Hello, everyone. I'm Anil Wadhwani, Prudential's Chief Executive Officer. I'm delighted to join Prudential at such an exciting time. Prudential has a rich history of serving customers and communities across the world. With my 30+ years of operating in financial services in Asia, the U.K., and the U.S., I'm so proud to be leading this team. Let me begin by thanking Mark FitzPatrick for his leadership of our business over the last 12 months. We are in a position of strength to address the incredible opportunities in the high-growth, high-potential markets of Asia and Africa. Before going through the financial highlights for 2022 and our outlook for 2023, I would like to share my observations.
Our market leading positions across both the life and the asset management markets of Greater China, Southeast Asia, India, and Africa provide an opportunity to potentially serve a population of 4 billion people across the two exciting continents. The demand in these markets is driven by structural trends, including fast economic growth and a rapidly growing middle class expected to expand by a further 1.5 billion people by 2030. A vast health protection gap estimated to be $1.8 trillion, and significantly underserved wealth and retirement needs. Importantly, we have both scale and breadth. Having lived and worked in Asia, I have seen the value of this firsthand. A high-quality, diversified platform comprising 35 businesses in 24 markets is focused on addressing customer needs with health, protection, savings, and investment products and services.
I have long envied this diversification, strengthened by 100,000+ active agents and a leading bancassurance platform in Asia that has over 190 partners. Eastspring, our in-house asset management company, manages in excess of $220 billion of third-party and life assets. In terms of people and culture, I have been impressed. I have been impressed by the commitment of our teams in building and maintaining trusted relationships with more than 18 million customers, as well as our focus on inclusivity and ESG. Finally, we have a rich 175-year history with an iconic brand that is widely recognized and trusted by our customers, our communities, and our stakeholders. Over the next six months, I'm sure you're keen to understand where I'll be spending my time.
I'm going to be meticulously focused on our operational execution so as to fully capture the value from the opportunities that we have ahead of us. This is the single most important priority for me and my leadership team. I'm looking forward to gaining a deeper understanding of our businesses. I'm also excited by the opportunity to spend time getting to know our people, listening to their ideas, their feedback, so that I can sharpen the focus on our customers and continue to improve our operational performance. I will also be engaging with our key partners and our stakeholders, building new relationships and at the same time refreshing many others with the objective of propelling our business into the next chapter of growth for our company. This will help inform my review of our strategic and operational priorities as well as our capabilities and how we operate as a team.
I anticipate sharing an update with you at our half-year results in August. Moving on to today's results, our CFO, James Turner , will provide a much more detailed commentary. I would like to highlight the following points. Despite the economic headwinds, new business profit was down only 11%, largely reflecting the impact of interest rate increases. New APE sales were up 9%, underscoring the ongoing capability and diversification strength of our distribution platform. IFRS operating profit was up 8%, and our operating free surplus generation for life and asset management grew by 9%. This is indeed a creditable and a resilient operational performance given the economic and COVID-related disruptions of last year. In terms of the balance sheet, this is a resilient capital position with cover in excess of 300%.
Standing back, we have a strong base and are well-placed to address both the organic and the strategic inorganic opportunities in the high potential, high growth markets of Asia and Africa. Prudential's diversification by geography, by channel, by product across the 24 markets is one of the key attributes that I have long respected. COVID taught us, among other things, that there is value in diversification. Greater China contributes to 42% of the group's new business profit. The Chinese mainland business, CPL, has grown significantly in the past few years. This continued to be the case in 2022. The business outperformed the industry last year. As we look ahead, CPL's broad footprint in both agency and bancassurance means that we have access to 100 cities covering more than 80% of the life insurance market and the broader economy.
I am focused on quality and on our long-term protection and retirement product offerings, a focus which is very much aligned with the regulatory guidance. Our product set is already broad, but the product mix will need to evolve in the near term as we continue to grow the business. Moving to Hong Kong, our domestic business has performed well, and we have grown in Taiwan. Southeast Asia now accounts for 53% of the group's new business profit. We have top three position in eight out of the nine markets. We are number one in Indonesia, in Malaysia, and in the Philippines, and a close number two in Vietnam. We indeed are very proud of our top-tier position in Singapore. In India, we have leading franchises across the life and the asset management sector.
Insurance penetration in India continues to be low in a similar-sized population of that of the Chinese mainland. Finally, and looking further ahead, in Africa, the underserved needs of our customers for health and protection and savings are very similar to what we are witnessing in Asia. Given the announcement earlier this year of the border reopening between the Chinese mainland and Hong Kong, here are some of my early insights. Our domestic business was re-energized during 2022, and we gained market share in the second half. We remain very optimistic about the demand for our products and services by mainland Chinese customers. Our customer surveys continue to show that as part of their private wealth management plans, 86% of participants intend to purchase life insurance in Hong Kong. Over time, this source of additional demand will complement our domestic Hong Kong business.
Since the border reopened, we have seen the number of mainland Chinese visitors gradually increase, though significantly lower than the peak volume seen during 2018. It's still early days. We have seen encouraging signs in year-on-year sales growth in the first two months of 2023. This has reinforced my conclusion that the capabilities and the value drivers of our Hong Kong business are in place, though I'm sure there will be areas for further refinement and for further improvement. We have one of the largest agency forces in the industry, and the significant capacity within that has been retained. We are also planning to significantly increase that capacity, targeting recruitment and onboarding of 4,000 agents in Hong Kong. There has been encouraging momentum with sales up 30% in the second half of 2022 as compared to the first.
I'm also delighted that we launched our Macau business this year after having obtained our license in the month of January. This now gives us access to all 11 cities in the Greater Bay Area. These are exciting times for the Hong Kong business, and we are well-placed to capture these opportunities. Despite the COVID-related disruption during the year, Prudential continued to outperform. We increased market share in eight of our life markets. Momentum has continued into 2023 with new APE sales growing 15% year-on-year in the first two months. To close, in 2022, Prudential delivered high-quality, resilient growth, and the encouraging sales momentum in the second half of the year has continued into the first quarter of 2023. We have fantastic opportunities across Asia and Africa with a diversified and market-leading business.
Together, we can deliver sustainable long-term growth and value creation for our people, our customers, our shareholders, and importantly, for our communities. I'm clear that meticulous operational delivery and a focus on quality of new business written will be the key aspects of driving our growth forward. I'm truly excited to be part of this team as we write the next chapter of growth for our company. Thank you.
Hello, I'm James Turner , Prudential CFO, and I'm delighted to take you through the group's 2022 financial performance. Our financial results demonstrate the benefit of our diversified platform and underpin our confidence in the growth opportunities ahead. There are three key messages I hope to leave you with. Firstly, we got strong momentum in agency. In the second half, agency sales in particular are up 23% versus the first half, positioning us well for growth in 2023 as COVID restrictions have now been lifted across the region. Secondly, our balance sheet is strong. We have the capital and cash to support and fund that growth. Finally, that we see diversification in geography, channel, products, combined with our quality focus as a source of competitive advantage supporting our growth momentum. As Anil explained, Prudential plc has a powerful Pan-Asian, multi-channel, high-quality business model positioned in attractive markets.
Our results showcase this, and we've delivered these results despite continued, and in the case of Hong Kong, intensified COVID-related disruptions in the first half of 2022, with the Chinese mainland border effectively remaining closed for the entire year. 2022 has also been characterized by substantial macroeconomic volatility, with significant increases in interest rate, particularly in the U.S. 10-year, which more than doubled to 3.9% and hits to equity markets, with the MSCI Asia ex-Japan down 24%, for example. New business profits were $2.2 billion, down 11%. Excluding our Hong Kong business, which bore the brunt of both COVID and adverse economic effects in 2022, they were 5% higher. The good news is that since the border reopened, we have seen encouraging momentum in the number of visitors coming across from the Chinese mainland.
The early demand for our products is pleasing, with clear evidence of significant pent-up demand. After adjusting for market effect, the year-end group embedded value was $42 billion, equivalent to $15.34 per share. Our capital position is strong. From a regulatory perspective, our cover ratio is 302% after allowing for a sterling debt repayment in January. Our stock of free surplus was $8 billion, again after this debt repayment. An operating capital generation in respect of our life and asset management business was up 9%. We have declared a second interim dividend of $0.1304 per share, taking our total 2022 dividend declared to $0.1878 per share. This is up 9% in line with our dividend policy.
Finally, for my last time on an IFRS 4 basis, the group's Full- year IFRS operating profit was up 8%. As CFO, I take great comfort from the fact that after a year as challenging as 2022, after having both reduced leverage, paid out a healthy dividend, our capital position is largely unchanged and remains resilient. In the first part of my presentation, I'm going to outline the high level drivers of how we've built value as measured by our EEV framework. This slide illustrates that this encouraging performance results from our geographic distribution and product diversification, particularly in periods of disruption. APE sales increased by 9% in 2022 to $4.4 billion, delivering $2.2 billion of new business profit. We use a mark-to-market philosophy for our EEV, higher long-term interest rates resulting in meaningful NBP margin compression.
This is most evident in Hong Kong for two reasons. Firstly, the discount rate we apply for the NBP calculation in Hong Kong is based on the 10-year U.S. Treasury rate, reflecting the high level of U.S. dollar business that we write. The 10-year U.S. Treasury rate increased by 2.4% in the period, much higher than the increase in long-term interest rates that we saw across our other Asian markets. Secondly, our health and protection business in Hong Kong is particularly long dated. We have annual customer retention in the high 90%, and those longer-dated health and protection cash flows are naturally more impacted by discounting in the NBP calculation. As a result, NBP was down 11% overall for the group, but excluding Hong Kong, it was actually up 5%.
From a distribution and product perspective, agency and health and protection remain our key value drivers, accounting for 55% and 43% of NBP, respectively. Let's now take a closer look at our performance in some of the key markets, starting with the Chinese mainland. Our Chinese mainland business, CPL, had a good year, growing NBP by 15% to just under $400 million. CPL has continued to outperform, with Gross Written Premium growth five times the industry level in the year. There are three reasons for this strong performance. Firstly, we have a great footprint. We're well-diversified with exposure in 23 provinces and 100 cities. Secondly, we have strong multi-channel distribution platform, agency and banker, supported by excellent digital capability. Finally, CPL has an extremely capable management team, and the business is executed effectively in very challenging conditions.
Bancassurance was the key driver of our performance in 2022, accounting for 70% of new sales and being up 32% on the prior year, driven by further expansion of our bank partner network. Agency sales improved in the second half, with APE up 6%, albeit that COVID restrictions remained in force for almost the entire period, which inhibited our agency performance. New business margin in the banker channel increased to 43%, while the agency margin was a little lower at 65%, with the overall margin remaining broadly stable at 44%. Looking forward, the Chinese Mainland represents a tremendous long-term opportunity for Prudential. CPL is currently our second largest market when measured by NBP, and yet our market share is only around 1%.
In the short term, there are ongoing regulatory developments across the industry that will lead to some transition of our product set in 2023, which could impact our volumes. In the longer term, the opportunity to drive significant growth in MBP remains vast. Turning to Hong Kong, this market was significantly impacted by COVID in 2022, but we continue to invest in retaining capacity to serve the Mainland Chinese visitor market in anticipation of the border reopening. We're now starting to see the benefits of those investments with clear evidence of the pent-up demand. I'll first cover our new business performance in 2022, which effectively represents our activity in the domestic market, and then comment on what we've seen since the border fully reopened on February 6.
Overall, new sales were 4% lower, reflecting the 5th wave COVID disruption impacting agency in the first half. I'm encouraged by the recovery in the second half of 2022 with the rebounding agency driving a 30% increase in overall APE sales compared to the first half and demonstrating our ability to grow domestically once the economy began to reopen. Banker also performed well with a notably resilient performance in the second half of the year, reflecting the strength of our banker franchise and proposition, increasing our market share as measured by APE sales in the latest available public data. New business profits fell 47% due to a 60 percentage point reduction in new business margin from 134% to 74%. The majority of this decline in margin was due to the impact of higher interest rates that I mentioned earlier.
To briefly recap, the increase in the 10-year U.S. Treasury rate was very significant in the period and resulted in a much higher discount rate being applied to the long-dated health and protection cash flows that our business in Hong Kong generates. The combination of these factors had a pronounced impact, driving just under 2/3 of the decline in the NBP margin. The remaining 1/3 of the margin decline was due to channel and product mix. In the first half, agency was significantly disrupted by COVID restrictions, and banker mix increased to 43% of total Hong Kong APE. In the second half, we took a conscious management action to reinvigorate our agency force ahead of the Mainland border reopening, which resulted in strong sales of relatively lower margin savings products in the second half.
Overall, in 2022, in the context of a tough market, we increased our market share while maintaining strong customer persistency, which remains stable at over 97%, demonstrating the resilience and strength of our franchise. Let's turn to what we've seen in the MCV market as the border has reopened. As the Mainland visitors return to Hong Kong, we are seeing the Chinese Mainland visitor business coming back strongly and momentum is building week by week. This is consistent with everything the consumer surveys have been telling us and validates our decision to maintain, and in the second half of 2022, reinvigorate our agency distribution. While visitor numbers are building encouragingly, these levels are currently considerably below those seen pre-COVID. Our base case assumption, therefore, is for a gradual recovery.
In these first few weeks, we have seen significant evidence of substantial pent-up demand coming through in terms of MCV APE sales. The first wave of customers, perhaps unsurprisingly, are at the upper end of the wealth spectrum, and this is reflected in high demand for our savings products. Over time, as we move beyond the first wave of customers, we expect the product mix will normalize. While it is still early days post the reopening, the overarching message is that these are exciting times for our Hong Kong business, and we are well-placed to capture significant value in both the domestic and the MCV markets. I'm now gonna turn to Southeast Asia, which accounts for 53% of our 2022 NBP. Starting with Singapore, our largest NBP contributor in 2022. Our business continues to deliver high quality growth through a multi-channel model.
Full year 2022 APE sales grew 6% year-on-year, reflecting a strong second half sales performance in agency and the resilient sales within the bank channel. As COVID restrictions eased, agency sales saw accelerating momentum in the second half of 2022, with year-on-year growth of 15%, 49% higher than the first half of 2022. The bank channel saw 11% year-on-year sales growth, reflecting the power of our long-term exclusive partnerships with UOB and SCB. Volumes increased, total NBP was down 2% year-on-year as higher interest rates impacted margins as 45% of our NBP originates from protection. Excluding this effect, NBP would have been up 4% broadly in line with our APE growth. We received regulatory permission to commence the financial advisory operations in December.
This new channel will offer holistic financial service and advice to our customers. Staying in Southeast Asia, let's turn to Indonesia. By virtue of its population size and economic growth potential, it remains one of our key market opportunities, giving our leading position. We are investing to strengthen our capabilities and have recently initiated a transformation program looking to refresh the existing agency model. The Indonesian economy has bounced back strongly as COVID restrictions have lifted. We've seen a strong new business recovery in the second half. However, this is gonna take time to earn in to IFRS profits. We've regained market leadership and are number one in agency and Sharia. Agency accounts for nearly 80% of our sales, our growth in Indonesia will continue to be agency-led.
Despite a challenging operating backdrop in the first half, agency activity rebounded in the second half, with fourth quarter sales up 15% year-on-year. Over the year as a whole, new sales were up 2% with positive sales momentum in the second half, with sales up 7% year-on-year. Overall NBP returned to positive trajectory up 4% year-on-year, supported by growth across all channels. We were also the first multinational insurer to set up a standalone Sharia life insurance entity as part of our strategy to meet the growing demands for Sharia solutions and support the growth of the Muslim community and its economy. We are cautiously optimistic about the near-term outlook. Second half sales returned to positive year-on-year growth. We see this momentum sustained in the first quarter of 2023.
In Southeast Asia, I want to highlight that our growth market segment did just that. In aggregate, delivering NBP growth of 20%, this despite COVID-related headwinds in the first half of the year. Vietnam, Thailand and the Philippines are great stories underpinned by real execution and industrial progress, including higher agency activation and productivity. We've got higher health and protection production as well. I want to highlight a couple of points in our EEV build. Our EEV operating profit was $4 billion, up 15%, driven by NBP and a higher in-force expected return. The significantly higher expected return resulted from growth in the in-force business and a mechanically higher discount rate. The positive flip side are the negative effect of higher interest rates on our in-force and new business profit.
Our operating return on an embedded value improved to 9%. Operating experience variance and assumption changes remain negative at $201 million compared to $131 million in 2021, reflecting a lower level of favorable assumption changes in the current year. The - $8.6 billion non-operating loss was driven by increasing yields, widening spreads and volatile equity markets. I've broken out the drivers on this slide, including the $900 million gain from our debt being revalued at a higher rate. I want to finish this section with an update to the slides that I've used at the half year, which shows our NBP performance from 2018 to 2022. In other words, the five years spanning the COVID period.
Excluding Hong Kong, we delivered a compound average NBP growth rate of 13% over this period. We've achieved this while maintaining our capacity to serve the MCV market, which was effectively shut from the first quarter of 2020. From my perspective as the CFO, this is a key slide. It demonstrates the resilience of our diversified business model during the most challenging periods of market disruption. As we return to something resembling more normal market conditions, we have a great base. The growth potential of our business is as strong as it's ever been. The next topic is capital, for which there are two key messages. Prudential's regulatory capital position is strong and resilient. We have a robust and growing operating capital generation, a strong cash position, low financial leverage. We have the capacity to fund that growth opportunities ahead.
We have a clear and disciplined capital allocation framework, which is focused on driving organic growth, building our distribution footprint, for example, with additional banker relationships, finally, being ready if strategic inorganic opportunities arise. We have extended the perimeter of our centrally managed cash following the consolidation of what were our group and Asia holding structures. This one-time change added $900 million to central cash resources. Given that this is very strong cash position, we have continued with our policy of only upstreaming cash needed to cover our central obligations. I was delighted that our Hong Kong listed shares, stock code 2378, has gained inclusion in both the Shenzhen Hong Kong and the Shanghai Hong Kong Stock Connect programs. This followed the inclusion of 2378 in the Hang Seng Composite Index in September 2022.
In short, our capital position is now primed for growth, demonstrated by the metrics you see on this slide, all of which are stated after allowing for the debt repayment in January. From a regulatory capital perspective, pro forma for the January debt redemption, our cover ratio is now 302% on a GPCR basis, comfortably ahead of our internal risk appetite. You can see from the sensitivities that we show a range of macro shocks that our capital position is highly resilient. This is supported by strong and predictable capital generation. From an internal perspective, our capital measure is free surplus. This is based on a regulatory view. Adjusted to reflect real-world fungibility constraints to provide a more realistic view of the distributable capital. On this slide, I show our sources and uses of capital over the year.
Our key source of capital is the steady and highly predictable emergence of capital from our in-force business, along with our asset management earnings. As we add new cohorts of profitable new business, this drives compounding growth up 10% in 2022. There is a chart in the Appendix which illustrates this in more detail. We then invest that capital at attractive returns. This year, about $0.6 billion generated NBP of $2.2 billion, a strong value multiplier. After allowing for central costs, our group operating free surplus generation, or OFSG, was $1.4 billion. Staying with our internal view of capital, I want to outline our stock position. The pro forma year-end free surplus stock of $8 billion represents funds that are distributable over time, above the GPCR threshold in each country.
Of this, $2.7 billion is held centrally. In practice, we would never want to draw this to 0. As a minimum, we would like to keep cover 12 months of central outflows, including the cost of the annual shareholder dividend, with some buffer in addition. This year, central outflows were $1.1 billion. With the debt redemption in January, our leverage ratio is now 20%, which is at the lower end of our normal range that we target. We therefore have capacity to the upper 25% boundary of about $1.6 billion. For the right strategic reasons, we would exceed this normal boundary for a period of time. Taking these factors together, alongside our organic capital generation capacity, Prudential is well placed to fund the growth opportunities ahead of us.
For the final section of my presentation, I'm gonna cover IFRS 4 and the accounting impacts of IFRS 17. Starting for the last time with our IFRS 4 base results. Overall, our group operating profit was up 8%. Within this, our life result was up 7%. The performance is well diversified, with all segments other than Indonesia reporting growth. This included Malaysia, which was up 10%, supported by in-force growth, in contrast with the new business metrics, which were impacted by the repricing effects in the prior year. Indonesia was down 20%. This reflects, firstly, increased medical claims levels, which is a pattern we've seen in other markets when COVID restrictions have subsided, and the impact of lower new sales over recent years. Notwithstanding the more encouraging developments and the results in the second half of 2022.
The other items includes various one-off effects which inevitably arise in a group of our scale, but have tended to be positive over time. Eastspring's profits were lower this year. This reflects the combined impact of lower average funds under management and the losses on seed capital investments that I set out at the half year. I'm pleased to confirm that we have delivered on our program to reduce central costs by further $70 million from 2023. This takes the total reduction to $250 million, or about 50% of the 2018 central cost level. Following the debt redemption programs, which completed in January 2022, our interest costs fell sharply. We will benefit from the redemption in January 2023. Based on our current debt position, we expect 2023 interest costs of about $175 million.
As expected, IFRS 17 and restructuring costs remained elevated. Until the standard is fully implemented, we expect further IFRS 17 and other costs this year of about 2/3 of the level we've experienced in 2022. Given we fair value account and mark-to-market via our P&L, not through OCI, macro effects, including higher interest rates, led to adverse short-term fluctuations, reflecting accounting mismatch effects. Turning to IFRS 17, the core message is that our strong fundamentals are unchanged. We plan to hold a detailed IFRS 17 teach-in at the end of June. I want to outline some of the estimated impacts today. At the risk of stating the obvious, IFRS 17 is an accounting change.
It introduces a new accounting framework, vocabulary, and disclosures, ultimately, all that really changes is the timing of the underlying profit recognition, not the total amount of profits that are going to be generated. The accounting for our asset management business and our central cost is unaffected. Based on our work to date, as you can see in our accounts, we expect the transition to IFRS 17 to lead to an increase in equity of between $1.8 billion and $2.7 billion from our IFRS 4, 31st of December 2021 position of $17.1 billion. We've not yet finalized our 2022 IFRS 17 financials and intend to provide you with these at our IFRS 17 briefing in June.
We have estimated that our 2022 IFRS 17 operating profit would be between $650 million and $850 million lower than under IFRS 4. It's important to stress that IFRS 17 does not impact our underlying capital, our cash flows, our free surplus generation, our EV reporting, our regulatory capital position, none of these are impacted. There's no change to our strategy, to our capital management, nor our dividend policy. There's also no change to any significance to our measurement of investments, most of which are already measured on a fair value basis through the P&L, and therefore, will continue to do so under IFRS 9. Except for our residual investment in Jackson, we don't use OCI, and as such, the parallel introduction of IFRS 9 has no material impact on our results. Let me now provide you with a little context.
Our IFRS 4 accounting permits a grandfathering of Local GAAP in each market, which is often based on the local regulatory basis. Means we are not transitioning from a single accounting approach, but from many different local basis. The impact of IFRS 17 adoption differs in each country. As I mentioned before, whilst the timing of profit recognition changes, the total profit generated ultimately does not. Starting with equity, as I just said, we expect an increase from $17.1 billion under IFRS 4 at 31st of December 2021 of between $1.8 billion and $2.7 billion. This increase reflects a prudence of our IFRS 4 accounting relating to the three main factors. The release of prudent registry margins, similar to the accounting effect we saw on the early adoption of Hong Kong RBC in 2022.
The addition of shareholders share at the with-profits inherited estate. Under IFRS 4, this sits within liabilities. Finally, various timing effects, which have overall led to a net acceleration of profits that have never previously been recognized under IFRS 4. Conceptually, there are broad parallels between the IFRS 17 and our embedded value approach. The contractual service margin, or CSM, introduced under IFRS 17, represents the stock of future unearned profits at the balance sheet date. It's akin to the EV value in force. The sum of IFRS 17 equity, CSM, risk adjustments, lesser related tax, is about 10% below our EV at the 31st of December 2021. The key difference is in the measurement of market risk, where IFRS 17 applies risk-neutral, market-consistent economic assumptions, while our EV approach is based on risk-adjusted real-world economic assumptions.
As I mentioned, we have not yet produced our 2022 comparators, and we intend to provide you with these at our IFRS 17 briefing in June. For 2022, we estimate that our IFRS 17 operating profit would be between $650 million and $850 million lower than our IFRS 4 result. This is largely due to timing differences that led to the increase in shareholders' equity and the removal of one-off gains recognized in IFRS 4 that will now be smoothed into profit under IFRS 17. Firstly, there is a moderate new business impact. Under IFRS 4, the grandfathering of Local GAAP results in an effective day-one profit contribution on certain products in some of our geographies. Under IFRS 17, day-one profits are not permitted.
Secondly, subsequent profits under IFRS 17 are smoother and reflect the services provided to the policyholder, the types of products sold, and the maturity of the business. Finally, as I said earlier, other items this year added just over $200 million in our IFRS 4 operating profits. Under IFRS 17, these are smoothed into profits rather than being recognized in the year they crystallize. To recap, the CSM balance represents our unearned discounted future profits. This discounting effect unwinds each period and consistent with our EV framework, increases through the generation of profitable new business. This stock of CSM is the key driver of IFRS 17 operating profit and amortizes into operating profit over time as services are provided over the lifetime of contracts. This is illustrated in the chart on the left.
This means that the effect of higher or lower new business generation leads to only a gradual change to IFRS 17 operating profit in any single period. This is illustrated in the chart on the right. In the meantime, to reiterate, IFRS 17 is an accounting change impacting the timing of profit recognition, not the total profits generated. As such, there is no impact on capital generation, strategy, or dividend policy. I'm gonna provide a fuller market update with more details in June. To summarize, these are exciting times at Prudential. Our diversified business model has many growth engines, and we see more of them were firing in the second half, and this trend is continuing in 2023. Agency is on the rebound. The diversification also provides both considerable resilience and a very substantial opportunity set across Greater China, India, and Southeast Asia.
This is underpinned by a strong and robust capital position and a clear and consistent allocation policy supporting these growth opportunities. Most of all, we are focused on the quality of business we write and on growing value measured by MVP.