Welcome to today's Prudential plc Live Q&A for the 2021 Full Year Results Call. My name is Jordan, and I'll be coordinating your call today. If you'd like to register a question, you may do so by pressing star, followed by one on your telephone keypad. For those of you connecting via the webcast, you can submit questions via the Questions tab on the top right. I'm now gonna hand over to Mike Wells, Group CEO, to begin. Mike, please go ahead.
Jordan, thank you. Welcome everybody to our Conference Call for the 2021 Full Year Results. I'm delighted to be joined today by several members of our leadership team, including Mark FitzPatrick , our Group CFO and COO, as well as Nicolaos Nicandrou, our CEO of Asia and Africa, and James Turner, who is Group Chief Risk Officer. You'll have noticed that we've moved our start time for the results day to be at lunchtime in Hong Kong, and we're delighted that we're joined by a number of Asian-based research analysts who've just started their coverage of the group. Welcome to all of you. I'll make some short-term remarks, and then we'll go directly to Q&A, and I appreciate the several numbers the companies are reporting today, so we'll try and keep this on time for your convenience. Let's start with the external environment.
We're obviously all very conscious of the current acute global political issues. Combine this with the ongoing challenges of COVID-19 and its effects, the resulting environment remains highly uncertain. The pandemic has had an ongoing impact on our customers, the communities we serve, colleagues, and we continue to support our key stakeholders. Right now, there's a record high number of COVID cases in many Asian markets. Sadly, last year we lost 52 of our staff and agents to COVID over the year, and our thoughts and prayers are with their families, friends and colleagues. We've taken and will continue to take further steps to support the emotional, mental and financial wellbeing of our people. To be clear, our people have. They've not only risen to the challenges of COVID, but I think they've delivered to incredibly high standards across our footprint.
We've also responded for our customers. We've developed and tailored our product ranges, in particular in health and protection, to enable these products to be suitable for a wider range of income gaps, such as our bite-sized insurance products and including specific coverage for COVID at very low or discounted rates. As far as strategic priorities, 2021, we completed our strategic repositioning to focus entirely on the long-term opportunities for us in Asia and Africa. This, of course, follows the demerger of Jackson in Q3 and the equity raise in Hong Kong in Q4. Looking ahead, we're very excited, in particular by the four large markets of China, India, Indonesia and Thailand. In all of them, there's significant structural demand drivers and opportunities to strengthen our growing positions further. As far as 2021 results, let's run through them briefly.
We delivered high quality, resilient growth in 2021. I think that's despite the challenges posed by the pandemic. We increased our APE sales by 8%, delivered double-digit growth in nine of our 14 insurance markets. Outside of Hong Kong, we grew APE sales by 16%. Again, that's driven by our business in mainland China, India, Malaysia, Philippines, Singapore and Thailand. We reported 13% growth in new business profits to over $2.5 billion with our margins improving on better business mix. China is now our largest market for sales, and I'm really pleased with the way the rest of the businesses are developing across Asia and Africa.
Our business, as you all know, is based on regular recurring premium income, a focus on health and protection and high levels of consumer retention, all of which support resilient compounding growth as you see in today's results. Our adjusted operating profit for the continuing business was up 16% to $3.2 billion. Again, we believe that's in line with the market's expectations. At the same time, our asset manager, Eastspring Investments, IFRS operating profit was up 10%, with funds under management reaching $258.5 billion. Our embedded value grew to $47.4 billion, again leading to a 7% rise in embedded value per share.
We continue to invest for the long term in new products, additional distribution capabilities to further build out our presence as a leading agency and bank insurance player and to access new pools of customers. We also announced a second interim ordinary dividend of $0.1186 per share, creating a total dividend of $0.1723 per share for the full year. I'm sure you're aware, last month we announced I'll be retiring from my role at the end of March. Given the refocused nature of the business, the board is conducting a search for a new CEO to be based in Asia, looking at both internal and external candidates.
Mark will become interim Group CEO at the end of March, and he'll assist the incoming CEO in completing the transition process as required, and then he'll be stepping down from the board. We've also announced two internal promotions of James Taylor taking over as CFO and Avnish taking over as CRO. Both of them experienced, highly valued internal candidates and both of them already based in Hong Kong. As far as an outlook, we enter 2022 with a strong balance sheet and capital position. The timing of the opening of Hong Kong border remains uncertain and we believe COVID will continue to have an impact. Clearly, there are tragic events going on in Ukraine which could have wider implications for the global economic and market conditions as well as potentially geopolitical relations.
However, we think our heavily diversified multi-channel approach focused on quality business and operating efficiency is the right strategy for dealing with volatility in any operating conditions, including these. We're confident that our investment in new business distribution, product enhancements will continue to meet the long-term needs of the customers and build value for our shareholders over the long term. Let me stop there and let's go to Q&A, and we'll open the mics up, Jordan, if you will, now to take some questions.
Of course. As a reminder, if you'd like to register a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two, and please ensure you're unmuted when speaking. For those on the webcast, you can submit a question via the Questions tab in the top right. Our first question comes from Edwin Liu with CLSA. Edwin, please go ahead.
Hi. Good morning. Thanks for the opportunity to ask questions. My name is Edwin from CLSA in Hong Kong. Congratulations on the decent result in a challenging environment. If I may ask two questions. Firstly, on mainland China, CPL has been able to outperform the industry in terms of gross premium or APE. Could you share a little bit more on how you could achieve that, and what is the outlook for this year? Secondly, on Hong Kong, as you pivot to the domestic segment, given there's no MCV, what exactly have you done, more specifically on agency and bank assurance channel, respectively? That would be two questions from my side, one on mainland China and one on Hong Kong. Thank you.
Edwin, thank you for the question and the comments. Appreciate it. Let me give one general statement on mainland, and Nick, if you wouldn't mind, you can provide some color on both domestic, the activities and the, you know, the success we've had there and also mainland. Edwin, what you probably saw too in the gross written premium numbers that are out for the market, we're up 15% last year, and the market was down 1%. Not only were our results, you know, obviously pleased with them year-over-year in our business, but also relative to all of our peers in China. We, you know, we feel we're taking market share, and our combination of bancassurance and agency is producing a unique result in market.
Nick, do you wanna give some color on that and what you have the teams doing in Hong Kong?
Okay. Thank you. Thank you, Mike. Good afternoon, Edwin. As Mike said, we've delivered both absolute as well as relative growth in China. We've been able to do that because of the model that we operate. We're a well-diversified business because we're spread over 20 provinces, 99 cities. We're structurally advantaged because we're multi-product and we're also multi-channel. Because we've entered some of these provinces and some of these cities relatively recently, there's a natural seasoning or maturation that happens every year. Those cities and provinces are getting better and better.
Clearly, with new products that have been launched and refreshed with good training on agency, we run an intensive agency model with a focus on quality, focus on regular premium business, and a heavy health and protection content. All this came to our advantage. The bank models that we run, again, a lot of the products that we sell are regular premium in nature with a very long tenure. We've added more bank relationships. We've increased the outlets through which CPL's products are marketed massively in the course of the year by more than 60%. All of this played well.
We increased our share overall, as Mike said, but if you study the appendices to our slides, you'll see that we've done that importantly across clusters such as GBA and Beijing, where our share of market is 2% or more. We're very pleased with the performance. On outlook, clearly the year is tougher for there are several factors that are affecting that, not least consumer sentiment, not least some restructuring that is taking place in the market. Not all of these factors affect us in the same way as the rest of the industry. We do expect the market to slow down in the first half.
We saw in the January numbers that the market declined by 6.6 percentage points. We were in positive territory, again, for all those structural reasons. You know, while I expect some short-term volatility and challenge, I think the structural advantages that we have, that seasoning that I've referenced, should hold us in good stead and continue to grow share. I mean, in Hong Kong, if I can move on to that, the pivot has been fully to the domestic channel, domestic segment. We have broadened as we focused on that segment, our proposition. Again, if you look at the slides compared to pre-COVID, we have many more products and riders.
Products and that we've entered in the last three years now contribute over a third of our APE. That just speaks to how much better the business is. We're multi-channel in Hong Kong with a very good partnership with SCB, which we have reinvigorated. We've seen very strong improvement in sales through SCB, more than 20% last year, up and new business profit more than doubling. Again, that's part of the structural advantages that we have, our experience of working with banks, but also the improved product set. We are offering now digital services through Pulse that's bringing a digital presence with consumers with 800,000 downloads.
Generally, while the border is still closed, we're improving, if you like, the quality of the business that we currently have, and you see that through the 9% increase in domestic NBP.
Thanks, Nick. Thank you, Edward.
Our next question comes from Jingjing Mao with CICC. Jingjing, the line is yours.
Thanks. It's Jingjing Mao from CICC. Congrats on the results. If I can ask to deep dive deeply on China a little bit. We can see your resilient growth, which is quite impressive, I mean, the slowdown in the industry. Could you tell us more about what's driving this significant improvement of agency productivity? And what's the outlook for this year? That's all for me.
Jingjing, thank you. Nick, I'm gonna flip it back to you again, if you don't mind.
Could you tell us more?
Okay.
I'm sorry?
Jingjing, did you have another question? I'm sorry. Well, we'll leave one on China productivity. What was it? Is there another one we can answer?
Okay. Could you tell us what's the outlook for China this year?
Okay. Nick?
Okay. Okay. Thank you. Can you hear me?
Yes.
Yes.
Just making sure you can hear. Okay. On agency, as you know, as I've said before, we've been operating in China for 20+ years now. We've imported the same intensive model that we apply elsewhere in the region. By that, I mean, watching very carefully, if you like, the ratios of the pyramid from agency leaders to downstream agents. We run relatively tight ratios of 5-1. That, if you like, improves both the supervision and the support that an agency leader can give the downstream. At the same time, we've imported many of the programs we call them run-to-MDRT that we use in other parts of Asia.
We've seen a significant improvement in both the number of MDRTs, as shown on the slide, but also the percentage of business that is written by them. It doesn't stop there. We give quite a lot of training, and we started new programs in the course of last year on how to support agents, new lead management, new activity management systems, how they can support productivity. Where we've rolled those systems out, we've seen a threefold increase in productivity, and we will gradually roll out the equivalent systems to cover 80% of our footprint in 2022. Hiring has been a challenge. You would have heard that from a lot of people in a lot of players in China.
It's just as much to do with the hiring skills as it is with the availability of candidates. Again, we've upgraded and we're rolling out virtual onboarding. The most recent one we did, a business opportunity presentation, was attended virtually by 4,000 prospects. There is demand. It's just how do we close it. The training that we give people is differentiated, both in its duration, its timing, and how we do that. Of course, as we enter a new city, we adopt the same model, and we build highly productive pyramids as we go. Every year, those pyramids get more and more experienced.
I've already referenced the outlook. The market is tough. I've given you the stats from, you know, from January. But all these structural advantages that I've referenced in my earlier answers should enable us to continue to deliver relative outperformance if we can't deliver absolute longer term. I think the prospects are huge given the low level of penetration across the market, the need for retirement products, the need for ongoing medical and educational savings plans. We're well placed to do that with a very strong brand and a very good partner.
Thanks, Nick. Thanks, Jingjing.
Our next question comes from Sabrina Tso with UOB Kay Hian. Sabrina, please go ahead.
Hi, I'm Sabrina from UOB. Thank you for this opportunity, and congrats on the results. I have two small questions here. I would like to ask, could you share with us the view on the Greater Bay Area development? Like, what are some opportunities that Prudential is eyeing to accomplish? Another question about Southeast Asia. What are your plans to revive the business in Indonesia, and what's the outlook for Indonesia?
Okay. Thanks, Sabrina. I think again, I'll give some general comments, and then we'll let Nick add some color to those. I think on GBA, it's one of the catalysts for us in Hong Kong. I mean, clearly the border reopening in whatever shape that takes and, you know, we're not forecasting the date on that, we're ready. That's a combination of training, the communication our agents have had with You know, with their clients that you see the persistency of the business in Hong Kong that, you know, those mainland Chinese consumers still funding these 20-year relationships they have with us each year. On GBA in particular, the final shape of it is still being discussed.
You clearly see attention now and public positioning from Beijing on its importance, which I think is a great message in terms of the resources that get put behind it, and it continues to move forward in COVID. What it means to us, it's one of the wealthiest. Collectively, it's some of the wealthiest parts of Greater China. It's markets we're operating in, with the exception of Macau, we're working on that. We have roughly 10% market share of it, so we start with a great brand, as Nick said, a leadership position.
If it's insurance service, if it's insurance sales, if it's wealth management, these are all things to Nick's earlier comments that I think we're incredibly well-positioned to capture. We're in these dialogues both with, you know, commercial trading partners and the government on it, and we see it as a, as, you know, as a very good thing for the region. Again, it's not the only cluster model in China, as you're well aware, but it's one that has a particularly unique benefit to us, I think, over the intermediate term. But Nick, any further comment on that, or do you wanna comment on all the work going into Indonesia?
No, I think you covered the GBA. The only thing I'd repeat is if you have the right brand, if you understand the needs, if you have the right relationships and distribution reach, and the right products, then we're well placed to continue to win. Sales or the premiums that our joint venture writes in the GBA area are more than a quarter of our premium take. That's again shown in the slides. Of course, we're one of the biggest. About 20% of what used to be written in Hong Kong from Mainland China when the borders were open were also from GBA.
Brand resonates well, and we understand the needs, and we're well placed to service them. Once the rules on how Insurance Connect will operate are announced, then we'll be able to share more. I mean, on Indonesia, the market, Indonesia as a market continued to be disrupted. It was the most disrupted through COVID. If you look at the GDP, it's only just getting back to 2019 levels. Unemployment is running between 6.5% and 7%. Before COVID, it was running just below 5%. Impacted as an economy overall.
The insurance sector was flat in 2021, but it was only flat because a lot of money went offshore through bank-sourced unit-linked single-premium unit-linked products. That's not really the business that we're in. It's opportunistic in my view. It is not a structural growth driver. The business that we're in is in regular premiums. Those were down single-digit and overall agency in the market. The regular premium business was also down, partly because as I said, the high net worth individuals took advantage of the single premium offerings, and partly because affluent families took the view that they wanted to instead buy simpler protection-based regular premium products. What we did against that backdrop was to massively expand the product range.
We've issued standalone critical illness, standalone medical products, standalone hospitalization, standalone term. All these were termed as opposed to whole of life. We've written a lot more of these contracts that are at any point in our history, as I said, so much so that even though our sales are down, the number of policies that we've written was up consecutively the last two years. Actually, in a way, our business is a much better business than it's ever been before. We now have market presence in the traditional segment, which we didn't have before. We have market presence in the group insurance segment, which we didn't have before. We retain the leadership position we had in agency and unit linked. It's a much stronger business.
As soon as the environment normalizes, you know, I believe that, whether it's our scale, whether it's the enhancements that we made, whether it's now the digital reach that we have with Pulse, with 10 million downloads and 4 million registrations, and now it's becoming the main tool our agents use to onboard customers. We are phenomenally well-placed. As soon as it normalizes, then you will see the benefits of this investment. Unfortunately, the performance is lagging the development of our capabilities. But rest assured, those are much stronger than at any point before.
Thanks, Nick. Of course, the development of our Sharia business continues at pace. Effectively, we created a standalone entity. Lots going on there. I couldn't agree more with Nick that positions us well, but it's been a difficult time in Indonesia. Sabrina, thank you for your question. Simon, next question.
Our next question comes from Xu Linliang with Morgan Stanley. Su Lin, please go ahead.
Thank you. Very good results. Congratulations. I forgot the three questions, if I may. Two of them are related to Hong Kong. The first one is on the IFRS basis
Your Hong Kong profit earning year-on-year growth is falling below 10% for the first time, I think, in the last decade. I just wonder what, because for Hong Kong is still your largest like IFRS earning contributor. If this falling down, what's the reason behind it? Because I'm just worried that something we should actually like expect in the future as well. Any reason for that? The first one. The second one is again on the Hong Kong domestic base business. I understand currently you wrote about 430 new business profit in the second half of 2021 without very, very small contribution from mainland Chinese visitors. Is that some kind of sustainable new business profit in the future?
How does the very strict lockdown locally actually affecting these numbers in 2023, 2022? That's the second one. The last one is, I know that we have been talking about the potential pent-up demand once the COVID situation getting better. I just wonder actually from the market which has opened up gradually, like Singapore, are we seeing pent-up demand there? Thank you.
Let me address a couple, and I'm gonna put Mark to work on the IFRS topics, and we'll give Nick a break on this one. I think on lockdown, we have seen, at our peak we were 96% locked down globally. When we can, you know, our capabilities were there and they certainly improved to be able to deal with lockdowns. Let me give you an example. Even in markets that are open, our agency business now is about 50% virtual selling, which again, in Hong Kong when the city was closed but not fully locked down, that was not a tool that was used as much. Now of course it's a tool that's available to them and we can adjust.
It doesn't replace face-to-face, but it has become a normal way that a consumer preference as well as an agent preference. Of course, you've had some of the bank branches close currently in Hong Kong. Those will affect, you know, on a very short-term basis. Again, our ability to deal with this now is a pretty well-traveled business plan, and we know how to execute that. On pent-up demand, we use an external survey, and there's some in the deck, mainland Chinese consumers to see, you know, are they still interested in having long-term savings for education and retirement in Hong Kong? Are they still interested in accessing, you know, medical care, rather specifically to go to Hong Kong for that or while they're there? The short answer is they are.
It's sort of pre-pandemic levels is what the surveys would show you. Again, we position that in our results in the appendix for you to look at. It's so we think the demand is there. In all of our markets, I think, you see an increase in health demand that's been just incrementally growing, you know, quarter by quarter because people are just so aware of the financial risk of this. It does vary by the amount of government support a bit in the markets. We do business in a lot of countries where there's little or no government support, or rather effective health support or unemployment events. Those tend to have a much more dramatic need, if you will.
With that, Mark, do you wanna go through the IFRS piece of the resilience?
In terms of Hong Kong IFRS operating profit on a constant exchange rate basis is up 10%. We're really pleased with that and because I think it reflects both our long-term focus on regular premium and also, the element of health and protection business and a very strong retention, rate of both our domestic and mainland Chinese customers. You know, kind of, regular premium mix is, 85% , and the element of our customer retention number is in the, 90s. We're very pleased with the number. I don't think there's anything untoward to see inside there.
If you think that, Hong Kong, I suppose for the last two and a half years has been affected either through COVID or protests earlier on, to still be able to have this level of IFRS operating profit growth, I think talks to that resilience and quality and the great ability that Derek and the team have had during the course of this last year to pivot to the domestic business. The one thing that we've also seen is that the medical expenses coming through. We saw a kind of an element of in 2020, an aspect of medical expenses a bit lower as people were staying away. During the course of this year, we've seen that normalize a little bit towards the back end of the year.
We're pleased with the IFRS number in Hong Kong.
Xu Lin, thank you for the question.
Thank you.
Our next question comes from Kailesh Mistry with HSBC. Kailesh, the line is yours.
Hi. Morning, everybody. It's Kailash here from HSBC. I think there's three questions. First one is obviously in terms of new business value, the health and protection mix fell. Can you just take us through why that is? I think there were some product adjustments on the savings side. The second thing is just on the Indonesia comments. I think OPAT down impacted by both claims and worsening persistency. In particular on persistency, is this something you've seen in other markets as well, and in particular, mainland Chinese buying in Hong Kong? The third thing is, obviously in the second half, there was a slowdown in new business momentum.
Can you just help us to unpick, you know, base effects versus pandemic-related sort of restrictions on that to help us with our forecast going forward?
Certainly, good to talk to you. It's Mike. I think that, let me do the last one first, and then Mark, I'll turn it to you on the NBP parts. I think the second half in most of our markets in Asia was the most severe pieces we saw of the Delta variant hitting. It's when we had the most, sadly, it's when we had the most mortality claims, Indonesia and India. The tail of most of our markets on their heaviest lockdowns. It was, I think, if you look at the GDP of the various countries, I think it's the most disrupted half for GDP across the region.
Various countries, as they are in the West, are in various positions now coming out of that as Nick flagged. Some of them are still, Indonesia, for example, working through it and the economic impacts of it. I think to help you out, we've got in there the vaccination level slides and things, and I think it's a decent leading indicator. Because I think you know, the differences when you look at that is keep in mind, you know, a vaccination level a year ago versus a vaccination level today, the one today has the benefit of everything the medical community's learned in the last 12 months.
You know, you have the protein-based, which effectively means non-refrigerated vaccines on the horizon, Novavax, et cetera, you know, in weeks now for these markets, which given the sophistication of some of the delivery, you know, a vaccine that you can ship in a box instead of needing a sophisticated refrigeration is a major breakthrough for some of these markets to get to the next level. There's better information, better medical product and solutions now than there were, you know, if you look at that same vaccine level a year ago. I wouldn't make it. It's not linear by quarter, but it's a directionally good indicator of where the markets are and the impact on our various markets.
I think it warrants you taking a minute and looking at country by country, 'cause that's really the way we've seen it play out. None of these two started in the same place. You know, none of the two countries are reacting the same way. The last one is their economic options. You know, what do they do with QE? You know, what's their per capita income? Those sorts of things. It's all combined. That's how we look at it. I would say that the second half of last year was the most difficult macro environment we dealt with. You know, it definitely feels better in most markets. Does that answer that clearly?
I think, partly. I think, one of the other things is just to understand the base effects. In my mind, I guess mainland China was pretty high in the first half, and I know that domestic Hong Kong was improving quarter-over-quarter through the year. Are there other base effects that we should be considering? I am thinking-
The other markets, I would say no. I think that the Hong Kong or in Hong Kong, I'd say no. I think mainland China, you gotta remember the industry enjoyed in the first part of 2021, a unique CI, you know, sales spike. You've also had policies there that are actually taking effect now, where the government has said to, you know, the insurance industry, "We really want you out of the short-term bank like savings product. We want you out of shadow banking as a company." I think you've seen that in the decline of agency in China across the entire industry. You know, what it does is force people to a more professional model. The agents have to learn health and protection.
They have to learn long-term savings products instead of short-term, you know, bank equivalent time deposit. That's a transition for a market that at its peak had, you know, almost 9 million agents, right? It is losing a lot now. Which everyone will lose their part-timers in that. You know, that's not a unique occurrence and it's a manageable event. For the scale of some of our competitors in China, you know, it's a big challenge if you've got a million or more agents in market, right? I don't wanna diminish the work those firms are doing to pivot their distribution strategy. That's what I would say. When you look at China, the base, that would be the only key ones.
The rest of the markets, no, there's no material difference. Mark, do you wanna hit NBP and the mix?
Kailesh, hi. In terms of health and protection, when I look at the year and from an APE level, health and protection last year was about 27%, 2020 was also about 27%. The kind of mix of sales hasn't really changed. Overall health and protection will have grown in line with the overall growth in APE. In terms of NBP mix, it has come down a bit. Part of that is an element also of the effect that Nick mentioned in terms of the broadening of the product range, slightly more standalone products and element of term products. Some of those products have a slightly different element of profit signature in them.
As Nick said, in some of the markets, we're actually selling more, but it's at a slightly lower case size and therefore the profitability of some of those is slightly off relative to levels we've seen before. Underlying mix in terms of, and the underlying direction of travel in terms of, health and protection, we're very pleased with it. We think it is very important, and we think that with, as a result of COVID, it has actually increased the demand from customers and from the market as a whole for health and protection products.
That's one of the reasons you're seeing a strong uptick in terms of the number of policies that we call out in terms of some of the narrative and some of the slides in the deck today, that more and more people are buying, but they may be buying slightly shorter term products and slightly less complex and therefore less rich margin products.
Mark, it's Nick here. If I can interject. I mean, we're selling fewer, if you like, riders that are attached to a whole of life type contracts. This is what we're finding in one or two markets as people pull back from making the kind of commitments given the backdrop and selling more standalone, which are termed. It could be for five years, 10 years, 15 years. When you look at the profitability of a 10- to 15-year contract divided by the first year premium, it's going to look optically lower than that which you would get from a rider which is whole of life.
If you look at other metrics, kind of much more meaningful metrics, which are internal rates of return, for example, they are just as attractive if not more attractive. So in Indonesia, where we've seen the biggest transition from people buying unit-linked protection into standalone, the IRRs of the business that we've written in 2021 are much healthier than that, which we've written in years where there was more rider-based business and less standalone business. So the economics on which we're writing these can be downplayed. These standalone products can be downplayed if you simply looked at margin because they are termed. I hope that makes sense.
Yeah, that makes sense.
Thanks, Nick.
Thank you, Nick.
There was just one more question on the persistency on claims. Any other markets materially impacted?
Kailash, I think India, Indonesia are the main ones. We haven't seen, I think for a while now we've been keeping a very close eye on persistency levels in Hong Kong, especially to your question around Mainland China. Sorry, I forgot about that part. We haven't seen any kind of deterioration in that in terms of, you know, business coming across the border. I think that just talks to the value that customers attribute to that. From the survey slides that you'll see in the deck, that also talks to the ongoing enthusiasm for people to continue to buy, and when they can, products down in Hong Kong to provide Mainland China customers with support.
Guys, just, I think, you know, it's always been a risk off trade for the consumer. You know, I think we feel pretty good about the, you know, the future resilience of that book.
Thank you.
Super. Thank you very much. Thank you.
Our next question comes from Andrew Crean of Autonomous. Andrew, please go ahead.
Good morning, all. Thanks for taking my questions. A couple of questions. Firstly, I wanted to get a sense as to what is happening on the talks with the China JV, whether there are live talks with CITIC and whether there is any sort of timeline around that. Then secondly, I know you have yet to adopt RBC and C-ROSS II, but could you give us some sense as to what your capital position feels like relative to the comfort zones you'd like to operate in?
Yeah, I think, let me speak to the CITIC relationship, then James Turner, I'm gonna have you speak to China RBC and C-ROSS if you would, please. Andrew, nothing to announce. You know, the relationship you see continues to work incredibly well, outperforming the market. You know, I don't think my view on it has changed. We've been very public that we'd love to own more of it, but there's nothing to announce today. I think you know, I think I told you once in a group meeting, you know, that in the first meeting with the new chair, he said, "Yeah, I would too," you know, sort of thing. It's a great business. I don't...
You know, I think long term, it's probably not big enough for CITIC, 'cause they, you know, their capabilities in China, they could operate something even bigger. They could buy and operate something even bigger. But there's no announcement there. There's no. We don't comment on ongoing conversations, but we've made it very clear to them, both publicly and privately, that we stand ready to do more there at a reasonable price. You know, we're not gonna pay anything for it, but it's, you see the model is working. You see. You know, we'll have more competition, obviously, as people see its performance.
You know what both partners have brought, I think they are very helpful in entrance into new markets and navigating some of the complexity of China and navigating some of the political and as a distribution partner. We brought our best practices from, you know, region wide in there. I'm you know, extremely pleased to see where that business has gotten to in the last few years. It's you know, it's compounding its IFRS earnings, and it's APE close to 40% on both those metrics. You know, that's, if you look over the last, say, five or six years or so. You know, it's very, very happy with it. That's not lost on them either, Andrew.
James, you wanna talk about C-ROSS and RBC? You're spending a lot of time on both.
Yeah. No, look, I'm happy to. Thank you. Listen, clearly where we are right now, yes, we're at the capital level, we're very well capitalized. We've got pro forma LCSM ratio of 408%.
Now the published results do not reflect either the uplift from the early adoption of RBC in Hong Kong, nor the impact of C-ROSS II. The impact of both will be shared at the half year once these regulatory changes have become effective. To give some kind of flavor directionally, given our health and protection focus, you're gonna see additional surplus arising whenever we adopt RBC regimes. There's a number of changes across the region where regulators are looking at RBC regimes. Similarly, the impact of C-ROSS II, as I think we said at the half year, is not expected to be material in terms of our surplus. We will go into more details on the impacts at the half year. That's directionally where they are.
They're both positive.
Thanks, Andrew. Thanks, James. Appreciate the question, Andrew.
Any questions?
Our next question comes from Larissa van Deventer with Barclays. Larissa, please go ahead.
Thank you. Three quick ones from my side, please. The first one, you haven't spoken much about Pulse. Could you please highlight the markets where you're getting most benefit and what those are, and the extent to which you believe they can be expanded into other regions? The second one is a very simple question on China. What is the biggest constraint on growth? The last one is, on the China-Hong Kong border. Could you comment on how much of the lost Hong Kong sales you believe may have been taken up in mainland China or may be taken up in other regions? That is in terms of
Let me do a couple of these, Nick, and then I'm gonna flip them to you for color and Pulse. They're generally the you know, again, we're outgrowing the Chinese market as a whole, I think, at you know, pretty dramatic levels. I just mentioned the kind of compounding growth we've seen in China, which I think are you know, certainly rival anybody in market. We're starting from a lower base on this, and so it's not a fair comparison to somebody who's got you know, a larger shop there. It's the real and their relative and absolute you know benefits to us and our shareholders.
The only constraints to growth for us in China, we pretty much have the regulatory footprint of the country now available to us, not quite, but the majority of it. It's speed of development of quality agency. It takes a while to get good agents to build a book. You know, we have roughly 4,000 wholesalers who call on banks. We have the ability not only to distribute the bank products, but to get them up to speed very, very quickly when we enter a new city. We have lots of new cities to enter when you look at some of the second and third tier markets, and we're, you know, those aren't lost on us. That's where we should go next. It's an order of execution for us, not a lack of opportunity.
You know, you wanna build agency quality first, not quantity first. You wanna make sure you have the right people. They build a quality book. You don't want compliance issues later. You don't want reputational issues. You're gonna do that the right way, and that takes time. That's the only part of our business plan in China that's got any sort of, you know, constraint on its short-term growth. As you get more successful in agency, the more agents wanna work for you and the more, you know, easier recruiting gets. There's, you know, a virtuous circle there. On Pulse in China, we have said we're looking at it. We haven't announced a launch there. That's a dimension of our capabilities that we haven't brought there.
We have, as Nick said, gone, you know, brought a virtual hiring, training, agency development model that's our best practices into China in this last year, and we continue to extend that. Again, for agency productivity, no barriers there other than execution. Nick, do you want to comment on Pulse and the border question?
Let's start with the border question. I mean, to understand what's been lost to maybe local competition within China, you have to go back and see who was buying in Hong Kong and why were they buying. The vast majority of people who were buying in Hong Kong were high net worth individuals, particularly of a certain age group, 40- to 55-year-olds, or affluent individuals with children under the age of six that were looking for educational savings type products, denominated in foreign currency. The reason they were buying is exactly that, is the foreign currency, the ability to invest in US or Hong Kong dollars to tap into returns outside China.
Because of the comprehensive nature and the quality of the coverage on the CI critical illness, as well as access to private hospitals for medical treatments. Now, those needs remain, and the availability of equivalent products in China is not there. Difficult to be specific therefore on your question, but the underlying needs have not changed, and they're not served anywhere near in the same way as they are in Hong Kong. Which is why we believe once the border opens, the business will return, and it's a question of the shape rather than the question of the quantum.
The fact that we've broadened our product set now to appeal to mass market as well with Insurance Connect also gives us another leg, so that with a new segment, particularly with those others in Thailand who will not need to travel in to buy a policy. On Pulse, we've done a lot. The focus shifted in the second half of last year to one of embedding and conversion. That's 32 million downloads, 13 million registrations. I think we have plenty, you know, of users. So it was all about how do we get them to use the services more. So we expanded the services to 56. How do we get them to spend more time, those that are using the services?
We again, on average, the amount of time spent increased by about 20% by the regular users. We also hosted. We're now hosting tools on Pulse that help with lead management, with activity management. So if you like the conversion or passing across a Pulse user into a lead and converting that into a phone call is now seamless, and it all happens within the same application. That's been done now across eight markets. Indonesia and Malaysia led the way. Hong Kong has come on stream. Now, pretty much every single one of our big agency markets, including Vietnam, Philippines, Hong Kong, Singapore, are all looking to adopt those tools.
We've had a fourfold increase in the number of agents who are now registered to use those tools and a 2.5-fold increase in the numbers that are actually using them. As we go into 2022, we will see further increases there. Which is part of the reason why you've seen the percentage of APE that comes from users that are involved in Pulse increase from around 6% last year, 7% last year to so as much as 11.5%, but in the fourth quarter, it was 13%. Look through number of cases, those numbers are even higher. We've added direct to consumer products. We now have 46 products across 9 markets. A lot of them came live latter part of last year.
The direct to consumer sales that we've had so far this year are primarily concentrated in Vietnam, Philippines, and in Indonesia. We expect to see a lot more coming across the rest of the markets as we put some marketing effort behind those. Again, these are all new relationships that we will have with Pulse users. If you like a second relationship before we engage our agents. Higher usage of services, more direct to consumer products, greater efficiency or improving efficiency in terms of converting users to buyers of full premium products are now being spread across more markets than this time last year.
Thanks, Nick. Guys, we've got time for just a couple more questions, and we have opportunities to meet with you over the next few days in various meetings. Apologies if we didn't get to your question today, but we're also live to the fact there's a number of firms reporting, and we were asked by a lot of you to stop at the top of the hour, so I wanna respect that. Next question, if we could, please.
The next question comes from Blair Stewart with Bank of America. Blair, the line is yours.
Thanks. Good morning. I just made it seems. Two questions, please. First one on the margins. I noticed 134% Hong Kong new business margins, 70% in Singapore. These are margins that you've never seen before. What's going on there? Are you just able to sell a richer stream of health and protection? Is that all that's going on? Is that being driven by the pandemic or, you know, what's happening there to just drive that uplift? My second question, for now at least, is it's just on financial flexibility.
You've given an indication of C-ROSS and RBC, and I think, Mark, you talked in your statements earlier about having financial flexibility, and I think leverage is down at 21%. So, what level of financial flexibility do you think you have, based on what you know about your solvency and liquidity, et cetera? Thank you.
A general comment on the second one, then I'll go to Mark just for timing. You know, I don't think I've. Blair, we've had this lowest sensitivity to rates and equities movements in our earnings. You know, and I think our financial flexibility in my time has never been greater. Mark, do you want to comment on specifics on both, and there's a wrap up with this one?
Yeah.
Yeah, I think you're right in terms of the richer stream of health and protection that's come through in both of those components and also with an element in Singapore, additional link products, et cetera, coming through. In terms of financial flexibility, as you say, our Moody's leverage ratio pro forma for the debt repayment in January, it's about 21%. We think we've got decent scale in terms of the headroom to kind of get to about 25%. It's kind of, you know, just under $1.5 billion kind of headroom that we have for that perspective.
In terms of our regulatory capital levels, at the levels we're at the 4%-8%, again, pro forma, it's an aspect where the regulatory capital is not a binding constraint in terms of how we operate and what we do. We think that's important 'cause that enables us to operate, enable us to engage with the regulator on the front foot and be very kind of forward-looking and forward-leaning in terms of the opportunities that we might have in front of us. We saw how we deployed that locally, for example, in Thailand, recently with the TTB bancassurance deal, where that was partly funded by some surplus in Thailand and partly funded from the center.
We continue to be very pleased with the strength of the balance sheet, especially with the turbulent markets that we have, the resilience of that and the financial flexibility for the element of inorganic opportunities, but also the great organic opportunities. In the last eight years, we've invested about $11 billion in Asia and Africa alone, kind of roughly split 50-50 between organic and inorganic. We'll continue to look to invest hugely in organic and continue to explore carefully inorganic opportunities ahead.
Blair, I'm gonna have to cut it there. I know we'll see you later in the week, and thank you for the questions. You know, to Mark's point on Thailand, the measurable output of that is you've watched the bank insurance channel market share go from 4% to 14%, if you look at the detail and the results. Very happy with that. Thank you very much, everybody, for your questions. I just wanna personally thank you for your interest and support in our business in my time as CEO. It's been a privilege for me to serve for the last 26 years with Prudential. I'd like you to take away three things, if you would. We are now, and I'm very pleased to say, entirely focused on Asia and Africa.
Clearly, we've delivered high quality, resilient growth in 2021, and I think in this environment, that's a, you know, valued and unique statement. We're extremely confident that the model we built with this diversification of countries, the multi-channel structure, it's the right one to continue to execute on what's going to be or very likely gonna be a complex environment for the short term. Thank you again for your time today. We look forward to talking to you all in more detail in the coming days.
This concludes today's call. Thank you for joining. You may now disconnect your line.