Call Start: 17:00 January 1, 0000 7:21 PM ET
Prudential PLC (NYSE:PUK)
Q4 2020 Earnings Conference Call
March 03, 2021, 17:00 ET
Company Participants
Mike Wells - Group Chief Executive & Executive Director
Mark FitzPatrick - Group CFO, COO & Executive Director
Laura Prieskorn - CEO, Jackson Holdings LLC
Patrick Bowes - Head, IR
Marcia Wadsten - CEO & CFO, Jackson National Life Insurance Company of New York
Nic Nicandrou - CEO, Prudential Corporation Asia
Ben Bulmer - Interim CFO of Asia
Conference Call Participants
Farooq Hanif - Crédit Suisse
Jonathan Hocking - Morgan Stanley
Colm Kelly - UBS
Scott Russell - Macquarie Research
Oliver Steel - Deutsche Bank
Kailesh Mistry - HSBC
Andrew Crean - Autonomous Research
Larissa Van Deventer - Barclays Bank
Blair Stewart - Bank of America Merrill Lynch
Ashik Musaddi - JPMorgan Chase & Co.
Dominic O'Mahony - Exane BNP Paribas
Nick Holmes - Societe Generale
Gordon Aitken - RBC Capital Markets
Thomas Wang - Goldman Sachs Group
Mike Wells
Good morning. I'm Mike Wells. In this video, I'd like to cover 3 things: First, the progress we're making towards the proposed separation of our U.S. business, Jackson; second, highlights of how our businesses have delivered in 2020; and third, I will set out our go-forward investment case as an Asian and African-focused business.
As we announced in January, the plan is for Jackson to be separated through a demerger. This decision was guided by 2 priorities that have driven our strategy over the past 12 months: One, to achieve a fully independent Jackson at pace; and two, to best position our investors to benefit from the opportunities of Asia and Africa.
The demerger is designed to lead to the earlier creation of a separate fully independent Jackson than would have been possible through a minority IPO. It would deconsolidate Jackson in a single step. For shareholders, this accelerates the transformation of Prudential into a business purely focused on the exciting growth opportunities in Asia and Africa.
We've made considerable progress towards our most important near-term strategic objectives. We've hit many of the key milestones along the path to Jackson's independents. We've completed the transaction with Athene, we've secured the bank commitments for the debt financing. We appointed a new leadership team that positions Jackson for independents: Steve Kandarian as Chair; Laura Prieskorn, our CEO; and Marcia Wadsten as CFO.
Laura and Marcia, are 2 highly experienced professionals with long records of delivering for Jackson. Laura most recently served as Chief Operating Officer; and Marcia as Chief Actuary. Looking ahead to the expected path to completion the next steps of the regulatory filings, Jackson management roadshow and the regulatory and investor approvals.
I hope during this process that many of you have the opportunity to meet this quality management team. Subject to shareholder and regulatory approvals, we look forward to an independent Jackson trading on the New York Stock Exchange in the second quarter of this year. Following the planned demerger, Jackson intends to pursue a focused strategy that prioritizes optimization and stability of capital resources while protecting franchise value.
Jackson's financial goals as a stand-alone company will be designed to maintain a resilient balance sheet in order to provide shareholders with stable capital returns and profitable growth over the long term.
Now let's move to the financial highlights and what our Asia business has achieved last year. The macro environment for these results should be considered. It was a time of extreme volatility in equities, foreign exchange, bond markets, geopolitical uncertainty and the operational impacts of COVID-19. That said, they're very strong results.
In 2020, we demonstrate that we have a business, which is high quality, compounding, diversified, resilient and at scale. We continue to focus on high-quality health and protection business, and our insurance margins, that's our underwriting profit grew by 19% to $2.6 billion in 2020. The layering and compounding impacts are powerful. With client retention ratios in the '90s, we've again produced high-quality resilient growth in premiums.
This is despite the very challenging headwinds with respect to new business sales in 2020. This was demonstrated through the in-force base of recurring premium income, which grew by 6% to $20 billion. We continue to invest in relationships and to advance service quality and technology. All of these enhanced both our new business capability and our ability to service and retain those profitable client relationships.
Our geopolitical footprint, our multichannel distribution and our broad product mix demonstrate the diversity of our platform. As COVID-related restrictions have lifted, we have seen strong recovery in APE sales from a low in the second quarter. Nine markets and all product lines saw strong sequential APE growth in both the third quarter and the fourth quarter. Free surplus is up 8% and both Asian earnings and embedded value are up strongly with double-digit growth. What I'm particularly pleased with is that 9 of our life businesses had double-digit growth in IFRS profits.
Eight of our business has now produced over $200 million in earnings, and we are seeing increasingly material contributions from markets that not long ago were considered two small dimensions separately. I'm also excited that our prospects in Africa, which saw rapid growth in APE sales of over 50%.
We've accomplished a great deal over the last year, and I want to share some of our key achievements with you. We believe in a multichannel approach to distribution. The benefits of this diversification come through in the resilience of our business model, particularly so in 2020. This means being able to successfully operate in all 3 channels: agency, bancassurance and digital. And what's exciting for me is that this is an increasingly integrated and flexible approach to servicing our customers.
We've stepped up our agent recruitment with recruits up 4%, but we've also improved the quality and productivity of our agents.
We've created a culture whereby agents aspire to attain membership in the Million Dollar Round Table, which is an industry-recognized indicator of quality. The number of our MDRT agents has doubled in size during 2020. And Indonesia is a standout result here.
On bancassurance, we continue to invest heavily in our leading position. And last year, we added 5 new bancassurance partnerships, expanding our reach to around 20,000 bank branches. Most importantly, this includes establishing a 15-year strategic partnership with TMB. And then in the digital space, we've made great strides with Pulse, our digital mobile health ecosystem. Crucially, we control most of the intellectual property and maintain the client relationships directly.
There are around 3 billion mobile users in Asia, and Pulse is set up to meet the needs of consumers in this addressable market. Take-up has been strong with 20 million downloads and 2 million new policies written. We're driving hard, our focus on health and protection business, with 7 of our markets seeing an increase in their health and protection sales mix. Not surprisingly, our surveys show us that the pandemic has increased awareness and demand for health and wellness.
Asian consumers are looking for more flexible cover and insurance bundled with value-added services. And the protection gap in Asia is huge, with roughly $400 billion of health care costs being settled out-of-pocket by the consumer. Enhancing the customer proposition is at the heart of everything we do. And we've broadened coverage for new risks, added innovative new features. And last year, we launched 175 products, of which over 115 were traditional health and protection products. New protection policies in the fourth quarter rose by 10%.
We're also seeking to develop Eastspring, a unique capability and a leading asset manager in the region with $248 billion of funds under management. Inflows have recovered in the fourth quarter, and there is strong support from our life businesses with in-house funds under management, up 19% in 2020. We continue to enhance its capabilities to better capture the significant opportunities for mutual fund growth in the region.
And finally, we're making great progress in deepening our presence in China with our life operations. This is the single biggest opportunity in front of us, where we're able to reach close to 80% of the population and 83% of the GDP of China with our regulatory footprint.
We are growing faster than the market in the majority of our 99 cities and 229 sales outlets. The bank channel did exceptionally well during the COVID lockdown and our agency new business profit was very strong at 85%. The runway for growth here is exciting for us. Our life assets reach close to $22 billion, demonstrating the scale of this important business.
A crucial part of our multichannel model is digital. Pulses are all-in-one artificial intelligence powered digital mobile app. Consumers use it because of its broad suite of value-added services from the best-in-breed health and wealth area. In 19 months since its launch, we are now operating at scale in 15 markets using 11 languages. And with that, we've launched 37 digital products in 2020, winning 1.3 million new customers of whom 70% are new to Prudential, and most of them are a younger demographic, some 10 years younger than the off-line customer base on average. We're using micro products to generate customer leads for our traditional agents.
From there, we're able to sell full suites of products, the full premium products. In 2020, we generated 2.2 million leads for our agents, converting 120,000 of those into new business. And that produced $208 million in sales. It's already a valuable contributor to the sales overall.
Pulse is not just about customer acquisition. It's also about an end-to-end platform. Consumers are not only able to purchase insurance products directly online, but in a number of our key markets, they're also able to make claims and do policy servicing through Pulse. We're creating a new platform that can keep up with the demands required by many stakeholders while improving workflow efficiency, generating operating leverage through end-to-end integration.
So our 2020 Asia and Africa scorecard is just another reference point in our long track record. Our focus on operational improvements and disciplined execution has created a financial signature of double-digit growth over 10 years across all key metrics, new business profits, earnings and capital generation. Embedded value, perhaps the best proxy for our compounding growth has more than tripled over the decade and doubled in the last 5 years.
For a company of our scale with almost a century of history in this region, this is particularly an impressive achievement. Prudential has the discipline capabilities and the capital to continue this delivery.
So let's now move on to the group post separation. Our business model will focus on the long-term structural growth opportunities in Asia and Africa, building our market-leading positions and growth levers in our chosen markets. We have a high-quality, diversified portfolio of 26 businesses in 15 markets, operating across different maturity spectrums. In the more developed markets, such as Hong Kong and Singapore, we have top 3 positions.
In the largest scale markets of China, India, Indonesia and Thailand, we have significant operations, which represent huge long-term opportunities. Across the region, we have a leading multichannel distribution platform with around 600,000 agents, a leading position in bancassurance channel, and over 300 life and asset management distribution partnerships.
We are also building competitive advantages in digital. We have innovative and adaptable product skills, customer centricity is our mantra. And with Pulse, we offer an end-to-end solution, which covers health, wellness, fitness, diet, links to hospitals in many markets, all through our in-house ecosystem.
And in Eastspring, a leading Asia-based asset manager with assets under management of $248 billion, we have an excellent platform, giving us access to the fastest-growing demand for wealth solutions across the entire region. We have a strong track record and effective capital allocation in risk management. And Prudential will be focused on growth with a view towards achieving sustained double-digit growth in embedded value per shares. For shareholders, this means direct and focused exposure to this powerful compounding value creator, creating sustainable growth in operating capital generation in a unique and proven business model.
And Mark FitzPatrick will go into this in more detail in the financial review that follows. So to sum it up, 2020 has been an extremely important year. We've made substantial strategic, operational and financial progress. The most important near-term objective is the separation of Jackson, and the demerger is on track for completion in the second quarter of 2021. We expect the pandemic to accelerate digital and health trends further by highlighting the need for increased provision of financial protection and health. Importantly, COVID has also reinforced the alignment of our business and social purpose with our communities, our staff and our stakeholders.
Throughout the pandemic, we've demonstrated our ability to act at pace and our flexibility to adapt. And our results show the resilience of our underlying business. We know there's significant latent demand for our services, and our people are becoming ever more effective at working amid social distancing requirements.
We have invested almost $10 billion into Asia since 2013, including approximately $5 billion of inorganic investment to grow our distribution and to build our digital capabilities. Our organic new business continues to generate internal rates of return in excess of 35%, with an average payback period of 3 years.
The potential equity raise is intended to further enhance our financial flexibility as a pure-play Asia and Africa business following the redemption of existing high coupon debt. We see a breadth of opportunities in the region in which to invest. We see scope for further compounding growth with high risk-adjusted returns for shareholders as we continue to execute our strategy with discipline and enhance our platform.
In summary, we're well positioned for long-term value creation.
Mark FitzPatrick
Thank you, Mike, and welcome to you all. In this presentation, I will cover 4 areas: First, our Asia businesses; secondly, the U.S.; thirdly, some group related items; and finally, I will close by covering some of the financial aspects of the Prudential group following the separation of the U.S.
We are pleased and encouraged by the financial performance of our Asia businesses in 2020 despite the significant impact of COVID-19 and substantial market volatility. Our business has distinct and diverse capabilities across product development, digitally enabled distribution and disciplined capital allocation. We have worked to develop these further over 2020, and all of these underpin the financial performance summarized on this slide.
We have a high-quality in-force business. Our sales are mostly comprised of regular annual premiums, and we have a very high customer retention ratio. Our focus on health and protection products resulted in insurance margin representing 79% of our 2020 insurance income. All of these helped to provide stability in volatile markets. We are well diversified across the region, and balanced across distribution channels. We are agile and highly innovative, whether through our new and revamped products or our rollout of Pulse.
Over the year, we further broadened our offering with 175 new and revamped products. We are also focused on managing our cost base, and we have today announced that we have delivered on the $180 million central cost reduction target. The outworking of these qualities is the resilience of our financial performance.
Among these selected performance metrics for the group, I would highlight the following: The 13% growth in our Asia Embedded Value; a 13% growth in Asia IFRS operating profits; and an 8% increase in operating free surplus.
These are all driven by the quality and resilience of our in-force book. Although sales and new business profits were lower over the year as a whole, given COVID disruption, we saw an encouraging bounce back in the second half, with APE sales 20% up on the first half of the year.
Other highlights are the growth in Eastspring's fund under management to $248 billion after a strong second half recovery. And we are reporting a solid year-end group LCSM shareholder cover ratio of 328%.
So moving on to my first topic, the detail of our Asia results. In 2020, our overall renewal premiums increased 6% to reach $20 billion. Within that, health and protection renewal premiums were up 8%, and both demonstrating the value of our compounding model. A 19% increase in our insurance margin, largely earned from health and protection business, supported a $400 million growth in overall IFRS life operating profits. This reflects the continued growth of our in-force business.
As we indicated at the half year, we continue to benefit from favorable claims experience, which was partly due to the effects of the pandemic, for example, as elective medical procedures were deferred. Over time, we expect some of this favorable claims experience to unwind.
We now have 9 life markers with double-digit growth and 7 businesses, including Eastspring, earning an excess of $250 million. Although Eastspring's IFRS profit growth was more subdued than in prior years. As an integrated part of our business, it continues to benefit from steady net inflows of internal insurance funds totaling $8.5 billion.
Internal FUM of $138 billion now accounts for around 60% of total FUM, which at year-end was $248 billion, up 3%, driven by internal net flows and higher equity markets. Against this, we saw third-party net outflows excluding to M&G plc, of $10 billion over the year as a whole. Now this was driven by outflows in the first half, notwithstanding an improved performance in the second half, with $0.5 billion of positive net flows in the fourth quarter.
In addition, as we anticipated, we also had outflows of $10 billion in respect to funds managed on behalf of M&G plc, with further outflows of around $6 billion expected in the first half of 2021. Underlying cost control remains strict. With the 2020 cost income ratio stable year-on-year at 52%.
Turning now to Asia new business performance. COVID-related disruption varied considerably in both duration and severity across the region, and this pattern has continued into 2021. There is a chart in the appendix summarizing these effects.
Overall, new sales were down 28%. In large part, this reflects the impact of the Hong Kong China border closure earlier in the year, which led to an effective halt in Hong Kong cross-border business. Excluding Hong Kong, new sales were only 6% lower despite COVID disruption during the year.
Importantly, as COVID restrictions have lifted, we have seen a sustained bounce back in APE quarter-on-quarter from the low in the second quarter shown on the middle chart. Now a number of factors contributed to this.
First, we are well diversified by market, and we benefit from the portfolio effect this brings. While some markets remained under strict lockdown, others were rebounding strongly. Overall, new sales ex Hong Kong in the second half of 2020 were up 27% on the first half. And 6 markets delivered growth in the second half of 2020 compared with the second half of 2019.
Secondly, we benefited from a diversified and multichannel distribution platform. Being able to sell-through 20,000 bank branches was particularly valuable. In many markets, bank branches tended to remain open as an essential public service.
Thirdly, we benefited from tremendous progress in the implementation of our digital strategy. Virtual sales accounted for 27% of bank sales between July and December and 28% of all agency sales from April to December. Our agency force was also supported by leads provided by customers accessing Pulse, which we call online to off-line sales.
Over the course of the year, we saw a pivot to stand-alone protection products, reflecting increasing consumer demand. This contributed to a higher health and protection sales mix in 7 markets.
Finally, a word on our Africa businesses. These delivered an excellent 2020 performance, with APE up 51% to $112 million. In terms of outlook, we are encouraged by the sequential quarterly increases in sales in Asia, seen from the second quarter of last year. However, our continued success across all our markets will be dependent in part on government reaction to changes in the number and type of COVID-19 cases and the rollout of vaccines.
In respect of Mainland China/Hong Kong border restrictions, there is at present, unlikely to be a lifting of the border restrictions until the third quarter of 2021 at the earliest, but this will depend on a number of factors. We do believe there will continue to be demand for mainland Chinese customers for the Hong Kong product suite once the border reopens. Until then, this will continue to materially restrict our Hong Kong cross-border business.
This year, we have further enhanced our NBP and EEV disclosures. We have provided additional EEV sensitivity scenarios in particular for larger changes in interest rates, which will allow you to compare us better with some of our regional peers. We have also provided NBP and EEV results for each of our main business units, as well as for our growth markets combined. These, along with Eastspring, will provide the basis of our new segmental reporting from half year 2021.
New business profits largely followed new sales trends. Excluding Hong Kong, new business profit was 4% lower, and in Hong Kong, new business profit was down 62%. Among our larger markets, China, Malaysia grew NBP, largely reflecting resilient new sales levels. And in China, a more favorable business mix.
Within our growth markets, Thailand was up strongly by 38%, reflecting the activation of the substantial bancassurance transaction last year. The addition of each year's new business profits is really the key in our EV build. New business profits of $2.2 billion added 6% to the opening balance. And the 11% increase in the Asia segment EEV value build is underpinned by this new business profit and the $1.9 billion of expected return on our in-force business.
Once again, operating experience variances were favorable for the year, underscoring the conservative nature of our assumption setting under EEV. Asia segment embedded value grew by 13% over the year to $44 billion, more than doubling over the last 5 years. As we indicated with our half year results, after the separation of the U.S. business, Prudential will focus on achieving sustained double-digit growth in EEV per share. This will, in turn, be supported by growth rates of new business profit, which are expected to exceed GDP growth rates in the markets in which we operate.
Moving now to my second topic, the U.S. results. Jackson's new sales development reflects a combination of pricing actions taken in relation to its general account business and a strong sales performance from its core VA business. On a headline basis, U.S. operating profit was 9% lower. Both current and prior year operating earnings were impacted by the effects of deferred acquisition costs or DAC. And in the current year, we have seen the impact of the reinsurance agreement with Athene, which was effective from the 1st of June 2020.
And to provide you with a clear view of the underlying picture in the right-hand chart, I've deducted the favorable DAC deceleration recorded in 2019 to get to an adjusted base. We saw a moderate increase in fee income, largely reflecting the higher average separate account balance although this was effectively offset by lower spread and other income. This resulted in pre-DAC 2020 earnings, approximately in line with the 2019 adjusted base.
I will spend a few moments now going through Jackson's statutory capital development. So starting with the adverse 80% RBC point impact from the hedge modeling revision, which we announced in January. This was a revision of the hedge modeling used to calculate statutory reserves and capital. It is not related to hedging strategy. They are different. The new VA statutory framework, which Jackson adopted at the end of 2019, recognizes the cost and benefits of hedging in the statutory reserves and capital requirement computations.
In the preparation for the planned separation from the group, Jackson conducted a thorough review across all models and assumptions, which concluded in January this year. As a result, Jackson identified a modeling simplification, which needed to be revised. This change was reviewed by independent third parties. This modeling simplification reduced the level of hedge credit recognized in the statutory reserves and capital requirements, resulting in a $390 million reduction in surplus. Given this included a $251 million increase in required capital, this magnified the effect on the RBC ratio, leading to an 80-point reduction.
I'll now turn to the other components of Jackson's 2020 Capital Development. As expected, in-force Capital generation contributed $975 million to surplus, equating to 100 RBC points. Repricing actions resulted in an intended sharp reduction in FIA and FA new sales, which reduced new business strain to 23 points, roughly 1/3 of the level we incurred in 2019. Other nonoperating movements reduced RBC by 108 points and were mainly driven by the impact of falling interest rates, rising equity markets and elevated volatility. The Athene reinsurance transaction and equity investment combined added 92 RBC points.
Finally, reflecting more favorable economic conditions and following the recapitalization of Jackson through the debt raise, the team expects Jackson's RBC ratio at the point of separation to be in excess of 450%, though this remains subject to market conditions.
My third topic is the group results, where segment profits from continuing operations were 2% higher on an IFRS basis. Central overhead expenses are down 20%. And we have delivered on the $180 million annual cost reduction target, and this applies in full from the 1st of January of this year. Of this, roughly $80 million flowed into our 2020 results.
As previously announced, costs are targeted to further reduce by about $70 million from the start of 2023. We will continue to review the timing of the full realization of these further savings following the completion of the U.S. demerger. Combined, these actions will represent a $250 million annual reduction in costs compared to the $490 million cost level in 2018. Interest costs are also down sharply. Looking forward, we are considering raising new equity in order to enhance financial flexibility. Interest costs would reduce commensurately with any deleveraging we undertake. We also expect to refinance a large portion of our remaining debt at lower interest costs in due course, where we have the options to do so.
While restructuring and IFRS 17 costs increased, they did not do so by as much as we anticipated. In 2021, we will continue to invest in automation and aligning of core functions and processes to support growth. We will incur more costs with the ongoing IFRS 17 build-out. As a result, we currently expect 2021 restructuring and IFRS 17 costs combined to remain elevated. Thereafter, we expect these costs to reduce.
Short-term fluctuations and other items are largely driven by the U.S., principally resulting from incurred hedging expenses and adverse IFRS liability movements driven by lower interest rates.
These negative effects are partially offset by gains on several corporate transactions. Notably, the reinsurance transaction in the U.S. in June and the Reinsurance Commission received from a quota share transaction undertaken by our Hong Kong business. This transaction has been done as part of the group's ongoing asset liability management and helps mitigate the effect of the accounting mismatch that exists under the existing regulatory framework in Hong Kong prior to the transition to the new risk-based capital regime.
We are well positioned for the transition to the new group-wide supervisory framework. On the current local capital summation method, we ended the year with a shareholder cover ratio of 328%. Excluding the U.S. completely, this ratio would be marginally lower at 323%. We have been operating under the LCSM framework for a while now, and I'm pleased with the building track record you can see in the left-hand chart. Our updated economic sensitivities are illustrated on the right-hand chart.
The Hong Kong Leg Co approved the enabling primary legislation in July 2020 and the subsidiary legislation in February '21. The GWS framework is expected to be effective for Prudential upon designation by the HKIA in the second quarter of this year. As we have previously indicated, the GWS methodology is largely consistent with that applied under our current LCSM regime.
Our initial analysis indicates that all debt instruments, senior and subordinated, issued by Prudential will meet the grandfathering conditions set by the HKIA. If this is confirmed, the group ex U.S. shareholder LCSM ratio of 323% would increase by around 50 percentage points.
Turning to my fourth and final topic of today's session. Following the demerger of Jackson, Prudential was solely focused on the growth markets of Asia and Africa. I'll start with organic capital generation. Our Asia business is highly capital generative. And in 2020, for every $1 invested, we generated nearly $4 of new business profit.
The chart illustrates our operating capital generation over 2020 and chose in-force capital generation of $2.4 billion before central overheads. On the right, we show our uses of capital. We will continue to invest in new business, while paying dividends under the revised policy we set out in August last year. For clarity, the dividend has been calibrated to rightsize cost, not current costs, so dividend growth over the next few years will not benefit from expected central cost reductions.
The 2020 total dividend proposed set according to this revised policy, is $0.161 per share, equivalent to $420 million. In 2020, our strategic investments mainly related to broadening our distribution reach through new and extended partnerships and enhancing our digital capabilities. This takes strategic capital investment in Asia to almost $10 billion since 2013. And finally, at the bottom of the slide, you will see that our holding company's liquidity position remains strong at just under $1.5 billion after having invested $1.2 billion of central resources into Asia growth opportunities during the year.
To ensure we are well positioned to take advantage of the age of growth opportunities ahead of us, we are considering some balance sheet restructuring. Based on our year-end position, excluding the U.S. completely, our Moody's total leverage ratio would be 33%. While this would be manageable, it is clearly above the 20% to 25% range we are targeting over the medium term. Therefore, in order to enhance financial flexibility and delever the balance sheet, Prudential is considering raising new equity of around $2.50 billion to $3 billion following the completion of the Jackson demerger.
We have $2.25 billion of relatively expensive debt, which will be past first call date by the end of July this year, with annual interest costs of about $125 million. If we were to redeem all of this with the proceeds of the potential equity raise, it would put our pro forma end 2020 position towards the lower end of our target leverage range.
We have a strong investment case. Prudential is well positioned in a diversified portfolio of attractive markets with substantial opportunities ahead, is focused on high-quality, recurring premium business and on meeting the health and protection needs of people in Asia and in Africa. We have a modern distribution platform diversified across agency, bank and digital channels.
We have a leading pan Asian third-party asset management capability. And we have a strong record of value creation, evidenced by doubling of embedded value over the last 5 years and more than tripling over the last decade. All of this gives us confidence about our abilities to drive future growth.
To summarize, our 2020 financial performance reflects the strength of our business model. We expect to complete the separation of Jackson in the second quarter of 2021. In order to enhance financial flexibility and delever the balance sheet, we are considering raising new equity of around $2.50 billion to $3 billion following the completion of the Jackson demerger. Following the separation of Jackson, Prudential will focus on achieving sustained double-digit growth in embedded value per share. I look forward to engaging with you in the coming days and weeks. Thank you.
Operator
Ladies and gentlemen, hello, and welcome to the Prudential 2020 Full Year Results Call. My name is Maxine, and I'll be coordinating the call today. [Operator Instructions].
I will now hand you over to your host, Mike Wells, Group Chief Executive to begin. Mike, please go ahead when you're ready.
Mike Wells
Maxine, thank you. Well, welcome, everybody, to the conference call today for our 2020 prelim results and on the next phase in the transformation of Prudential Plc into a pure play Asian and African group with obviously exciting growth opportunities. As you've heard me say in January this year, we have 2 key priorities, one is to pursue at pace an independent Jackson and the second is to enable our investors to fully benefit from the opportunities of Asia and Africa.
So today, we're announcing further substantial progress in this journey. Firstly, indicative details in our timetable in H1 2020 for the intended demerger and a summary of what we can say about -- at this stage about Jackson's equity story. Documentation will follow in due course with more details as we proceed with the required approvals.
We can then give you full details on the timetable for the Q2 completion. Second, now that we have secured committed bank financing for Jackson, this will support its RBC, which we now expect to be above our 450 RBC target level on demerger, again subject to market conditions. Thirdly, our fully audited financial results are in line with our expectations, as highlighted to you in January.
I think this is an encouraging performance given the challenging conditions. And then finally, further details on the preferred route of the $2.5 billion to $3 billion equity raise that we announced in January.
So I'm delighted to introduce to you today by telephone to Laura Prieskorn, Marcia Wadsten, the new CEO and CFO of Jackson, respectively. And now Laura is going to give you some brief introductory remarks. We also announced in January the appointment of Steve Kandarian as the Independent Chair of Jackson's Board of Directors, and we expect to make further nonexecutive appointments with Jackson shortly.
And in February, we announced two new plc nonexecutive Board members Chua Sock Koong and Ming Lu are joining the plc Board. Both are Asian based business leaders, whose skills and experience are closely aligned to our Asian and African future and we welcome them all.
So also joining me on the call today are several members of leadership team including, Mark FitzPatrick, Group CFO and COO; Nic Nicandrou, CEO of our Asia business; Ben Bulmer, Interim CFO of Asia; James Turner, our Group CRO, [indiscernible] this as well, and then we also have our group in Jackson Investor Relations team.
So Laura over to you. If you would please to make some short prepared remarks and what you see as the key features of the business. Then another early morning for you and your team.
Laura Prieskorn
Thank you, Mike. I'm excited to speak with you today about executive outlooking, hard work towards independent. Over my many years at Jackson, I've helped guide the company's growth. My regional terms were leading U.S. annuity provider. Throughout our history, our culture of ownership and accountability has served us well and we'll continue to do so as we move towards an independent public company.
Our 2020 results, highlighting the hard work of our associates and the steps taken to position Jackson for a success as a standalone company. All well navigating in our response to the COVID-19 pandemic. As the former COO, I can personally speak to the dedication of our employees to our customers, our business partners, our communities and certainly to each other.
And although the pandemic persists, we continue to adapt our business and deliver on our ongoing commitments to helping American seek financial protection as they transition to and through retirement.
From an operating standpoint, given the low interest rate and tight credit environment, we've repriced our fixed -- in fixed index annuities and reduced our institutional new business, actions designed to optimize our capital position ahead of separation.
We actively managed our product offerings, which you saw on our updated variable annuity benefit. Our customers continue to place great value and the investment freedom we offer, and they were rewarded with strong separate account returns in 2020, a significant positives for both Sam and for Jackson.
We've maintained the leading market position with key distributors and increasingly diversified our channels to market. Customer service and operational standards have been industry leading and remain a priority as we meet customers needs throughout this period of COVID-19.
This collective effort contributed to a 13% rise in VA sales and a matter that increasing fee income reflecting the higher average separate account balance for this year. In 2021, you can expect us to remain innovative in our approach to the market, we'll forward to future updates on the rollout of our registered index linked annuity or RILA, which meets market demand for equities exposure with a limited downside protection structure.
Jackson is well on track to demerge in the second quarter subject to its shareholder and regulatory approval. You've seen us take important steps as we prepare to operate as an independent public company. Last June, we announced positive capital transactions with a theme, including in a reinsurance agreement and an equity investment. In addition, our hedging strategy continued its long-term track record protecting our business during stresses, most evident in the stability provided during volatile first quarter.
As Mark, explained in his video this morning, there are recent hedge modeling change which reduced our year-end RBC as a revision under the new statutory accounting frame work related to hedge credit. It was not a change to our hedging strategy and does not change our view of in force capital generation.
As we move towards separation, Jackson is pursuing a focused strategy which prioritizes the optimization and stability of capital resources, while protecting our franchise value. This strategy combined with Jackson's well recognized brand and award winning customer service will allow us to further build upon our position as a leading U.S. annuity provider.
We'll have to give further details in our SEC Form-10 filing, but I want to highlight today that Jackson's financial goal as a standalone company, will be to maintain a resilient balance sheet provide shareholders with attractive capital returns and profitable growth over the long term.
Both Marcia and I will look forward to spending more time with you here today, but for now I will turn the call back over to Mike.
Mike Wells
Okay. Thanks, Laura. So despite quite a extraordinary market and operating conditions the business is across the group have proven, I think extremely resilient, adaptable and agile. In particular, we can confirm the overall quarterly sales trajectory in Asia continues to improve during the second half of 2020. Our presentation slide is up on the web today, go and visit for more details.
By pivoting to a demerger, we're aiming to complete the transaction by the -- excuse me, the transformation of Prudential into a business, it's purely focused on the exciting growth opportunities of Asia and Africa sooner than what have been possible into the minority IPO. This spell us out under the IPO route Prudential and our likelihood could have been a majority owner Jackson for some considerable time. However, we expect to complete the demerger in the second quarter of this year.
Going forward, the pure play Asia and Africa PRU is in essence a new company. We want that new company to have the best possible start and to have the further financial flexibility to invest in growth opportunity. So we said in January that we are considering raising $2.5 billion to $3 billion in equity, primarily the redeem relatively high coupon debt in 2020 was a year of substantial in organic investments, for example, in Thailand and today you saw we announced a very significant 15-year extension and an expansion of our MSP bancassurance partnership in Vietnam.
With this agreement Prudential will become MSP's single partner in nationwide, Vietnam's life insurance sector has significant growth potential with insurance penetration, a roughly 1.6%. Being well positioned in these fast growing economies as an important part of how we can achieve our objective that's the same double digit growth of embedded value per share and we believe that there's clear benefits in the group as an Asian focused company of increased institutional ownership in Asia, in enhancing the liquidity of our ordinary shares in Hong Kong.
So as a result of that our preference is to raise the new equity through a fully marketed global offering, institutional investors, concurrent with the public offering in Hong Kong to retail investors. And this will be undertaken after the Jackson demerger and obviously subject to market condition. It's been a lot of time assessing the ways we could achieve our objectives with this potential equity offering, and we've also consulted widely with shareholders in Asian focused investors.
Our teams continue to get better and better at adapting to the restrictions caused by COVID-19 and meeting the needs of our customers. As I indicated on the pre-recorded video published earlier this morning. I also see that the virus has reinforced demand for our products and services as well as the aligning even further with the social purpose of the group. So to that end I want to highlight what we'll shortly publish with our full report in accounts and importantly our updated ESG strategy.
Our ESG strategy, there's still many ways in which the business model and strategies support our stakeholders. So let me briefly go into the 3-core teams here for you. One, we give people greater opportunity for good health and financial security and we're doing this at scale. We are moving beyond our traditional role of financial protection to provide services that also prevent and postpone on this. And we are increasing our focus on the underserved parts of the population. Our multi-product, multi-channel approach of Asian bancassurance is now 20 million downloads on polls. I'll show you how active we are in doing this.
Second, we stewarding the human impact on climate change, we're setting new and stretching targets for Scope 1 and Scope 2 greenhouse gas emissions with the aim of becoming net carbon neutral across these two scopes by the end of 2030 and we're assessing similar or suitable targets in respect to carbon emissions from our investments.
Crucially, as an Asian and African focused business we're pursuing an inclusive transition in the market. We're also building social capital, promoting diversity and prospering culture of inclusion, we are prioritizing digital responsibility through our organization, digital capabilities in new markets and engage with new demographics using new products sets and services.
So to close, we are well positioned for growth. And today's announcement shows we are moving at pace, and executing on our strategy. And now let me turn it back over to Maxine for to take question-and-answer session. And as you'll be aware everybody there's a considerable amount of regulatory work going on. So some of our answers are going to need to be limited until we can share more detail with you, but please bear with it. Patrick as usual, pull us back if we straight too far. Maxine do you want to open it for up Q&A please.
Question-and-Answer Session
Operator
[Operator Instructions]. Our first question comes from Farooq Hanif from Crédit Suisse.
Farooq Hanif
Congratulations today on the steps you've taken. So just my first question on Jackson, actually. Given the positive news you've given on the outlook for the RBC ratio. And it seems that your capital generation will allow that to potentially quite quickly. What are your kind of early thoughts on capital return policy. Again, I know you've probably will kept on details but just do you feel for example that the 450 level allow -- is a really good base? That's question one.
Question two, just on Mainland China. The recent regulatory move to potentially allow greater oversees insurance and share ownership.
Just wondering what your thoughts were on those regulatory developments and whether that's actually a benefit or a risk to your business model? And lastly, just on Pulse. So given the very quick payback period that you have on health and protection in Asia, can you guide us a little bit to when Pulse will appear in your P&L? When will it start to be kind of an isolated contributor to the group?
Mike Wells
So let me give a couple of general comments, and I'm going to go back to Laura and Nic on your -- on the specific answer. So I think one of the things with Pulse is critical to keep in mind is what you're seeing is an integration of the channels as much as you are -- the success in each one. So we're growing agency and they're more efficient and more effective. We're growing banca maintaining sort of leadership position there and again, getting involved in their digital platforms and then obviously growing now the digital platform with the sheer scale of Pulse now and its success.
But they also intertwine. So you have leads going from Pulse to agency, you have banca using Pulse technology on their platforms, there's a -- we talk a lot about the reporting on this, and we'll continue to give you enhanced reporting on our activities as we move forward. But it's an interesting challenge because it's a bit -- I'd say, the closest analogy we have in-house would be Eastspring because Eastspring's success is both related to it's sister companies in the group and it's also related to its ability to raise money with Asian investors directly and investors outside of Asia who want to invest directly in Asia, and the scale of all of those make each piece more successful. I think you're going to see Pulse continue down that sort of trajectory.
So we'll keep giving you more detail, but I think you -- if you pull it apart, you underestimate the value of those intersects. So Nic, do you want to talk a little bit about -- I'm sorry, let's go Laura first on what little you can say about capital return given the current SEC filing, but a little direction on your views on that and then Nic, on the other two, if you would, please. Laura first.
Laura Prieskorn
Okay. Sure. Thank you, Mike. A couple of points I would like to share is that the health of the existing imports book is very strong. And you would, of course, expect this to be the case with the equity markets near all-time highs. The other point I would share is, keep in mind, we have a long history of capital generation and remittances to Prudential. And then in relation to our overall financial goals, I would just point out that we'll have more detail available in our upcoming SEC filings.
Mike Wells
Nic, do you want to share ownership rules in China and Pulse?
Nic Nicandrou
Sure, Mike. Hello, Farooq. I mean the share ownership rules in China are neither really a benefit or a risk to our franchise. It's a 50-50 JV. Yes, we're interested in buying up, but that's now dependent on our partner. So nothing -- as I said, no, neither a risk or a benefit.
In relation to Pulse, I mean, clearly, the costs that we are incurring, both technology and marketing, are included in the numbers that you see. On average, it costs us about $1 to secure a download. That gives you a sense of some of the marketing spend. I mean the technology spend is part of our change agenda. And that we have a significant spend each year. So we are redirecting more towards this particular platform. The sales that we're generating, we've generated 3 million of APE -- $3 million of APE from direct-to-consumer small products. But importantly, we generated $208 million of APE from referrals to agent.
At least 34,000 agents have done at least 1 sale from referrals that have come from Pulse. The economics of that are very similar to any of our products. And given that the vast majority of what's been sold tends to have a health and protection flavor and tends to come from the markets of Hong Kong, Malaysia, Singapore, Indonesia, which is where our downloads are greater. They're very rich. They're very rich from a margin perspective. So the economics are there in the numbers that you see, both in terms of top line, new business value and contribution to IFRS. I mean contribution to IFRS will lag. This is like any other start-up. But it's part and parcel of what we offer. It's integrated with our other panel offering.
Farooq Hanif
I mean, just to come back on the share ownership, I was referring more to rules about individuals in Mainland China and their ability to buy foreign insurance products and liberalizing that. I'm happy to take that off-line, but I know there's lots of questions on the line, but that's what I was referring to more than your ownership of the JV.
Nic Nicandrou
I see. So you're referring to the announcements that were made on sales priorities for 2021?
Farooq Hanif
Yes, that's right, yes.
Nic Nicandrou
I mean, yes, we note that with interest. They did say that they will study how -- when and if so, how to open up the capital account. The capital account is the component of the $50,000 a year that can be directed to buying effectively protection linked products or protection products with a saving element. I mean, clearly, if that was to come to fruition, it will unwind some of the restrictions that were imposed in 2017.
And it may even lead to using the Union pay card again to affect transactions, but we're getting ahead of ourselves. It's positive. They're looking at it. And it reinforces the -- it will be positive for our franchise were that to -- were they to conclude to reopen aspects of the way in which people bought that were in place pre-2017.
Mike Wells
Farooq, thanks for the questions. Appreciate it.
Operator
Our next question comes from Jon Hocking from Morgan Stanley.
Jonathan Hocking
I've got three questions, please. Firstly, on Indonesia, I think from the dependencies that you've got sort of increased market share of the traditional business, about 20% or so, I wondered whether you could comment on where you see that topping out? And how do you see the return profile for the traditional product versus what you've historically written in that market? That's the first question.
Second question, in the slides you've sort of reiterated the guidance you've had before about the sort of double-digit EEV growth per share going forward for the sort of pro forma Asia group. That's slower than the traditional guidance that you've had sort of doubling the business every sort of 5 to 7 years or so. Is that predominantly a function of the sort of discount rate coming down on the EEV with rates over the last few years? Or is there something structurally you're seeking there in terms of growth slowing over time? That's the second question.
And then the final question, on the Holdco cash on a pro forma basis, you sort of got $1.5 billion at the end of 2020. What sort of level do you want to run in terms of central liquidity going forward once you complete all the restructuring?
Mike Wells
Thanks, Jon. Nic, do you want to take Indonesia and then Mark the EEV question and the Holdco cash question, please?
Nic Nicandrou
Okay. Let's start. Hello, Jon. Let's start with Indonesia. We've done a number of things this year. The -- we've launched, and there's more detail on an Indonesia specific slide, but we've launched around 60 new products. Remember, we've been saying for some time that we're looking to broaden out the offering that we have in place. And in the past, we had effectively a link protection flagship product, and that's pretty much what we did, linked with riders.
Over the last few years, and it further accelerated this year, we started offering stand-alone protection products, whether that's hospitalization, whether that's simple, critical illness, whether that's medical. Clearly, not linked -- not having a savings element, so to speak, pure protection. And the vast majority of those 60 products were on that nature. Now against the backdrop of the pandemic where there's been an enhanced demand for all sorts of protection and against the backdrop where people are a little more worried about the financial outlook, selling pure protection with lower ticket sizes has found favor with consumers in Indonesia. So that's what you see. Many more products, pure protection in nature bought by with lower ticket size. So even though -- just to give you some more color, even though our sales are down 30% year-on-year, the number of cases that we wrote in Indonesia this year is up 10%. That kind of gives you a sense to how we are fulfilling demand in the current environment.
The contribution to our sales from pure protection has gone up to around 38% of our sales, up from 8% the year before. So that's what's driving that uptick in the market share for traditional. It's not endowment. It's not guaranteed type products. It's candidly pure protection without a savings element. At the same time, we pushed very hard on the Sharia component of our business. We're a market leader in Indonesia. We have 35% market share. So as we have created or manufactured these products, we've issued them both in conventional and Sharia format. And the Sharia segment is highly underpenetrated. We have a 35% market share. We have 400,000 customers to give you a sense, modern population of Indonesia is 220 million.
So again, lower ticket sized products found favor with people who buy Islamic insurance. And again, which is why even though our overall sales are down, our APE from Sharia products was up 6%, NBP was up 27% because of the high health and protection component. And we've sold twice as many policies as the year before.
So despite the fact that the onset of COVID in April of 2020 slowed down, if you like, or halted the progress that we have made in the previous 2 months in growing this business, we've continued to increase the -- broadened our product set and finding favor with consumers in the current backdrop, and we're a better business for it.
Mike Wells
Thanks, Nic. Mark, do you want to EEV and Holdco cash, please?
Mark FitzPatrick
Yes. Sure. Jon, so on the EEV, the double-digit EEV growth, not trying to signify or signal anything particular other than an element of actually allowing for slightly lower rates in our projections and also acknowledging there is a somewhat larger base to grow front.
So there isn't anything in particular that you're missing in that particular piece. And as for the $1.5 billion central liquidity, very comfortable with that level. I think we did expect a lower level of central cash to be held post demerger. And as the group demerges from Jackson, our central costs will be coming -- continue to come down. Interest costs come down in light of the potential equity raise.
So all of that will mean that we've got a very good cover in terms of our central cash level. But we're very comfortable with what it is at the level it is at the moment, and we'd expect to see that come down a little bit as we get the other side of Jackson.
Mike Wells
Thanks, Jon.
Operator
Our next question comes from Colm Kelly from UBS.
Colm Kelly
I think given the guidance on the U.S. demerger, quite clear, I'll focus mainly on Asia. The first question is just on the health and protection mix. You made very good progress on increasing that mix over time given the product strategy. I know there's a full year, the percentage is slightly lower than that at the half year at 27%. So is that just a function of market disruption in 2020? Or is there anything more related to the use of more digital distribution in 2020 that influence that health and protection mix? And that's the first question.
The second one is on Solvency capital and specifically to Hong Kong. So I noticed that's ahead of the move to the Hong Kong RBC regime you've put in place and good derisking of reinsurance treaty ahead of that, is there any -- are there any further management actions you're looking to take with respect to the Hong Kong portfolio in advance of the move to the RBC framework?
And related to that, I suppose, in the context of the fact that the move to the Singapore RBC actually benefited the group Solvency, the group LCSM by $2 billion or more. Are you able to provide any more updated guidance on what you can be impacted to the Hong Kong capital levels will be as you transition to RBC? So I'll leave it that there.
Mike Wells
Appreciate that. Thanks. Nic, do you want to talk about health and protection mix and then Mark the capital regimes and the actions required or not required going forward for RBC, including -- probably should mention the group regime as well.
Nic Nicandrou
Okay. So on health and protection mix, the reason, candidly, the reason is change is because of how significant in terms of size, Mainland China, businesses in Hong Kong. We had the benefit literally of a month in 2020 of just over with pipeline business. And that factor alone is that's way that overall ratio.
When you go beyond that and you look at market by market, the health and protection mix actually increased in 7 of our markets, including places like India, which was strong, Singapore, to name a few, Vietnam, Thailand, so a few markets. So that's really what's driving. And it's on the back of this, that really, we've seen margin improvement in 10 of our markets last year, notwithstanding the drop-off in overall sales. Look through other metrics, the health and protection renewal premiums were up 8% to $6.3 billion. This is the totality of the premiums that we collect from in force as well as new business, looked at the contribution to IFRS earnings of our health and protection business, if you like, the underwriting result, that was up 19% to $2.6 billion.
And of course, the -- at 19% increase compared to 14% for the life business, of course, the contribution to that total has increased to 74%. So no, there's nothing that we're seeing in the mix of that portfolio that is making us anything other than happy. And we clearly would like the border to open and for that high ticket size critical illness to sales to Mainland Chinese customers to resume. We've shown a lot of innovation in that space, and we're ready to go once the border opens up.
Mike Wells
Mark, on RBC management actions?
Mark FitzPatrick
Colm, maybe if I step up a level first to GWS and then I'll cover off the RBC. As you can see, we've noted that the group-wide supervisory regime is that much closer. We're expecting the rules to come into operation on the 29th of this month. The rules in the framework will be effective for ourselves and upon designation by the HKIA in the second quarter of 2021, and that will be subject to certain transitional arrangements.
So the GWS methodology is largely consistent with that which we've got at the moment in terms of the LCSM, and we don't expect any significant changes. There is a potential upside, as I think I've mentioned before in terms of what might happen in terms of the debt instruments, that all of them may be recognized, and therefore, it would act as an uplift to our LCSM ratio.
In terms of the RBC 2 for Hong Kong, we continue to work closely with HKIA on that and as we move towards that. Clearly, as Asia markets generally transition to more realistic solvency regime, we tend to see benefits, and that was kind of I suppose what you're alluding to and referring to in terms of Singapore, and we would expect to see a benefit in terms of the Hong Kong regime. That is still all to settle down.
So I don't want to kind of get ahead of ourselves and kind of giving you any kind of number. As soon as we are comfortable as soon as the regulator is comfortable, we'll be able to share something more fully with you on that side. But generally speaking, as the markets move towards these new kind of realistic regimes, we do see a very significant benefit coming through.
Operator
Our next question comes from Scott Russell from Macquarie.
Scott Russell
Three questions, if I can, about Asia. Firstly, in Hong Kong, the -- I'm interested in the half-on-half increase in margins. It was surprisingly strong in the second half, which is surprising given rates were lower in terms of assumptions and acquisition costs would have been higher the policy as well. So maybe just a bit of explanation how the margin was so strong there in the second half? Is it all products -- product-related or is it something else going on? The second question is just picking up on Nick's comment about NBP cross-border sales being ready to go. And I've got Slide 63 in front of me here where -- I'm wondering what the source of the data is here. There have been some reports of agents who are based in Hong Kong who traditionally focus on NBP on visitors who are currently residing in Guangdong until the border reopens and then do they transition back to Hong Kong to continue their cross-border sales.
I'm just wondering if that's an opportunity for the crew, whether you have agents -- some of your agents focus are in Guangdong at the moment, and that's where you're getting the confidence from the surveying future customers? And then finally, just on the orphan estate. The unallocated surplus now at $5.2 billion. This is a headache to value. But I'm more interested in why it just keeps rising, what does that say about the level of bonuses that you're paying on win profit policies at the moment. Is there anything I can infer there?
Mike Wells
Thanks, Scott. Nic, why don't you do the first 2 and then Mark on the third?
Nic Nicandrou
Okay. The increase in margin in the second half is purely a protection, a business mix change. I mean, clearly, with the border closed, our attention turned squarely on the development of our domestic franchise, maybe I can give you a little more color. Historically, in the domestic franchise, we've targeted the affluent, the high net worth. Around 500,000 of our 800,000 domestic customers are in that segment. And we've -- over the last 12-or-so months -- 12 to 18 months really are -- we've had a twin strategy.
The first one was to upsell to this segment. An example of that being the qualified diverted annuity plan, which were launched in 2019 and through which we secured around 16% market share. So that shows the power of our franchise. And to your -- to the specific question, recently, we've refreshed the high-end critical illness offering in this -- for that particular segment.
Now in addition to that, we've sought to broaden our presence in the mass affluent in the mid segment. Again, there, we launched a VHIS, the Voluntary Health Insurance Plan, in 2019. That was an entry-level product. But in the second half of this year, we extended it to a mid-tier product.
So much so that our market share of that particular offering increased from 7-or-so percent in 2019 to more than 20% in the second half of this year. And there were a number of other stand-alone protection products that were also launched again in -- like we've done everywhere else in light of the pandemic, in light of enhanced demand for protection.
And that's really what you're seeing coming through. I mean, clearly, with the 600,000 downloads that we had on Pulse, 50% of those were new to Prudential. Again, our agents were given leads. And really the first product that is often sold to that particular cohort tends to be a protection product. So that's really what's driving it is an uptick in sales from agents in the second half of the year relative to the first half. And because the agency does a lot more health and protection, that's what's driving the uptick that you see.
Less to do with rates, and less to do with the savings component. Really, a lot of the profit comes from health and protection. Savings is participating inevitably, the margins of those are more modest.
Mike Wells
Yes. Mark, do you want -- with profits, please?
Mark FitzPatrick
Sure.
Nic Nicandrou
No I didn't -- sorry Mike. I didn't answer the question on agency. Yes, I mean, we are clearly maintaining our distribution infrastructure is key. A lot of the agents that were purely Mainland China focused haven't been very busy in 2019 and remain. So some are in China, not all. But clearly, they can't market in China. It's against the rules. A number of others we focused their efforts into the domestic market. And as I said on the last call, Fed by -- often Fed by leads from Pulse in order to help them establish a client base.
Mike Wells
Okay. So Mark.
Mark FitzPatrick
Okay. So on the with profit fund, I get that it may be a messy thing to or difficult thing to value, but it's an incredibly valuable thing to have in the business. So as you say, we have $5.2 billion of unallocated surplus, and that's really there to fund future bonuses. And it's a bit difficult to read into bonus rates from that number. It clearly grows the business grows and market returns generate more capacity to be able to pay future bonuses, and that kind of message what is held by the unallocated surplus until it's converted into terminal bonuses. So really kind of see that as the capacity for future bonuses that would come out to the policyholder. And then clearly, a percentage of it would come out to us as shareholders. So it's an incredibly valuable component of the Asia business in terms of the way the risks are pulled and our earnings from them tend to be fairly back-end loaded, but it is an incredibly powerful and key differentiator.
Scott Russell
Can I just quickly pick up on that. I mean, I guess, I'm trying to understand why you're not actively trying to reduce it because it's money that's stuck there that doesn't really belong to anybody. And if you're paying out, it gives you a power to pay more bonuses with profit policyholders. Is it going up simply because the asset balances increased during 2020 or is it going up because an insufficient level of bonus was paid out to policyholders unallocated to -- during the year?
Nic Nicandrou
If I may, the unallocated surplus is the surplus over and above asset share. So it doesn't -- it's not correlated to, if you like, the phasing of your annual terminal bonus. It simply reflects the overall size of the fund. This is a $63 billion fund that it needs to have a sufficiently healthy state in order to provide the investment freedom and to provide the working capital in order to continue to grow that particular fund.
So we don't think it is out with the size of the overall fund. And as I said, it provides the investment freedom that allows us to manufacture a yield that allows us to compete in the savings part of the sector here in Hong Kong.
Mike Wells
Thank you.
Operator
Our next question comes from Oliver Steel from Deutsche Bank.
Oliver Steel
A couple of questions. The first is, I wonder if you can just give us a little bit more granularity fourth quarter on fourth quarter and third quarter on third quarter in terms of sort of VNB growth in the different markets because otherwise, it's incredibly difficult to try and sort of forecast ahead over the next 12 months for new business.
The second question I've got is really on the sort of group structure and the management going forward. I mean you're becoming an Asian-focused business, a little bit of Africa. But you still got head office and top management in London.
And in fact, you've got sort of 2 layers of management now because you've got sort of Head of Asia and you've got a sort of Chief Executive of the HR group. So I'm just wondering, what are you -- what do you see long-term in terms of the management structure? And what do you see long-term in terms of the sort of head office of the group?
Mike Wells
So the quarter-on-quarter, Nic, I'll let you address that, then I think I'll take the group structure. I think your question is Oliver is am I here. So I'll come back to that. Nic, why don't you do Q4-on-Q4.
Nic Nicandrou
Oliver, I'd point you to 2 slides in the appendix. So Slide 59 first, which gives that quarterly progression in the middle section of that slide on new business profit, admitting it's not by market, but it gives you the uptick. You see 28% uplift in Q3 on Q2 and another 40% uplift Q4 on Q3, at least sequentially. And then the second slide that I would point you to is 39, which gives -- in the commentary, the -- some color around the market dimension.
And really, what we will point is that there are 8 markets and they're listed in the first bullet on Slide 39, which have all seen upticks in 3Q versus 2Q and upticks in 4Q over 3Q, including Hong Kong overall. Interestingly, notwithstanding the fact that -- remind you, Q2, there was no Mainland China, but important markets, such as Singapore, Malaysia, Thailand, Vietnam and Philippines.
So pretty much mirrors the uptick that we saw in APE. And if you go into the individual country market slides further back from 59 and you will see quarterly bars that -- we don't show the numbers, but they are proportionate to the upticks that we saw in H1. So they've come across the piece, pretty much aided by agency coming back more strongly, more health and protection being done and just generally, volumes going up as we retooled the business and as we got used to doing business in the current environment.
Oliver Steel
Can we work out from these, what sort of fourth quarter on fourth quarter growth was ex Hong Kong? Because I mean you're always higher in the fourth quarter than in the third quarter. But you're normal in the fourth quarter.
Nic Nicandrou
So bottom left of Slide 39. It gives you the numbers.
Mike Wells
Oliver, on the structure -- thanks, Nic. On the structure, I agree with a couple of pieces. So we have about 200 roles now in London approximately. And I think that's what -- for all of us, I'm sure, on this call, COVID has sort of demonstrated that you work globally and teams don't have to be in the same building. And we have no aspiration to have all of our associates in one location. So let's start with that.
So you saw us open in India and Shenzhen tech centers even during COVID that do development work for us on Pulse and the other tech synergies. And I think there's a cohort of the team in London that is absolutely critical and are difficult to replace in Hong Kong and are close to the stakeholders they interact with. So I think that's from a staffing structure, that's that part of your question, is key to us.
And candidly, I don't think the roles are -- I think they're likely be more expensive in Hong Kong than they would be in London as we have competitors there that a transition to RBC for us is straightforward. I mean -- but for some of these firms, it's quite a material change than they need the kind of people we have and with the experience they have to do it. So those roles are very much in demand in Hong Kong right now. And that was just -- in Asia, in general, with the direction of travel, as Mark alluded to, on regulatory models.
On the overall group structure, I guess the management structure, I mean, first off, we've got a lot to do, as you see laid out in the work programs there. But I have a personal view on this over my 26-plus years here and that -- there's always a lot of focus on one individual in these organizations is true of the industry, not just us, but actually, the reason we've got as much done as we have in the last 3 years is the complementing skills we've got as a team.
And whatever the final structure is of the group over time, it should one be appropriate for the group, but it's also based on the skill of the individuals. These aren't -- we're not looking to replicate anybody else's management model. And I think if we could -- the one proof point, I think we have over the last 3 years without question is just the sheer amount of work we can do at the exec level and at the level below that, even with less people than the level below that. And I think that's more decentralized approach the decision-making and management more of a team view versus -- is 1 person making all the calls, sort of structure is extremely effective for the group to move this fast.
And so I think over time, the model will evolve, both from a -- you see us hitting the cost targets that we put out and it will stay appropriate with the location and scale of the business. But as you and I have talked many times, we all travel in a normal environment. And we're all lockdown in last year in an unconventional environment, and we made sure we add exec in each of the key markets and that served us well.
When you look at these results, not just on the performance side, but on the strategic side. So I think that's -- we're well-structured now. And if we're going to change that, we'll come back to you and tell you what that's going to look like, but it's -- I would just -- I guess my bias would be to guide you towards the combination of skills versus does any one individual -- as any one person up 24 hours a day making all these calls because we now work pretty much around the clock, and that's where this bandwidth is coming from. And I'd say that's true, the management team in the U.S. and certainly true of the teams on the ground in Asia and where we have in group, that's all working because of the leverage in it, not because of any one individual or where they're sitting.
Operator
Our next question comes from Kailesh Mistry from HSBC.
Kailesh Mistry
This is Kailesh here. First one is just coming back to this point around Mainland Chinese sales in Hong Kong. Two points here. Has imported persistency held up well given the border restrictions impact and ability to access policies, medical system, et cetera? And coming back to Scott's question around, what makes you confident that this market will look like what it was pre the second half of 2019, given obviously, GBA Expansion, Connect, some change in sort of critical illness pricing on the Mainland, et cetera? And obviously, what COVID has done to perceptions?
The second question is around Pulse. Thank you for the additional disclosure. One thing I just wanted to ask is, am I reading Slide 36 correctly in that $3 million APE is the sort of very, very low-margin business and the other $2 million and $5 million is effectively consistent with other health and protections you would sell at the group level?
If so, can you just talk a little bit about plans to upsell effectively that higher-margin product into the people that have either downloaded or gotten the bite-sized product? Thirdly, just if you could provide any comments on sales investment in the first 2 months of this year, perhaps splitted into Hong Kong and then ex Hong Kong? And lastly, just on management KPIs for the PRU group post first half of this year, I guess. What would those KPIs be going forward? Because obviously, the structure of the group has changed and then you're hoping to get some change in the shareholder structure as well.
Mike Wells
Can you talk me a little bit on the last one on KPIs. What are you -- give me a little more detail on what you'd like in that question? I want to make sure I answer that specifically.
Kailesh Mistry
Yes, yes. So obviously, you've talked about EEV per share growth of double digit and then you've talked about dividend tied to operating cash generation. But what are the KPIs on which management or the financial KPIs that management would be remunerated upon? And I guess that fits into the G part of the ESG debate.
Mike Wells
Yes. No, that helps a lot Kailesh. Thank you. So I guess, Nic, I'll give you the Mainland China, but just a general comment I'd make first is Kailesh, remember, we've been operating in Hong Kong for decades. So where COVID is unique in scale. We've seen pent-up demand come back multiple times. And I think the structural demand for health products and protection products across Asia clearly is up with COVID.
And I'm not trying to make a virtue out of that. But the reality is it's brought the awareness of not only the availability of products that can offset this risk, but the out-of-pocket cost of not having it much more relevant to a retail consumer and certainly policymakers. But Nic, do you want to talk about Mainland, GBA, critical illness pricing?
Nic Nicandrou
Okay. So on Mainland customers persistency, no change to what we've seen historically. Between 97% and 98% of customers that were with us at the beginning of 2020 ended up with us at the end of 2020. No significant premium collection issues. In 2020, we collected $6.1 billion from the nearly 500,000 Mainland China customers that we have. And because of the new business that we wrote the previous year and early in 2020, the renewal premiums were up 6%. So nothing on the in-force book.
Look, our confidence comes from understanding those customers. The survey -- and sorry, there was a question earlier that I didn't answer. It was not the survey undertaken by agents that are in FTSE. We use proper firms. It's something that we do twice. And in fact, we've increased to 3x a year. It's done statistically and validly -- in a statistically rather valid way across a number of parts of China, and the trend has been consistent that people do look to Hong Kong to buy the high-end medical and critical illness policies because of additional -- because of some pricing advantages, because of certainly perceived and real better medical treatment.
And as I said, because you can get multi-stage and many more conditions, multi-condition products that are not yet available, given the regulations in China. So that's why we're confident that demand -- once the border opens, demand will return.
On Pulse, if I can refer you to Slide 36, effectively, you are right. The way we are thinking about this is 20 million downloads, nearly 8 million registrations, which means people have given us their names and means of contacting them. And really, the next stage is to then curate those registrants, so to speak. This is where the -- whether it's the 37 digital products that we currently have, some are premium, some are small bite-size premiums, we're talking about $1 -- anything between $1 to $10 a year.
Whether it's some of the packaged subscriptions, that's a combination of maybe some nutrition advice, a virtual personal trainer, some telemedicine, maybe some protection, hospitalization. All these are there to curate and increase the stickability, the reuse, a user coming back. And then as we curate and we learn more about customers, then that is transferred as -- in the form of a lead to an agent. And the 208 million is exactly that.
It's the normal products that an agent would sell as part of their briefcase. Now what we're doing on Pulse, though, is we are connecting -- we are putting the entire lead management and activity management. We're integrating and enhancing the activity and lead management system. So effectively, a referral can be made on the same platform and we're also adding a virtual advice technology on it.
So again, on Pulse, someone can use video calling to effectively undertake a sale virtually all the way through to an e-signature and an electronic payment. So we are integrating the entire fulfillment process from someone downloading the app registering, taking one of the 20-odd services and 37 products or subscriptions and that's integrated all the way through with our activity and lead management system through to fulfillment. That's the power of the platform that we have. Year one was directed to growing, attracting more customers. And clearly, we need -- we want to grow that further and increase, if you like, the proportion that dropped through at the bottom of that funnel. Year two will also move into servicing of in-force customers as well as I guess, trying to upsell to those at the appropriate point in time.
Mike Wells
And I think one of the things that we've said to you a couple of times in the past is, one of the objectives on Pulse, and objectives in general business was to acquire clients at a faster rate and not just one at a time whether a formal meeting with in a bank lobby or a normal sales process. And clearly, we've had a good year of doing that.
And then the -- as you see from some of the information, it's -- we're trying to broaden the products, the channels, the cohorts of people we do business with. Pulse is bringing a younger client in every market that we get to our traditional channel. I don't think that's surprising to anybody on the call, but it's excess for us to get another demographic. And that -- those things are structurally key to sustaining the kind of growth we want. I think we're going to do a trading update on the first part of the year yet today.
So I'm going to leave that one unanswered. But on the KPIs management, the REM report will be out shortly, and I'll let that speak for itself, but we're aligned with the public statements and goals that the firm has stated and very much aligned with shareholder return in the REM. And then obviously, we're aligned with ESG and the comments I made at the beginning of the call to make sure that all those things are true. And I think that just goes to the broader category of management being paid on its public commitments. And so there's no -- I'll let that report stand for itself. And we need to talk when it's out and I can schedule some time to go through that.
But I think it's well-structured remuneration models given the breadth of the objectives we have as a group and -- for the year, and they're all concurrent, right? We've got to grow the business, grow the value of the business, grow the return of the business while we're doing all the strategic objectives we've stated and that's how people will be paid.
Operator
Our next question comes from Andrew Crean from Autonomous.
Andrew Crean
Firstly on specific relationship. I mean, I know you've said you want to say majority control. It's up to them. But could you give us a bit more context? I mean, is specific actually thinking about selling safety. I know they've done something with Allianz. What's the timing on that? Would you look to try and take the whole 50% often more or quickly so? That's one thing.
Secondly, this LCSM capital ratio, which I think is about 373 or 370-ish with all the senior debt. Can you give us some sense of bandwidth as to when that ratio means that you've got excess capital for inorganic, when that ratio falls to a certain level, you need to do capital preservation?
We've got no idea whether 373 is a good number or a bad number. So some bandwidth around that would be helpful. And then on the Hong Kong border openings, I mean broadly, I think the assumption is that business returns to normality. But will there be a time -- is there -- given the fact the board has been closed for over a year, probably nearly 1.5 years, and there was any rate disruption before then, is there any likelihood that there will be sort of superannuated sales from pent-up demand from the years when the border was closed?
Mike Wells
Okay. So no, nothing to announce on the negotiations or discussions with CITIC on structure. As I've said before, both firms are -- view the business as a quality property, the regulatory landscape has changed over the last 24 months. I don't think there's a read across. I'll let Allianz comment on their structure, but they had a different structure, a different business than we have, and I'll let them speak to their trade. But I don't think it's particularly meaningful given the -- it was a different relationship, different ownership structure than we have.
Andrew Crean
Are you actually negotiating?
Mike Wells
I'm not going to comment on that sort of strategic conversation. What I have said before publicly, and I'll stay with this is we would like to own more of it. I think CITIC also sees it as a valuable asset. I don't think those of you that follow CITIC probably have it as a huge part of the sum of the parts for them. So I think it's candidly more valuable to us than it is to them.
And we're growing the value of that annually because it just continues to outperform the market there, and it's probably one of the cleanest balance sheets of any insurer in China. And you saw last year enter the bank channel, which we've taken up model from our playbook and the balance of Asia. It was incredibly resilient in COVID. Even when markets were closed, the banks weren't completely closed.
And so I think we've had a -- the business model looks great. You see the margins at 85% solid. 80% of the country plus under our footprint now. So I mean, it's a very, very good business as is, but I don't want to negotiate with CITIC on a call like this. So I'm going to keep the percentages and things guarded. I think the -- as I've said before, a control premium for a small piece of it, probably doesn't make sense to either firm because I don't think our shareholders would like to price for that, and I don't think they would -- that wouldn't make sense for them to do. So there's a -- they're a good partner. And I wouldn't underestimate the value of that as we enter new markets and continue to move forward.
On LCSM, it is a good number, and I'll let Mark comment on that and then Nic comment on border opening one more time. Mark, on capital one?
Mark FitzPatrick
Andrew, so LCSM, yes, as you say, the level that we're at, at the moment, 328% at the end of the year, ex Jackson, about 323%. And then if you add on the senior debt, you get to the 370 number that you quoted. So we're very happy with that. Our kind of LCSM risk appetite is really derived from buying stress test. And we're very comfortable within our risk appetite. You've seen the impact of the stresses that we love very comfortable buffer and the regulatory minimum. And while we're pleased -- and it's been in place for a little while now, it's still relatively early. We want to make sure the GWS settles as we expected to settle. And before we start talking about any potential ranges in terms of which we're looking to operate. But as things stand, we are very comfortable with the level that we are at, and it enables us to do what we need to do.
Mike Wells
Nic, on the border?
Nic Nicandrou
Okay. Andrew, I do expect there to be some pent-up demand, not least because like everyone else, we'll be ready with a number of customer campaigns. But I don't think that, that is what it's going to influence the shape of the recovery. I think the determining factor will be whether the border opens up at a whole of China level or whether it opens up, firstly, with neighboring provinces and then gradually or all the time, I guess, with other parts of China.
And I think that's what's going to drive the shape of the recovery, less any pent-up demand, which as I said, I do expect it to see that. We've seen that elsewhere when the markets have suddenly reopened and with campaigns, we've tried to access it. But I think it's the pace at which the various parts of China open air corridors or otherwise with Hong Kong.
Mike Wells
And Andrew, I think we are much faster and much better at dealing with reopenings than we've ever been in the history of the group, and you see that across different markets in Asia. Also in China, we have initiatives with the East Spring with the Wilf B that's doing well. There's work with -- I mentioned earlier, we opened the Shenzen tech center is doing well. And then the GBA, we have a strategy there that we're implementing as well. So it's not just the CITIC partnership is doing well, but the other activity is part of a broader Mainland China strategy. So it's -- we're pleased with the breadth of that and obviously, relative to market, very pleased with the year-on-year growth, I mean as you see the growth of the earnings. Thank you.
Operator
Our next question comes from Larissa Van Deventer from Barclays.
Larissa Van Deventer
Three questions, the first on numbers, the other two strategic on distribution fees, all in Asia. On -- first on the numbers, it's 1.4 on Asian in-force business generation. I'll read you the numbers, you don't necessarily need to go there. But basically, the profits in the in-force business out of Asia were $2.4 billion in 2018, declined slightly to $2.3 billion in 2019, but then they dropped to $1.9 billion in 2020. The question is why the volatility? And how should we expect this metric to evolve as well going forward because you would have thought that would be a relatively stable number?
Number two, on distribution. You've mentioned why the change towards how the protection products impacted margins into H '20, but you do state the multichannel approach. You have made active investments in bancassurance in the last 2 -- well, last year and then also renewing this year. How do you see the mix in new business profits change from a distribution perspective? And then how should we think of the impact on margin, please?
Mike Wells
Okay. Mark, do you want to take the first one and Nic the second?
Mark FitzPatrick
Mike, I'm just looking at the numbers. So Nic wants to start on the second, and then I'll come back to this with the first one as to the schedule up..
Nic Nicandrou
Okay. Larissa, the first thing I'd say is that all these channels, they're not competing with each other, they're complementary. And the level of penetration is what it is across all of our markets in Asia. Actually, what you would want to have, and this is what we do is to have as being largely a shop window as possible. So the 600,000-odd agency force, the 20,000 branches, a 100-plus banking relationships and now a digital ecosystem gives us as wide a shop window across the markets that we're in as anyone, if it's not better than anyone. So that's the first thing I would say. The other is the banks, of course, tend to market a lot to their in-force. It's a very captive -- it's a very captive audience, they tend to traditionally go for long-term regular premium savings type products with an element of protection, often death cover.
And have we -- not many banks have tracked the selling of stand-alone protection products. Now we think with the ecosystem, we have a fighting chance of doing that as we simplify the customer journey and the user experience. Banks, because they stayed open, as Mike said, as an essential service, the performance of banks was much more resilient across our portfolio of sales were only down 9%. You can contrast that with the overall sales of PCA.
And in fact, at the second half, they were positive, positive APE of 6%. Now it does -- of course, that does depend on which country and in terms of margins. But no, we were pleased with that. We were pleased that the diversification that we have on channel came through in a much more resilient performance from this particular channel. And we were pleased to see that 5 markets, including China, Indonesia, Vietnam, Thailand and Taiwan grew sales through that particular channel year-on-year. Products are priced to deliver good returns, certainly measured on an IRR basis, which is, I think, a more useful metric when you're looking at savings type products.
If you're looking at par products, with profit type products, unit-linked, really, margin is not the best measure. It's about what matters more is the return for the risk capital that one is deploying, and we deploy very little risk capital. So the performance on IRR basis is very strong, and it complements that from agency to produce an overall across our portfolio, IRR of north of 30% with very attractive payback period.
Mark FitzPatrick
And Larissa, if your question was about the in-force unwind, yes, that is really due to the lower rates that we saw during the course of the year, and that's the element that has created some movement there.
Larissa Van Deventer
Okay. So mainly a rate driven change?
Mark FitzPatrick
Yes.
Patrick Bowes
Mike, it's Patrick. I've got a question online now, which I'll just read out, is from Justin Floor in South Africa from PSG. I've got two questions, one for Mark and then one for Nic. The question for Mark is, under what conditions would Prudential not need to raise equity capital? And what's the probability of this? And the question for Nic is that key competitor AIA has launched the strategy partially built around vitality wellness ecosystem where early signs have been positive. What's the competitive threat from this for Prudential Asia's franchise? Thank you.
Mike Wells
Mark on equity raise?
Mark FitzPatrick
Yes. So in terms of the element of looking around equity raise, I think we don't -- well, firstly, as you can see with the elements of the debt equity ratio that we have and what we said previously in terms of the comments from the rating agencies is we don't have to raise. We're raising to be able to create the additional flexibility really that we're looking at. And we're looking at that flexibility to be able to make the most of the opportunities that we see ahead of us in Asia. So ultimately, it's really around that element is to accelerate the deleveraging really with a view to enhancing our financial flexibility. We don't have to raise, but we think if we don't raise it will curtail some of the growth opportunities we see ahead of us in Asia.
Mike Wells
Thanks, Mark. Nic?
Nic Nicandrou
I mean, we -- clearly, we study what everyone else is doing in the region. What we have with Pulse is a completely different proposition. Vitality is a wellness app. And it's focused on reward-based behavior. Ours is an ecosystem. It's infinitely scalable. That's why we've been able to take it to 15 markets and deploy it to consumers, whether they sit in an urban location or whether they sit on an island in Philippines or one of the many thousands of islands, it's infinitely scalable. It sources services from a number of providers. And it's, as I said, whilst in year 1 it's been about growing the people who tend to -- who get to experience Prudential for the first time, different cohorts in different ways, it will also become our fulfillment and servicing platform.
It's multisided so it can connect with anyone's ecosystem. We're already connecting it with UOB mighty app. We're already connecting it with SVB's mobile banking app in Hong Kong. We're connecting it with our new wage partners in the most recent example being the central's e-loyalty card. And we're able to harness the data exchanges to effectively develop personalized propositions for their -- for different customer sets. So it's a very different concept. And it's certainly very important to us and critical to our growth ambitions going forward.
Patrick Bowes
Maxine, back to you.
Operator
Our next question comes from Blair Stewart from Bank of America.
Blair Stewart
I've actually got four questions, apologies. The first question is just linked to the favorable experience you talked about in Asia. We've seen a decoupling of profits growth, 14% against the in-force premium base which grew by 6%. Is the favorable experience a key factor within that decoupling? And would you expect that to unwind?
Secondly, just for the U.S. business, what conceptually can be done to reduce the market aspect, that 108 points of unwanted volatility that you had in the RBC progression. What conceptually can be done to reduce that or hopefully eliminate it going forward, just to think just thinking about the volatility of the RBC? Thirdly, the Asian EEV there was that nonoperating -- there was a big turnaround in the nonoperating contribution that was negative $3 billion at the first half and it finished the year plus $1.6 billion. So a delta there of $4.6 billion. Just give us a bit of color as to what's in that?
And finally, just looking at Holdco cash flows, if I take into account the lower dividend cost going forward and lower corporate expenses and lower interest paid, there's still not a great deal of headroom, if any, between cash-in versus cash-out. I just wonder if that's something that concerns you? Or is there any plans to increase the amount of cash remittances from Asia?
Mike Wells
Okay. Why don't we -- Blair, if you don't mind, I'll change the order and we'll address them all, okay? Let's do -- Marcia, do you want to address RBC volatility and keep in mind, in a year that was records on equity rate and basis risk in the U.S. So I think it's -- but at that said, why don't you address that. And then I think we will -- Mark, I'm going to have you get the next three, if you don't mind.
Marcia Wadsten
Sure, Blair question. I think I can acknowledge that we're largely a VA company. So there is a certain amount of volatility that is difficult to quickly eliminate. But I would say, certainly, when we look at 2020 and even going back to 2019, we did have some pretty unique situational effects that were influencing what was going on in terms of the transition to VM21 in 2019 and then in 2020 preparing for the separation. We were definitely wanting to manage the hedging more tightly for smaller moves and so forth. But really it's the economic drivers that we saw in 2020 that were definitely influencing our results in terms of historically low interest rates, and the extreme high volatility both on an implied and realized basis. So we certainly expect both of those economic factors have kind of normalized a bit as we've gotten into 2021, which is helpful. And certainly, those situational effects around the preparing for separation, for example, will not unique items that won't be repeated.
But then going forward, too, we're looking to introduce the RILA product, which should be helpful in terms of diversification and add some more stability in that sense from a diversification standpoint. And then just we look to our hedging program too to just continue to operate effectively as it has so many times over the years in a volatile period and use that as a way to try to manage that volatility to the greatest extent that we can.
Mike Wells
Thanks, Marcia. Mark, Holdco cash?
Mark FitzPatrick
Yes. Blair, in terms of Holdco cash, I think you've heard me say a little while now, we bring up to the center, what we need and part of the reason that we do that it's actually having the funds down at the -- down in the businesses is that we can actually get -- we can actually work them harder. And you're seeing the return in terms of the new business investment and new business profit. And we can actually just deploy it far more efficiently. It also reduces any kind of withholding tax potential aspects that I might have whenever I bring the money up to the center.
So I bring up what I -- exactly what I need and the back end of last year, right at the end of last year, we paid the second installment for the tied bancassurance deal, just about $400 million. We pay that from the center, literally the last couple of days of year-end to make sure the money ended in Thailand for the beginning of '21.
So Holdco cash very comfortable with in terms of how that stands and how it's looking. In terms of Asia EEV, the non-op, I think, by far and away, the largest component of that is we saw, as you know, we adopt a very active basis in terms of our EEV methodology. Rates came down significantly. And then with rates going back up, we saw the element of that change. And also coming through in terms of the higher projected earn rate. So that's really what you're seeing play out in terms of the non-op level on that side.
And then in terms of the Asia experiences, in terms of the profitability, I mean, there are lots of moving parts to the IFRS. It's not just premium growth. There is an element, as we said before, some of the claims levels being slightly down this year and what we've seen in the past as a result of some deferral of, for example, electric procedures and the like that have been pushed out as a result of COVID and people understandably staying away from hospitals and they absolutely have to go there.
Blair Stewart
And just on that last point, Mark, you've -- with all due respective just repeated the question I asked, what is the impact of that favorable experience? Is that the reason that there's been a decoupling between the in-force premium base and the profit growth? And would you expect that to normalize as we go into this year and next?
Mark FitzPatrick
So if the element of those claims come back, we would expect there to be a degree of normalization coming through on that particular patch as I think as -- because ultimately, if you need a hip replacement you're going to need to get that done as soon as you can, as soon as you feel comfortable going back in. So the claims levels, we would expect to the speed at which that's going to play through, Blair, is unclear, clearly in terms of how the COVID manifests and how the various variants impact people's behavior and people's appetite to engage in -- or to engage with hospitals and the like. So claims is an important component of it. And therefore, I think you'll see a more normalized level of those going forward, I thought I would think at the back-end of this year and certainly for '22.
Blair Stewart
But not possible to quantify at this stage?
Mark FitzPatrick
Not at this stage, no.
Operator
Our next question comes from Ashik Musaddi from JPMorgan.
Ashik Musaddi
Just three questions I have. First of all, thanks a lot for Slide 76 for giving the embedded value split for different regions. Having said that, like, when I look at that slide, it's a bit puzzling to me because if I compare the IFRS profit versus embedded value of Indonesia and the IFRS profit versus embedded value growth -- growth market, it's 25% of EEV, like annual profit is 25% of both of EEV, whereas if I compare the same number for Hong Kong, it's only 3%.
Now I understand that I'm comparing apples with pears because EEV and IFRS are different, but then this kind of huge discrepancy is a bit weird as well. It would be great a bit to get a bit more color about this 3% versus 25%. So that's number one.
Secondly, Mark, you mentioned that you only take out cash from subs as much as needed rather than taking extra. But at the moment, holding company cash is about $1.4 billion, and you're saying it might go lower as you demerge U.S. So I mean, how do we think about any flexibility for inorganic M&A? I mean, if you need to do an M&A for $2 billion, $3 billion or $4 billion, would you say that you have flexibility in the subs to take out that money or would you say that you have flexibility in that LCSM ratio to take out that $3 billion, $4 billion cash and do the M&A? Or would you say that you would need to think about raising equity in that scenario?
Now I agree, it's a completely hypothetical situation, but then because there is always a debate about China M&A, that's the reason why I'm asking, trying to get a bit more color? And the third question is basically around, say, the question on Thailand. What's going on with the Thai business? I mean, I thought Thai business is having a bit of a trouble because of COVID, but earnings was up 25% in that market. So if you can give some color about why is high earnings up 25%, that would be very helpful.
Mike Wells
Great. Thanks, Ashik. The -- Mark, the first two are yours and Nic will have you do the third one. I think to generally address Ashik, your question on China in the second part, it would depend on the percentage we bought, right? So if we bought half the company, sure you have a value for it. That's a material raise. And then the other thing you've seen us do in region is on smaller transactions, including Thailand. We'll use local capital and sometimes supplement that with group capital to get the most efficient execution.
But it is a -- and that -- by efficient, that means tax friction and a variety of other ways of looking at that. So we've already have a history of using local capital for distribution M&A, if you will, and other M&A and asset management and things. So that trend, you'll see continue, and that's probably a better proof statement than a hypothetical, and I appreciate the hypothetical is an important one.
So Mark, do you want to do the first? And then, Nic, the third question, please?
Mark FitzPatrick
Certainly. So in terms of the extra information in the segmental reporting that we're going to look to do going forward really from the half year '21 in terms of that, hopefully, gives everybody a better sense of the different -- some of the different building blocks and then over the course of the half year we'll be able to give a lot more commentary about those and be able to drill down a little bit further information.
In essence, as you said, you're comparing 2 different metrics in IFRS and EEV. EEV, by definition, for a more realistic value measure, IFRS somewhat of a lagging indicator, and it can take quite a while for EEV to translate into IFRS earnings, especially for long-dated Hong Kong products and also bear in mind that we have the with profit fund component coming in. But one of the things that we'll certainly look to do as we go through the aspect of the half year, certainly give people a better sense of some of the drivers behind the individual metrics for these new segments during the half year, please.
Mike Wells
And Nic, Thailand?
Nic Nicandrou
Sure. Ashik, so your question was what's happening in Thailand is clearly the transactions that we've done -- I'll come back to your profitability point in a minute. The transactions that we've done over the last few years has given us a real presence in that in a market that is effectively ASEAN's second largest economy. But importantly, in a market where there's a very fast-growing high net worth population. We've given some more color on Slide 65 on Thailand, given the investment that we've made. So just adding to that color, we -- the -- on the asset management side, now we have a top 5 position through the 2 transactions and serving the needs of the high net worth. And with the distribution transaction that we put in place, we have the ability when it comes in force. And of course, it came into force the 1st of January this year to leapfrog, leapfrog in top 5 ranking in that important market overall in terms of new business, and importantly, leapfrog into top 2 position on the bank channel distribution, which is -- which in 2020 was the fastest-growing channel and now the more dominant channel.
The business does do quite a lot of health and protection business. We saw further increase last year. One of its USPs is the credit life business that we attach to loans or to attach to loans that are issued by our existing partners, and these are high-return products from our perspective. So yes, a scale business with a rich health and protection content growing. As you can see on the Slide, 78% was the H&P growth last year as we launched new products, not only ahead of the relationship that we started but also with the -- for the existing relationships that we have. So it's a nice market if we can get the scale, and we've taken actions to do that.
Mike Wells
Thank you, Ashik.
Operator
We have a question registered by Dominic O'Mahony from Exane BNP Paribas.
Dominic O'Mahony
I'm afraid that I've got one more on the border in Hong Kong. Could you give us some sense of how the border closure has impacted policy utilization by Mainland, for instance, the rate of surrenders and claims? And more broadly, is it fair to assume that Mainland residents haven't been able to access Hong Kong hospitals at all during the period of the border closure? Or are there actually exceptions for people who divergent need?
And second question, just on assumptions, both for reserving and pure embedded value calculations. I'm curious to understand whether you use the same assumptions or the persistency, mortality, morbidity across both your Mainland and domestic population -- domestic customers? Or whether actually you explicitly use different inputs to those 2 different populations?
And then thirdly, just on Indonesia, I wonder if you could give us a quick update on the competitive dynamic there thinking about the restructuring of UOB and the creation of a new state backed entity there. Is that having a truthful impact on the competitive dynamic?
Mike Wells
Thanks, Dominic. I think why don't -- Nic, why don't we let Ben answer a couple, make him -- make Ben work a little bit in the -- how about utilization of benefits. The borders truly closed. I think is the way to think of it. But Ben, you want to talk about our assumptions and also utilization and then, Nic, do you want to talk about Indonesia?
Ben Bulmer
Yes, sure. Look, on the assumptions, let me take that. So we do use the same assumption spend -- same assumption set, by and large, for both the Mainland and domestic business. We've done that for a number of years. We monitor both books separately in terms of our experience studies. But yes, it's the same set underlying. In terms of utilization rates, look, I -- there's sort of nothing really untoward or remarkable. I'd add that people have access to a variety of hospitals in the Mainland through their policies that are kept on an updated sort of hospital list and graded and largely reside in the sort of major cities. So I think from that regard, really, really very, very little to add over and above, of course, as we've seen elsewhere, given COVID people deferring elective medical procedures.
Nic Nicandrou
Okay. Maybe just to add, there is -- I mean, clearly, flows are tend to be gated from mainland China into Hong Kong, but not the other way. If someone wanted to surrender a policy, they could and the money could be paid into accounts in Hong Kong or even across the border. Also as part of our critical illness offering, people can use hospitals and clinics in Mainland China.
So there's about 1,000 hospitals on our list. People use them. They pay and then we reimburse them for those claims. So if you like, the servicing, the normal servicing, whether it's a surrender, whether it's an inquiry, whether it's a claim, it continues, that you don't have to be in Hong Kong if you can't travel. So no, there's no exception, unless people are prepared to do the quarantine.
As regards the competitive environment in Indonesia, I'm not sure I've understood the question, we -- the market in Indonesia has been impacted because of COVID, first and foremost. Banks, the bank channel has fared a little better, like we've seen elsewhere than the agency channel, not phenomenally better, but better. But what we saw specifically in the bank channel is a very -- a much higher incidence of single premium business than in the past.
So I think the banking channel was up overall in terms of new weighted premiums. But all of that was driven by single premium. Regular premium business declined. Our normal bank business is of a regular premium guys. So even though in the lower graphic that we show is the totality, in other words, it's single and regular or 1/10 of single and regular. If we look through that through the regular premium component, actually our share increased from just below 4 to just over 5. So the -- no, we're not seeing anything come through the specific example that you've referenced. And on our banking channel, we continue to focus on the regular premium and winning share in that particular segment.
Mike Wells
Okay. Everybody, thanks. So guys, we're down another 3 questions left, and I'd ask both the people asking the question and our team, let's keep it brief just given where we are in the time. You want to go to the next one, guys?
Operator
Our next question comes from Nick Holmes from Societe Generale.
Nick Holmes
I'll keep this very, very brief. RBC ratio, what's the reaction that you had from regulators and rating agencies about whether 450% is sufficient? And second, Jackson strategy. What about diversification? What happens to diversification? And what are you aiming to do to reduce dependence on variable annuity?
Mike Wells
So the rating to materials, Nic has published, and I think we have to gain with the Form 10. I'm not going to get into regulatory or anything forward-looking on that. But it's -- you see the rating agencies a bit public on their comments. On the jurisdiction, Marcia and Laura both mentioned, you have a new RILA product coming. And I think just depending on your view at your firm and your personal view on rates, I think the timing on the reinsurance transaction, the fixed looks pretty good right now. So there's a variety of things. I mean, Jackson leads the industry in its distribution capability and obviously has a full suite of products that can diversify with. But those are its options. But that's all we're going to say prior to the Form 10 filing later this month. So we've got to be very guarded that we don't -- you'll get some more information on it. But again, that's -- we're live on that now. So I've got to keep those two to a minimum.
Operator
Our next question comes from Gordon Aitken from RBC.
Gordon Aitken
A couple of questions on embedded value, please. Firstly, you've continued to report embedded value alongside IFRS earnings when most European insurance companies dropped embedded value and some a long time ago, why have we continued to do this? And can you just give us a sense of how important embedded values to Asian investors that you're trying to attract onto the register in comparison with European investors?
And the second question in Asia, you've really consistently recorded positive experience variances and operating assumption changes and many people would see embedded values a best estimate basis, how prudent do you believe your embedded value is and should we continue to expect positive variances and assumption changes in the future?
Mike Wells
Thanks, Gordon. Mark, do you want to take those two?
Mark FitzPatrick
Sure. Gordon, so in terms of embedded value, we believe that is a very important metric. It's something that we use extensively ourselves in-house as a management team is something we use extensively with our Board to be able to talk about the performance of the business. And the general kind of investor community for life insurance in India does tend to use embedded value and does tend to focus on the long-term cash flows and the expectations of those along the way, and we've seen the extensive disclosure we've given. And hopefully, you'll find the additional disclosure we've given this time around helpful and constructive.
In terms of the experience and assumption variances, I suppose the best driver would probably caution it is we all say it is probably it's a cautious and best estimate. We have had positive experience and assumptions coming through for a number of years now. And I'd much rather have a cautious stance and release than overly aggressive and pay back. So our cautious stance has been proven out year after year. And I'm not minded to change that on a go-forward basis.
Mike Wells
I think we have got time for one more, guys.
Operator
Our final question comes from Thomas Wang from Goldman Sachs.
Thomas Wang
I'll be rather quick. If I'm reading it correctly, I think Pulse is not in China and India. Just wondering why?
Mike Wells
Thanks, Thomas. So we are -- we obviously have the option to do both and we are looking at both actively. I think it's -- there's a bandwidth issue and the -- what you've seen us do with Pulse is we rolled it out in Malaysia in November of '19, late November, and then each iteration of it in each country has been effectively an improvement in a further integration of the operating model. So -- and then going back to the earlier markets and upgrading them to what we've seen in Pulse. So there isn't actually 1 Pulse entity out there right now.
In China, there's -- I mean, our -- it's been for the last 5 years, one of our most digitally advanced businesses. It's a cloud-based, almost signatureless platform and on the life side. There's a variety of licenses you would need with the Pulse project and then in India the same. But they're both within our realm of strategic options and are looking at both.
All right, guys. So hopefully, that gives you an idea, everybody on the progress we're making towards the strategic objectives, what we think was very agile and effective performance during the most severe parts of COVID. And I think that the key to me is the positioning of the group has improved for what follows this -- the strains of COVID is you see a business that's now, again, larger agency, larger bank distribution, more digital, more operational efficiency, faster at pace. And I think the work on the U.S. independence continues at pace. We've given you as clear guidance as we can there.
Again, it's basically now subject to regulatory and shareholder approvals. And there's a -- there's -- the consumer -- from one of the questions earlier, the ability to acquire consumers at a faster pace, the ability to get younger cohorts, the success of the new distribution activities and product sets we've rolled out. And we didn't get a question on Africa, but it continues to grow nicely. The options ahead of us are ours and they're unique and they're -- and I think they separate us from our peers and they position us to be the leader in Asia, to be clear. And that's the ambition, and that's where we see the business going.
So thank you for your time. I know it was a long one today, but we want to make sure we took everyone's questions and appreciate your support to what's been a material set of transformations for 173-year-old firm. And we'll continue to make sure it's highly competitive, growing its value and producing the kinds of returns you would expect us to. So thank you very much for your time today.
Operator
Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.
- Read more current PUK analysis and news
- View all earnings call transcripts