will report against these in the years to come.