Economic capital

Prudential defines its economic capital requirements as the amount of capital that the Group needs to hold in order to remain solvent over a 25-year horizon, given a target probability of insolvency appropriate for AA-debt. At 30 June 2008, Prudential has an economic capital surplus of c. £1.0 billion before taking credit for diversification and £2.8 billion after. Economic capital is central in Prudential’s decision-making process on allocating capital within the Group.