Final Results - Part 2
Prudential PLC
22 February 2001
PART 2
PRUDENTIAL PLC 2000 UNAUDITED RESULTS
Results Summary 2000 £m 1999 £m
Statutory operating profit (based on longer-term
investment returns) before amortisation of goodwill
UK Insurance Operations
Long-term business 468 454
General business 33 61
501 515
M&G 125 87
Egg (155) (150)
UK Operations 471 452
US Operations 466 451
Prudential Asia 22 15
Prudential Europe (10) 6
Other income and expenditure (109) (78)
Re-engineering costs - (70)
Operating profit before amortisation of goodwill 840 776
Amortisation of goodwill (84) (54)
Short-term fluctuations in investment returns (48) 28
Profit on sale and flotation of holding in Egg 119 -
Share of exceptional gain of associate company 21 -
Profit on sale of holding in associate company 99 -
Profit before tax (including actual investment returns) 947 750
Earnings per share
Based on operating profit after tax and minority 31.5p 29.1p
interests before amortisation of goodwill
Based on profit after tax and minority interests - basic 35.1p 27.8p
Based on profit after tax and minority interests - 35.0p 27.7p
diluted
Dividend per share 24.5p 23.0p
Achieved profits basis shareholders' funds £8.8bn £8.3bn
Insurance and investment funds under management £165bn £170bn
Banking deposit balances under management £7.6bn £8.2bn
Statutory Basis Results
Operating profit (based on longer-term investment
returns) before amortisation of goodwill
Results Analysis by Business Area 2000 £m 1999 £m
UK Operations
Prudential Insurance Services
- Long-term business 313 317
- General business 33 61
346 378
Prudential Intermediary Business 127 101
Prudential Financial Services 28 36
UK Insurance Operations 501 515
M&G 125 87
Egg (155) (150)
Total 471 452
US Operations
Jackson National Life 459 457
Broker dealer and fund management 7 (6)
Total 466 451
Prudential Asia
Long-term business and investment products 39 27
Development expenses (17) (12)
Total 22 15
Prudential Europe
Long-term business 8 6
Development expenses (18) 0
Total (10) 6
Other Income and Expenditure
Investment return and other income 76 93
Interest payable (143) (131)
Corporate expenditure (42) (40)
Total (109) (78)
Re-engineering costs - (70)
Total operating profit (based on longer-term investment
returns)
before amortisation of goodwill 840 776
Statutory Basis Results
Summarised Consolidated Profit and Loss Account 2000 £m 1999 £m
Operating profit (based on longer-term investment 840 776
returns) before amortisation of goodwill
Amortisation of goodwill (84) (54)
Short-term fluctuations in investment returns (48) 28
Profit on sale and flotation of holding in Egg 119 -
Share of exceptional gain of associate company 21 -
Profit on sale of holding in associate company 99 -
Profit on ordinary activities before tax (including 947 750
actual investment returns)
Tax (284) (208)
Profit for the financial year before minority interests 663 542
Minority interests 25 -
Profit for the financial year after minority interests 688 542
Dividends (484) (449)
Retained profit for the financial year 204 93
Basic Earnings Per Share 2000 1999
Based on operating profit after tax and related 31.5p 29.1p
minority interests before amortisation of goodwill of
£617m (£567m)
Adjustment for amortisation of goodwill (4.3)p (2.8)p
Adjustment from post-tax longer-term investment (1.4)p 2.3p
returns to post-tax actual investment returns (after
related minority interests)
Adjustment for profit on flotation of Egg and business 9.3p (0.8)p
disposals (1999 tax paid on prior year disposal)
Based on profit for the financial year after minority 35.1p 27.8p
interests of £688m (£542m)
Average number of shares 1,959m 1,947m
Diluted Earnings Per Share
Based on profit for the financial year after minority 35.0p 27.7p
interests of £688m (£542m)
Average number of shares 1,968m 1,959m
Dividend Per Share 24.5p 23.0p
Movement in Shareholders' Capital and Reserves 2000 £m 1999 £m
Profit for the financial year after minority interests 688 542
Exchange movements 118 48
Goodwill on disposal of associate company 90 -
New share capital subscribed 184 34
Dividends (484) (449)
Net increase in shareholders' capital and reserves 596 175
Shareholders' capital and reserves at beginning of year 3,424 3,249
Shareholders' capital and reserves at end of year 4,020 3,424
Funds Flow
Holding Company Funds Statement 2000 £m 1999 £m
Operating profit after tax and minority interests 617 567
before amortisation of goodwill
Dividends (484) (449)
Reinvested in businesses (292) (278)
Funds available to holding company (159) (160)
New investment in businesses (263) (2,320)
Capital repatriated from businesses 123 310
New share capital subscribed on listing of shares on 139 -
the New York Stock Exchange (net of expenses)
Other new share capital subscribed 45 34
Sale of holding in Egg (net of expenses) 90 -
Sale of holding in associate company 83 -
Timing differences and other items 121 (132)
Holding company net cash movement 179 (2,268)
Movement in Net Cash Balances 2000 £m 1999 £m
Holding company cash less shareholders' borrowings at (1,837) 453
beginning of year
Holding company net cash movement (as above) 179 (2,268)
Exchange translation losses (39) (22)
Holding company cash less shareholders' borrowings at (1,697) (1,837)
end of year
Represented by:
Holding company cash 38 78
Borrowings
- Holding company (1,568) (1,760)
- Jackson National Life (167) (155)
(1,697) (1,837)
New Business
Premiums by
Product
Distributor
Annual Premium
Single Regular Equivalents
2000 £m 1999 £m 2000 £m 1999 2000 £m 1999 £m
£m
UK Operations
Prudential
Intermediary
Business
Individual 196 173 54 34 74 51
pensions
Corporate 94 110 15 14 24 25
pensions
Life 1,660 2,070 36 68 202 275
Annuities 652 1,658 - - 65 166
Investment 101 49 3 3 13 8
products
2,703 4,060 108 119 378 525
Department of 59 64 - - 6 7
Social
Security
rebate
business
Total 2,762 4,124 108 119 384 532
Prudential
Financial
Services
Individual 30 35 34 51 37 55
pensions
Corporate 751 487 93 120 168 168
pensions
Life 534 883 28 49 82 137
Annuities 602 681 - - 60 68
Investment 43 40 12 7 16 11
products
1,960 2,126 167 227 363 439
Department of 175 175 - - 18 18
Social
Security
rebate
business
Total 2,135 2,301 167 227 381 457
M&G
Individual 28 39 2 2 5 6
pensions
Life 1 8 - 1 0 2
Investment 1,050 523 16 10 121 62
products
Total 1,079 570 18 13 126 70
Total UK 5,976 6,995 293 359 891 1,059
operations
Jackson
National Life
Fixed 1,056 826 - - 106 83
annuities
Equity linked 409 431 - - 41 43
index
annuities
Variable 1,709 1,187 - - 171 119
annuities
Guaranteed 365 994 - - 36 99
Investment
Contracts
GIC - 1,291 624 - - 129 62
European
Medium Term
Notes
Life - - 25 24 25 24
Total 4,830 4,062 25 24 508 430
Prudential
Asia
Insurance 275 183 229 106 256 124
products
Investment 2,259 582 - - 226 58
products
Total 2,534 765 229 106 482 182
Prudential
Europe
Individual 5 6 16 14 16 14
pensions
Investment 9 6 6 6 7 7
products
Total 14 12 22 20 23 21
Group Total
Insurance 9,892 10,634 532 483 1,521 1,546
products
Investment 3,462 1,200 37 26 383 146
products
Group Total 13,354 11,834 569 509 1,904 1,692
Single new business premiums include increments under existing group pension
schemes and pensions vested into annuity contracts (at the annuity purchase
price).
Regular new business premiums are determined on an annualised basis.
Annual Premium Equivalents are calculated as the aggregate of regular new
business premiums and one tenth of single new business premiums.
Gross Premiums Written by Product Provider
Long-term Investment General Total
business products business
2000 £m 1999 2000 £m 1999 2000 £m 1999 2000 1999
£m £m £m £m £m
UK 7,469 9,331 - - 333 318 7,802 9,649
Insurance
Operations
M&G 239 223 1,224 725 - - 1,463 948
Total UK 7,708 9,554 1,224 725 333 318 9,265 10,597
Operations
Jackson 5,223 4,449 - - - - 5,223 4,449
National
Life
Prudential 1,076 655 2,259 582 - - 3,335 1,237
Asia
Prudential 166 168 - - - - 166 168
Europe
Group 14,173 14,82 3,483 1,307 333 318 17,989 16,451
Total 6
The geographical analysis of premiums is based on the territory of the
operating unit assuming the risk.
Premiums by territory of risk are not materially different.
General Business Operating Result
Gross Underwriting Investment Operating
premiums result return profit (based
written on longer-term
investment
returns)
2000 1999 2000 1999 2000 1999 2000 1999
£m £m £m £m £m £m £m £m
UK
operations
Home 276 274 0 35 28 23 28 58
Motor 57 44 (3) (3) 8 6 5 3
Total 333 318 (3) 32 36 29 33 61
Notes on the Unaudited Results
a) The results for 2000 are unaudited and are not the Company's statutory
accounts. The results for 2000 have been prepared using the same accounting
policies as were used in the 1999 statutory accounts. The results for 1999
have been derived from those accounts. The auditors have reported on the
1999 statutory accounts and they have been delivered to the Registrar of
Companies. The auditors' report was unqualified and did not contain a
statement under section 237 (2) or (3) of the Companies Act 1985.
b) In March 2000 the Company announced the disposal of part of its
associate company, St James's Place Capital plc. Proceeds from this
disposal amounted to £213 million of which £83m has been received by the
holding company. After taking into account attributable net assets of £53
million and attributable goodwill of £61 million charged to reserves on
acquisition, the profit on disposal reported in the Group's Interim Results
and in the full year results included in this announcement, was £99
million. Subsequent to 30 June, the Company's remaining holding was sold
for £79 million. After taking into account attributable net assets of £26
million and goodwill of £29m, the gain on sale of £24 million has been
taken to short-term fluctuations in investment returns. The goodwill total
of £90 million has been credited back to reserves.
c) In March 2000 the Company announced the disposal of £12 billion of UK
institutional fund management business. After taking into account the
goodwill attached to this business, there was zero profit on disposal.
d) In June 2000 the Company undertook an Initial Public Offering of part of
its holding in Egg plc, its wholly owned UK banking subsidiary, and at the
same time Egg issued new shares to the market. Total proceeds, net of
expenses, amounted to £239 million of which £90 million related to the
holding company. After taking into account minority interests of £120
million arising as a result of this transaction, the profit to the Group
was £119 million.
Notes on the Unaudited Results (continued)
e) In July 2000 the Company issued 17 million shares following the listing
of its shares on the New York Stock Exchange.
Proceeds raised from the issue, net of expenses, amounted to £139 million.
f) During the year the company acquired Core Pacific Securities Investment
Trust Enterprise, a Taiwanese Mutual Fund company, and Highland Bank Corp
Inc, the holding company of Highland Federal Bank of California. The
results of these operations, which were acquired in the fourth quarter of
2000, do not materially affect the Group's results. In January 2001 the
Company announced that it had signed an agreement to acquire Orico Life
Insurance Compan. Limited of Japan for £133 million. The transaction was
completed on 13 February 2001.
g) The statutory tax charge comprises £167m (£83m) UK tax and £117m (£125m)
overseas tax.
h) On 13 February 2001 the Company announced the restructuring of the
direct sales force and customer service channels in the UK Insurance
Operations. The Company expects to incur a restructuring charge of £110m
from these changes of which £13m will impact directly on shareholders.
i) The 2000 Annual Report will be posted to shareholders on 30 March 2001.
Supplementary Achieved Profits Basis Results
Summarised Consolidated Profit and Loss Account 2000 £m 1999 £m
Operating profit (based on longer-term investment
returns)
New business 613 603
Business in force (net of development expenses) 509 633
Total long-term business 1,122 1,236
General business 33 61
M&G 125 87
Egg (155) (150)
US broker dealer and fund management 7 (6)
Other income and expenditure (103) (60)
Re-engineering costs - (70)
Operating profit before amortisation of goodwill 1,029 1,098
Amortisation of goodwill (84) (54)
Short-term fluctuations in investment returns (440) 637
Profit on sale and flotation of holding in Egg 119 -
Share of exceptional gain of associate company 21 -
Profit on sale of holding in associate company 83 -
Profit on ordinary activities before tax (including 728 1,681
actual investment returns)
Tax (239) (519)
Profit for the financial year before minority interests 489 1,162
Minority interests 25 -
Profit for the financial year after minority interests 514 1,162
Dividends (484) (449)
Retained profit for the financial year 30 713
Basic Earnings Per Share 2000 1999
Based on operating profit after tax and related 38.2p 39.1p
minority interests before amortisation of
goodwill of £749m (£762m)
Adjustment for amortisation of goodwill (4.3)p (2.8)p
Adjustment from post-tax longer-term investment returns (16.2)p 24.2p
to post-tax actual investment returns (after related
minority interests)
Adjustment for profit on flotation of Egg and business 8.5p (0.8)p
disposals (1999 tax paid on prior year disposal)
Based on profit for the year after tax and minority 26.2p 59.7p
interests of £514m (£1,162m)
Average number of shares 1,959m 1,947m
Supplementary Achieved Profits Basis Results (continued)
Operating profit (based on longer-term investment 2000 £m 1999 £m
returns) before amortisation of goodwill
UK operations
New business 230 308
Business in force 478 327
Total long-term business 708 635
General business 33 61
M&G 125 87
Egg (155) (150)
Total 711 633
US Operations
New business 221 198
Business in force (2) 277
Total long-term business 219 475
Broker dealer and fund management 7 (6)
Total 226 469
Prudential Asia
New business 153 90
Business in force 60 35
Total long-term business 213 125
Development expenses (17) (12)
Total 196 113
Prudential Europe
New business 9 7
Business in force 8 6
Total long-term business 17 13
Development expenses (18) 0
Total (1) 13
Other Income and Expenditure
Investment return and other income 82 111
Interest payable (143) (131)
Corporate expenditure (42) (40)
Total (103) (60)
Re-engineering costs - (70)
Total operating profit (based on longer-term investment
returns) before amortisation of goodwill
New business 613 603
Business in force (net of development expenses) 509 633
Total long-term business (net of development expenses) 1,122 1,236
Other operating results (93) (138)
Total 1,029 1,098
Supplementary Achieved Profits Basis Results
(continued)
Summarised Consolidated Balance Sheet 2000 £m 1999 £m
Investments in respect of non-linked business:
- Equities 51,232 57,692
- Fixed income securities 48,594 39,818
- Properties 10,303 8,763
- Deposits with credit institutions 3,875 4,413
- Other investments (principally mortgages and 4,507 3,960
loans)
Total investments 118,511 114,646
Assets held to cover linked liabilities 18,323 18,643
Banking business assets 8,603 8,945
Goodwill 1,611 1,582
Holding company cash less shareholders borrowings:
- Holding company cash 38 78
- Borrowings
- Holding company (1,568) (1,760)
- Jackson National Life (167) (155)
(1,697) (1,837)
Deferred acquisition costs 2,952 2,741
Dividend payable (322) (299)
Obligations of Jackson National Life under sale and (2,652) (1,512)
repurchase and lending agreements
Other net assets 305 166
145,634 143,075
Insurance technical provisions (net of reinsurance)
and fund for future appropriations:
- UK operations (105,907) (105,959)
- US operations (23,585) (21,783)
- Prudential Asia (3,352) (2,855)
- Prudential Europe (593) (529)
(133,437) (131,126)
Less: shareholders' accrued interest in the 4,813 4,918
long-term business
Insurance technical provisions (net of reinsurance)
and fund
for future appropriations, less shareholders' (128,624) (126,208)
accrued interest
Banking business liabilities (note c) (8,040) (8,525)
Minority interests (137) -
Total net assets 8,833 8,342
Shareholders' Capital and Reserves 2000 £m 1999 £m
Share capital 99 98
Share premium 458 249
Statutory basis retained profit 3,463 3,077
Total shareholders' capital and reserves - 4,020 3,424
statutory basis
Additional reserves on the achieved profits basis 4,813 4,918
Total shareholders' capital and reserves - achieved 8,833 8,342
profits basis
Supplementary Achieved Profits Basis Results (continued)
Movement in Shareholders' Capital and Reserves 2000 £m 1999 £m
Profit for the financial year after minority interests 514 1,162
Exchange movements 187 85
Goodwill on disposal of associate company 90 -
New share capital subscribed 184 34
Dividends (484) (449)
Net increase in shareholders' capital and reserves 491 832
Shareholders' capital and reserves at beginning of year 8,342 7,510
Shareholders' capital and reserves at end of year 8,833 8,342
Notes on the supplementary achieved profits basis
results
(a) The results for 2000 are unaudited. The results for
1999 have been derived from the achieved profits basis
results supplement to the Company's statutory accounts
for that year. The supplement included an unqualified
review report from the auditors.
(b) The results have been prepared in accordance with
the draft 'Guidance on accounting in Group Accounts for
proprietary companies' long-term insurance business'
issued by the Association of British Insurers in July
1995 and are provided as a supplement to the statutory
basis results contained in this announcement. Except
for changes to strengthen assumptions for future
persistency and expenses at Jackson National Life, and
to recognise the improvement in the persistency of
with-profit bonds in the UK, the results for 2000 have
been prepared using the same principal assumptions as
were used for 1999.
(c) Banking business liabilities 2000 £m 1999 £m
Egg 7,387 8,438
US operations 653 87
8,040 8,525
Comprising:
Banking deposit balances 7,618 8,222
Accruals, deferred income and other liabilities 422 303
8,040 8,525
PRUDENTIAL PLC
2000 Unaudited results
Additional information to the preliminary announcement Schedule
Statutory basis results
Earnings per share 1
US operations 2
Short-term fluctuations in investment returns
- Summary 3
- Analysis by business area 4
Taxation charge 5
Achieved Profits basis results
Earnings per share 6
Key economic assumptions 7
Operating profits
- New Business 8
- Business in force 9
Taxation charge 10
Shareholders' funds
- Summary 11
- Reconciliation of movement 12
Funds under management
Summary 13
Analysis by business area 14
Schedule 1
Statutory basis results
Post-tax
and
Minority minority Earnings
Pre-tax Tax Post-tax interests interests per share
2000 Basic £m £m £m £m £m (pence)
Earnings
Per Share
(note 1a)
Based on 840 (235) 605 12 617 31.5
operating
profit
after tax
and
minority
interests
before
amortisation
of goodwill
Adjustment (84) (84) (84) (4.3)
for
amortisation
of goodwill
Adjustment (48) 8 (40) 13 (27) (1.4)
from
post-tax
longer-term
investment
returns
to post-tax
actual
investment
returns
(after
related
minority
interests)
(note 1b)
Adjustment 239 (57) 182 182 9.3
for profit
on
flotation
of Egg and
business
disposals
Based on 947 (284) 663 25 688 35.1
profit for
the
financial
year after
minority
interests
Notes
1a. Average number of shares for 2000 is 1,959m
1b. Minority interests in adjustments from post-tax longer-term
investment returns to post-tax actual returns:
The adjustment from post-tax longer-term investment returns to
post-tax actual investment returns includes investment return
that is attributable to external equity investors in two
investment funds of the US fund management operation.
These two funds are consolidated as quasi-subsidiaries but have no
net impact on pre-tax or post-tax operating profit.
Total profit, before and after tax, incorporating the adjustment
from longer-term returns to actual investment returns,
includes losses of £13m attributable to these minority interests.
Schedule 2
Statutory
basis
results
2000 1999 2000 1999
US operations US $m US $m £m £m
Jackson National Life US GAAP operating 672 661 443 408
income (excluding realised gains and
losses) (note 2a)
Cumulative effect of change in - 28 - 17
accounting policy on guarantee fund
assessments (and related amortisation
of acquisition costs)
Averaged realised gains (Schedule 4) 23 52 16 32
UK basis operating result
Jackson National Life (note 2b) 695 741 459 457
Broker dealer and fund 10 (10) 7 (6)
management result
Total US operations 70 73 466 451
5 1
Adjustment to reflect actual realised
investment
gains and losses (Schedule 4) (79) (24) (52) (15)
Amortisation of goodwill (2) (1)
Profit before tax 624 707 413 436
Exchange rate 1.52 1.62
Notes
2a. Jackson National Life 2000 Segmental
result:
result
for UK
Published Minority reporting
accounts interests purposes
US$m US$m US$m
US GAAP operating income 682 (10) 672
Realised investment losses (121) 50 (71)
Related amortisation of 15 15
acquisition costs
Amortisation of goodwill (2) (2)
Pre-tax income before 574 40 614
minority interests (note 2b)
Minority interests (note 2c) 40 (40) 0
Pre-tax income after minority interests 614 0 614
2b. UK basis of presentation of
Jackson National Life results:
Operating result
for UK reporting purposes
Excluding 672
investment
gains and
losses
Averaged 23
realised
gains
(net of
related
change to
amortisation
of acquisition
costs)
695
Adjustment to reflect actual (79)
realised investment gains and
losses Amortisation of goodwill (2)
614
2c. Minority interests:
The minority interests
reflect the share of income
and realised losses
attributable to investors
other than Jackson National
Life in two investment funds.
The results of the funds have
been consolidated in the
published accounts of both
Jackson National Life and the
Prudential Group.
The minority stakes in the
two funds are held by a
subsidiary of the PAC life
fund and external investors.
For UK reporting purposes the
segmental results of Jackson
National Life, the PAC life
fund and external investors
reflect their proportionate
interests in the results of
the two investment funds.
Schedule 3
Statutory basis results
Short-term fluctuations in investment returns - 2000 £m 1999 £m
summary
Long-term business
Jackson National Life (52) (15)
(schedule 4)
UK non-life long-term 1 (2)
Asia (2) 2
Share of investment return of US managed (13) -
investment funds consolidated into Group
results that is attributable to external investors
General business and shareholders
Gain on sale post 30 24 -
June 2000 of residual
stake in St James's Place
Capital plc (formerly
an associate holding)
Other (schedule 4) (6) 43
Total (48) 28
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