Interim Results, Part 2 of 2

Prudential PLC 28 July 2006 Part 2 of 2 INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) BASIS RESULTS SUMMARY CONSOLIDATED INCOME STATEMENT Half Year Half Year Full Year 2006 2005 2005 £m £m £m Earned premiums, net of reinsurance 8,164 8,214 15,028 Investment income 5,303 9,563 24,013 Other income 1,006 991 2,084 Total revenue, net of reinsurance (note C) 14,473 18,768 41,125 Benefits and claims and movement in unallocated surplus of (11,370) (14,967) (33,100) with-profits funds Acquisition costs and other operating expenditure (2,142) (2,964) (5,552) Finance costs: Interest on structural borrowings of shareholder (107) (100) (208) financed operations Goodwill impairment charge - (95) (120) Total charges (note C) (13,619) (18,126) (38,980) Profit before tax* (note C) 854 642 2,145 Tax attributable to policyholders' returns (162) (182) (1,147) Profit before tax attributable to shareholders (note D) 692 460 998 Tax expense (note E) (404) (338) (1,388) Less: Income tax attributable to policyholders returns 162 182 1,147 Tax attributable to shareholders profits (note E) (242) (156) (241) Profit from continuing operations after tax 450 304 757 Discontinued operations (net of tax) 0 1 3 Profit for the period 450 305 760 Attributable to: Equity holders of the Company 449 300 748 Minority interests 1 5 12 Profit for the period 450 305 760 Earnings per share (in pence) Basic (based on 2,403m, 2,361m and 2,365m shares respectively) Based on profit from continuing operations attributable to the 18.7p 12.7p 31.5p equity holders of the Company (note F) Based on profit from discontinued operations attributable to the 0.0p 0.0p 0.1p equity holders of the Company 18.7p 12.7p 31.6p Diluted (based on 2,406m, 2,364m and 2,369m shares respectively) Based on profit from continuing operations attributable to the 18.7p 12.7p 31.5p equity holders of the Company Based on profit from discontinued operations attributable to the 0.0p 0.0p 0.1p equity holders of the Company 18.7p 12.7p 31.6p Dividends per share (in pence) Dividends relating to reporting period Interim dividend (2006 and 2005) (note G) 5.42p 5.30p 5.30p Final dividend (2005) - - 11.02p Total 5.42p 5.30p 16.32p Dividends declared and paid in reporting period Current year interim dividend - - 5.30p Final dividend for prior year 11.02p 10.65p 10.65p Total 11.02p 10.65p 15.95p * Profit before tax represents income net of post-tax transfers to unallocated surplus of with-profits funds, before tax attributable to policyholders and unallocated surplus of with-profits funds, unit-linked policies and shareholders' profits. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) BASIS RESULTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Period ended 30 June 2006 Share Share Retained Translation Available- Hedging Shareholders' Minority Total capital premium earnings reserve for-sale reserve equity interests equity securities reserve £m £m £m £m £m £m £m £m £m Reserves Profit for the period 449 449 1 450 Items recognised directly in equity: Exchange movements (134) (134) (134) Movement on cash flow hedges 4 4 4 Unrealised valuation movements on securities classified as available-for-sale from 1 January 2005 Unrealised holding losses arising during the period (707) (707) (707) Less reclassification adjustment for gains included in the income statement (3) (3) (3) Unrealised investment losses, net (710) (710) (710) Related change in amortisation of deferred income and acquisition costs 311 311 311 Related tax (39) 140 (1) 100 100 Total items recognised directly in equity (173) (259) 3 (429) (429) Total income and expense for the period 449 (173) (259) 3 20 1 21 Dividends (267) (267) (267) Reserve movements in respect of share-based payments 6 6 6 Change in minority interests arising principally from purchase and sale of venture investment companies and property partnerships of the PAC with-profits fund 7 7 Acquisition of Egg minority interests (note J) (167) (167) (84) (251) Share capital and share premium New share capital subscribed 2 251 253 253 Transfer to retained earnings in respect of shares issued in lieu of cash dividends (7) 7 0 0 Treasury shares Movement in own shares in respect of share-based payment plans 9 9 9 Movement on Prudential plc shares purchased by unit trusts consolidated under IFRS 1 1 1 Net increase (decrease) in equity 2 244 38 (173) (259) 3 (145) (76) (221) At beginning of period 119 1,564 3,236 173 105 (3) 5,194 172 5,366 At end of period 121 1,808 3,274 0 (154) 0 5,049 96 5,145 INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) BASIS RESULTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued) Period ended 30 June 2005 Share Share Retained Translation Available- Hedging Shareholders' Minority Total capital premium earnings reserve for-sale reserve equity interests equity securities reserve £m £m £m £m £m £m £m £m £m Reserves Profit for the period 300 300 5 305 Items recognised directly in equity: Exchange movements 183 183 183 Movement on cash flow hedges (7) (7) (1) (8) Unrealised valuation movements on securities classified as available-for-sale from 1 January 2005 Unrealised holding losses arising during the period (88) (88) 1 (87) Less reclassification adjustment for losses included in the income statement 25 25 25 Unrealised investment losses, net (63) (63) 1 (62) Related change in amortisation of deferred income and acquisition costs 14 14 14 Related tax 30 16 2 48 48 Total items recognised directly in equity 213 (33) (5) 175 175 Total income and expense for the period 300 213 (33) (5) 475 5 480 Cumulative effect of changes in accounting policies on adoption of IAS 32, IAS 39 and IFRS 4, net of applicable taxes at 1 January 2005 (note M) 2 (173) 397 226 (3) 223 Dividends (253) (253) (253) Reserve movements in respect of share-based payments 6 6 6 Change in minority interests arising principally from purchase and sale of venture investment companies and property partnerships of the PAC with-profits fund (9) (9) Share capital and share premium New share capital subscribed 0 40 40 40 Transfer to retained earnings in respect of shares issued in lieu of cash dividends (40) 40 0 0 Treasury shares Movement in own shares in respect of share-based payment plans 1 1 1 Movement on Prudential plc shares purchased by unit trusts consolidated under IFRS (5) (5) (5) Net increase (decrease) in equity 2 (84) 213 364 (5) 490 (7) 483 At beginning of period 119 1,558 2,972 (160) 4,489 137 4,626 At end of period 119 1,560 2,888 53 364 (5) 4,979 130 5,109 INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) BASIS RESULTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued) Year ended 31 December 2005 Share Share Retained Translation Available- Hedging Shareholders' Minority Total capital premium earnings reserve for-sale reserve equity interests equity securities reserve £m £m £m £m £m £m £m £m £m Reserves Profit for the year 748 748 12 760 Items recognised directly in equity: Exchange movements 268 268 268 Movement on cash flow hedges (4) (4) 1 (3) Unrealised valuation movements on securities classified as available-for-sale from 1 January 2005 Unrealised holding losses arising during the year (773) (773) (773) Less reclassification adjustment for losses included in the income statement 22 22 22 Unrealised investment losses, net (751) (751) (751) Related change in amortisation of deferred income and acquisition costs 307 307 307 Related tax 65 152 1 218 218 Total items recognised directly in equity 333 (292) (3) 38 1 39 Total income and expense for the year 748 333 (292) (3) 786 13 799 Cumulative effect of changes in accounting policies on adoption of IAS 32, IAS 39 and IFRS 4, net of applicable taxes at 1 January 2005 (note M) 2 (173) 397 226 (3) 223 Dividends (380) (380) (380) Reserve movements in respect of share-based payments 15 15 (1) 14 Change in minority interests arising principally from purchase and sale of venture investment companies and property partnerships of the PAC with-profits fund 26 26 Share capital and share premium New share capital subscribed 0 55 55 55 Transfer to retained earnings in respect of shares issued in lieu of cash dividends (51) 51 0 0 Treasury shares Movement in own shares in respect of share-based payment plans 0 0 0 Movement on Prudential plc shares purchased by unit trusts consolidated under IFRS 3 3 3 Net increase (decrease) in equity 6 264 333 105 (3) 705 35 740 At beginning of year 119 1,558 2,972 (160) 4,489 137 4,626 At end of year 119 1,564 3,236 173 105 (3) 5,194 172 5,366 INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) BASIS RESULTS SUMMARY CONSOLIDATED BALANCE SHEET 30 June 30 June 31 December 2006 £m 2005 £m 2005 £m Assets Goodwill: Attributable to the PAC with-profits fund (in respect of venture 891 487 607 fund investment subsidiaries) Attributable to shareholders 1,341 1,366 1,341 Total 2,232 1,853 1,948 Other intangible assets: Deferred acquisition costs 2,644 1,877 2,339 Present value of acquired in-force contracts 85 110 101 Total 2,729 1,987 2,440 Other non-investment and non-cash assets: Property, plant and equipment 1,018 816 910 Reinsurers' share of contract provisions 1,141 648 1,278 Deferred tax assets 423 1,071 755 Current tax recoverable 315 193 231 Accrued investment income 1,891 1,728 1,791 Other debtors 2,310 3,388 1,318 Total 7,098 7,844 6,283 Investments of long-term business, banking and other operations: Investment properties 13,682 12,575 13,180 Investments accounted for using the equity method 5 8 5 Financial investments: Loans and receivables 12,795 13,202 13,245 Equity securities and portfolio holdings in unit trusts 75,534 61,701 71,985 Debt securities 78,090 79,438 82,471 Other investments 3,930 3,504 3,879 Deposits 7,422 6,784 7,627 Total investments 191,458 177,212 192,392 Held for sale assets 94 1 728 Cash and cash equivalents 3,665 3,708 3,586 Total assets 207,276 192,605 207,377 Equity and liabilities Equity Shareholders' equity (note H) 5,049 4,979 5,194 Minority interests 96 130 172 Total equity 5,145 5,109 5,366 Liabilities Banking customer accounts 5,545 6,451 5,830 Policyholder liabilities and unallocated surplus of with-profits funds: Contract liabilities (including amounts in respect of contracts 158,127 147,169 158,985 classified as investment contracts under IFRS 4) Unallocated surplus of with-profits funds 13,458 8,879 11,357 Total insurance liabilities 171,585 156,048 170,342 Core structural borrowings of shareholder-financed operations: Subordinated debt (other than Egg) 1,573 1,463 1,646 Other 1,082 1,227 1,093 2,655 2,690 2,739 Egg subordinated debt capital 451 451 451 Total 3,106 3,141 3,190 Other borrowings: Operational borrowings attributable to shareholder-financed 5,994 6,231 6,432 operations (note I) Borrowings attributable to with-profits funds (note I) 2,042 1,725 1,898 Other non-insurance liabilities: Obligations under funding, securities lending and sale and 3,860 3,774 4,529 repurchase agreements Net asset value attributable to unit holders of consolidated unit 1,495 1,073 965 trusts and similar funds Current tax liabilities 1,168 925 962 Deferred tax liabilities 2,603 2,713 2,991 Accruals and deferred income 476 557 506 Other creditors 2,216 2,460 1,478 Provisions 383 990 972 Other liabilities 1,658 1,408 1,770 Held for sale liabilities - - 146 Total 13,859 13,900 14,319 Total liabilities 202,131 187,496 202,011 Total equity and liabilities 207,276 192,605 207,377 INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) BASIS RESULTS SUMMARY CONSOLIDATED CASH FLOW STATEMENT Half Year Half Year Full Year 2006 £m 2005 £m 2005 £m Net cash flows from operating activities Profit before tax (note (i)) 854 642 2,145 Changes in operating assets and liabilities (note (ii)) 73 (563) (1,987) Other items (note (ii)) (241) (138) (357) 686 (59) (199) Net cash flows from investing activities Net cash flows from purchases and disposals of property and (280) (52) (154) equipment Costs incurred on purchase of Egg minority interests (note J) (6) - - Acquisition of subsidiaries, net of cash balances (note (iii)) 15 (91) (68) Disposal of subsidiaries, net of cash balances (note (iii)) 80 - 252 (191) (143) 30 Net cash flows from financing activities Structural borrowings of the Group: Shareholder-financed operations (note (iv)): Redemption of borrowings (1) (171) (308) Issue of borrowings - - 168 Interest paid (104) (95) (204) With-profits operations (note (v)): Interest paid (9) (9) (9) Equity capital (note (vi)): Issues of ordinary share capital 1 - 3 Dividends paid to shareholders (260) (213) (328) (373) (488) (678) Net increase (decrease) in cash and cash equivalents 122 (690) (847) Cash and cash equivalents at beginning of period 3,586 4,341 4,341 Effect of exchange rate changes on cash and cash equivalents (43) 57 92 Cash and cash equivalents at end of period (note (vii)) 3,665 3,708 3,586 Notes (i) Profit before tax represents income net of post-tax transfers to unallocated surplus of with-profits funds, before tax attributable to policyholders and unallocated surplus of with-profits funds, unit-linked policies and shareholders' profits. It does not represent profit before tax attributable to shareholders. (ii) The adjusting items to profit before tax include changes in operating assets and liabilities, and other items comprising adjustments in respect of non-cash items, operational interest receipts and payments, dividend receipts, income tax paid and cash flows in respect of assets categorised as available-for-sale investments. The most significant elements of the adjusting items within changes in operating assets and liabilities are as follows: Half Year Half Year Full Year 2006 £m 2005 £m 2005 £m Deferred acquisition costs (excluding changes taken directly to (462) (21) (401) equity) Other non-investment and non-cash assets (883) (1,333) (569) Investments (2,618) (7,794) (21,462) Banking customer accounts (285) (240) (861) Policyholder liabilities (including unallocated surplus) 4,115 8,582 21,126 Other liabilities (including operational borrowings) 206 243 180 Changes in operating assets and liabilities 73 (563) (1,987) (iii) Acquisitions and disposals of subsidiaries shown above include venture subsidiaries of the PAC with-profits fund as shown in note J. In 2005, this also includes the purchase of Life Insurance Company of Georgia. (iv) Structural borrowings of shareholder-financed operations consist of the core debt of the parent company and related finance subsidiaries, Jackson National Life surplus notes and Egg debenture loans. Core debt excludes borrowings to support short-term fixed income securities reinvestment programmes and non-recourse borrowings of investment subsidiaries of shareholder-financed operations. Cash flows in respect of these borrowings are included within operating cash flows. (v) Structural borrowings of with-profits operations relates solely to the £100m 8.5 per cent undated subordinated guaranteed bonds which contribute to the solvency base of the Scottish Amicable Insurance Fund (SAIF), a ring-fenced sub-fund of the PAC with-profits fund. Cash flows on other borrowings of with-profits funds, which principally relate to venture investment subsidiaries, are categorised as operating activities in the presentation above. (vi) Cash movements in equity capital exclude scrip dividends and share capital issued in respect of the acquisition of Egg minority interests. (vii) Of the cash and cash equivalents amounts reported above £388m (half year 2005: £42m; full year 2005: £263m) represents cash and cash equivalents of the parent company and related finance subsidiaries. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) BASIS RESULTS NOTES ON THE UNAUDITED IFRS BASIS RESULTS A Basis of preparation and audit status This interim financial information has been prepared using the accounting policies adopted by the Group in its last consolidated financial statements, as updated by any changes in accounting policies it intends to make in its next consolidated financial statements as a result of new or changed IFRSs that are already endorsed by the EU and that are applicable or available for early adoption for the next annual financial statements. The half year 2005 financial statements published in July 2005 were prepared in accordance with the presentation, recognition and measurement bases that were expected to be applied for the full year 2005 results on first time adoption of International Financial Reporting Standards. The comparative half year 2005 results shown within this announcement include minor changes to those previously published arising from the refinement of these bases in the second half of 2005 prior to their application to the full year financial statements. The IFRS basis results for the 2006 and 2005 half years are unaudited. The 2005 full year IFRS basis results have been derived from the 2005 statutory accounts. The auditors have reported on the 2005 statutory accounts which have been delivered to the Registrar of Companies. The auditors' report was not qualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. B Significant accounting policies The accounting policies applied by the Group in these condensed consolidated financial statements are the same as those previously applied in the Group's consolidated financial statements for the year ended 31 December 2005. C Segment disclosure Half Year Half Year Full Year 2006 £m 2005 £m 2005 £m Revenue Long-term business 13,565 17,739 39,296 Banking 457 685 1,115 Broker-dealer and fund management 518 424 895 Unallocated corporate 71 67 98 Intra-group revenue eliminated on consolidation (138) (147) (279) Total revenue per income statement 14,473 18,768 41,125 Charges (before income tax attributable to policyholders and unallocated surplus of long-term insurance funds) Long-term business, including post-tax transfers to (12,881) (17,024) (36,997) unallocated surplus of with-profits funds Banking (502) (672) (1,071) Broker-dealer and fund management (358) (333) (741) Unallocated corporate (16) (244) (450) Intra-group charges eliminated on consolidation 138 147 279 Total charges per income statement (13,619) (18,126) (38,980) Segment results - revenue less charges (continuing operations) Long-term business 684 715 2,299 Banking (45) 13 44 Broker-dealer and fund management 160 91 154 Unallocated corporate 55 (177) (352) Profit before tax* 854 642 2,145 Tax attributable to policyholders' returns (162) (182) (1,147) Profit before tax attributable to shareholders 692 460 998 Tax attributable to shareholders' profits (242) (156) (241) Profit from continuing operations after tax 450 304 757 Segment results - discontinued operations (net of tax) Banking 0 1 3 Profit for the period 450 305 760 * Profit before tax represents income net of post-tax transfers to unallocated surplus of with-profits funds, before tax attributable to policyholders and unallocated surplus of with-profits funds, unit-linked policies and shareholders' profits. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) BASIS RESULTS NOTES ON THE UNAUDITED IFRS BASIS RESULTS (CONTINUED) D Supplementary analysis of profit from continuing operations before tax attributable to shareholders Half Year Half Year Full Year Results analysis by business area 2006 £m 2005 £m 2005 £m UK Operations UK Insurance Operations 205 187 400 M&G 100 83 163 Egg (39) 13 44 Total 266 283 607 US Operations Jackson National Life 223 157 348 Broker-dealer and fund management 8 18 24 Curian (4) (6) (10) Total 227 169 362 Asian Operations Long-term business 88 116 195 Fund management 22 2 12 Development expenses (7) (8) (20) Total 103 110 187 Other income and expenditure Investment return and other income 33 45 87 Interest payable on core structural borrowings (89) (84) (175) Corporate expenditure: Group Head Office (46) (36) (70) Asia Regional Head Office (19) (14) (30) Charge for share based payments for Prudential schemes (5) (4) (11) Total (126) (93) (199) UK restructuring costs (note L) (17) - - Operating profit from continuing operations based on longer-term 453 469 957 investment returns Goodwill impairment charge (note (i)) - (95) (120) Short-term fluctuations in investment returns on 39 94 211 shareholder-backed business (note (ii)) Shareholders' share of actuarial and other gains and losses on 200 (8) (50) defined benefit pension schemes (note (iii)) Profit from continuing operations before tax attributable to 692 460 998 shareholders (i) Goodwill impairment charge The charges for goodwill impairment in 2005 relate to the Japanese life business. (ii) Short-term fluctuations in investment returns on shareholder-backed business Half Year Half Year Full Year 2006 £m 2005 £m 2005 £m US Operations: Movement in market value of derivatives used for economic 93 36 122 hedging purposes Actual less longer-term investment returns for other 9 24 56 items Asian Operations (36) 17 32 Other operations (27) 17 1 39 94 211 (iii) Actuarial and other gains and losses on defined benefit pension schemes Actuarial gains and losses Actual less expected return on scheme assets (57) 144 544 Experience (losses) gains on liabilities 0 (3) 1 Gains (losses) on changes of assumptions for scheme liabilities* 611 (156) (489) 554 (15) 56 Less: amounts attributable to the PAC with-profits fund (354) 7 (58) 200 (8) (2) Non recurrent credit (charge) Shareholders' share of credit arising from reduction in assumed - - 35 level of future discretionary increases for pensions in payment of the Prudential Staff Pension Scheme to 2.5% Loss on re-estimation of shareholders' share of deficit on the - - (63) Prudential Staff Pension Scheme at 31 December 2005 to 30% Effect of strengthening in actuarial provisions for increase in - - (20) ongoing contributions for future service of active scheme members - - (48) 200 (8) (50) *The gains and losses on changes of assumption for scheme liabilities primarily reflect movements in yields on good quality corporate bonds. These yields are used to discount the projected pension scheme benefit payments. The discount rates applied for the Group's UK defined benefit schemes, and reflected in the gains and losses shown above, are as follows: 30 June 2006 5.5% 31 December 2005 4.8% 30 June 2005 5.0% 31 December 2004 5.3% INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) BASIS RESULTS NOTES ON THE UNAUDITED IFRS BASIS RESULTS (CONTINUED) E Tax charge The total tax charge of £404m for the 2006 half year (2005 half year £338m) comprises £220m (£217m) UK tax and £184m (£121m) overseas tax. This tax charge comprises tax attributable to policyholders and unallocated surplus of with-profits funds, unit-linked policies and shareholders. The tax charge attributable to shareholders of £242m for the 2006 half year (2005 half year £156m) comprises £95m (£52m) UK tax and £147m (£104m) overseas tax. Half Year Half Year Full Year F Supplementary analysis of earnings per share from continuing 2006 £m 2005 £m 2005 £m operations Operating profit based on longer-term investment returns after related 12.7p 14.0p 32.2p tax and minority interests Adjustment for goodwill impairment charge - (4.0)p (5.1)p Adjustment from post-tax longer-term investment returns to post-tax 0.2p 3.0p 5.9p actual investment returns (after related minority interests) Adjustment for post-tax shareholders' share of actuarial and other 5.8p (0.3)p (1.5)p gains and losses on defined benefit pension schemes Based on profit from continuing operations after tax and minority 18.7p 12.7p 31.5p interests G Dividend The interim dividend of 5.42p per share will be paid on 27 October 2006 to shareholders on the register at the close of business on 18 August 2006. A scrip dividend alternative will be offered to shareholders. H Shareholders' equity 30 June 30 June 31 December 2006 £m 2005 £m 2005 £m Share capital 121 119 119 Share premium 1,808 1,560 1,564 Reserves 3,120 3,300 3,511 Total 5,049 4,979 5,194 I Other borrowings 30 June 30 June 31 December 2006 £m 2005 £m 2005 £m Operational borrowings attributable to shareholder-financed operations Borrowings in respect of short-term fixed income securities 1,500 1,131 1,472 programmes Non-recourse borrowings of investment subsidiaries managed by PPM 943 1,195 1,085 America Borrowings in respect of banking operations 3,535 3,888 3,856 Other borrowings 16 17 19 Total 5,994 6,231 6,432 Borrowings attributable to with-profits funds Non-recourse borrowings of venture fund investment subsidiaries of 1,183 755 988 the PAC with-profits fund Structural borrowings (subordinated debt of the Scottish Amicable 100 100 100 Insurance Fund) Other borrowings (predominantly external funding of consolidated 759 870 810 investment vehicles) Total 2,042 1,725 1,898 INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) BASIS RESULTS NOTES ON THE UNAUDITED IFRS BASIS RESULTS (CONTINUED) J Acquisitions and disposals (i) Shareholder acquisitions - Egg minority interests In December 2005, the Company announced its intention to acquire the minority interests in Egg representing approximately 21.7 per cent of the existing issued share capital of Egg. The whole of the minority interests were acquired in the first half of 2006. Under the terms of the offer, Egg shareholders received 0.2237 new ordinary shares in the Company for each Egg share resulting in the issue of 41.6m new shares in the Company. The Company accounts for the purchase of minority interests using the economic entity method. Accordingly, £167m has been charged to retained earnings representing the difference between the consideration paid (including expenses) of £251m and the share of net assets acquired of £84m. (ii) PAC with-profits fund acquisitions The PAC with-profits fund acquires a number of venture capital holdings through PPM Capital in which the Group is deemed to have a controlling interest, in aggregate with, if applicable, other holdings held by, for example, the Prudential Staff Pension Scheme. There were two such acquisitions during the period to 30 June 2006: • Acquisition of 53 per cent of the voting equity interests of Histoire D'or, a jewellery retail company, in April 2006; and • Acquisition of 51 per cent of the voting equity interests of Azzuri Communications, a business IT services company, in June 2006. These acquisitions are considered individually immaterial and therefore all 2006 half year information in the following table has been presented in aggregate. Due to the nature of the investments, it is not practicable to provide certain information for acquisitions occuring in the 2006 half year, including the pro forma Group revenue and consolidated net profit information as if the acquisitions had occurred at the beginning of the year, and the carrying amounts, in accordance with IFRS, of each class of the acquiree's assets, liabilities, and contingent liabilities immediately before acquisition. The results of the acquisitions have been included in the consolidated financial statements of the Group commencing on the respective dates of acquisition. The earnings contributed by these acquisitions to the income statement is insignificant and is also reflected as part of the change in unallocated surplus of the with-profits fund. The table below identifies the net assets acquired and reconciles this amount to the consideration paid for the ventures acquisitions in the six months to 30 June 2006: Fair value on acquisition £m Cash and cash equivalents 16 Other current assets 62 Property, plant and equipment 14 Other non-current assets 51 Less liabilities, including current liabilities and borrowings (455) (312) Less minority interests 0 Net assets acquired (312) Goodwill 313 Cash consideration 1 Aggregate goodwill of £313m has been recognised for the excess of the cost over the Group's interest in the net fair value of entities assets, liabilities and contingent assets in the 2006 half year. There are no intangible assets that were not recognised separately from goodwill for these companies because the fair value of the intangible asset could not be reliably measured. (iii) PAC with-profits fund disposals As at 31 December 2005, two venture subsidiaries were classified as held for sale; Upperpoint Distribution Limited and Taverner Hotel Group Pty Ltd. The sale of these venture subsidiaries was completed in the 2006 half year. In addition, two additional venture subsidiaries of the PAC with-profits fund were disposed of during the period, namely Orefi and Aperio Group Pty Ltd. Total cash consideration received was £93m. Goodwill of £44m and cash and cash equivalents of £13m were disposed of. There are no venture subsidiaries classified as held for sale at 30 June 2006. K Bulk annuity reinsurance from the Scottish Amicable Insurance Fund to Prudential Retirement Income Limited In June 2006 Prudential Retirement Income Limited (PRIL), a shareholder-backed subsidiary of the Company, entered into a bulk annuity reinsurance arrangement with the Scottish Amicable Insurance Fund (SAIF) for the reinsurance of non-profit immediate pension annuity liabiities with a premium of £592m. SAIF is a closed ring-fenced sub-fund of the PAC long-term fund, established by a Court approved Scheme of Arrangement in 1997, which is solely for the benefit of SAIF policyholders. As explained in the notes to the tables for the supplementary transaction measure of new business, the economic substance of the arrangement is a transfer of risks and rewards attaching to this business from SAIF policyholders to Prudential shareholders. Accordingly, for the purpose of those tables the reinsurance transaction has been recorded as 'new business'. For Group reporting purposes the amounts recorded by SAIF and PRIL for the premium are eliminated on consolidation. L UK restructuring costs On 1 December 2005 the Company announced an initiative for UK Insurance Operations to work more closely with Egg and M&G and in the process facilitate the realisation of substantial annualised pre-tax cost savings and opportunities for revenue synergies. The one-off restructuring cost of achieving the savings was estimated to be £50m. As at 30 June 2006 £17m of cost to shareholder-backed operations had been incurred. In the first half of 2006 the level of current and projected restructuring activity has increased as a result of an end to end review of the UK business, which is in progress, that is aimed at reducing the overall cost base. The total cost of implementing this and the previously announced restructuring (as noted above) is estimated at £110m to be incurred in 2006 and 2007, of which £70m is anticipated to be born by the shareholder-backed UK Insurance Operations and Egg and £40m by the PAC with-profits fund. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) BASIS RESULTS NOTES ON THE UNAUDITED IFRS BASIS RESULTS (CONTINUED) M Effect of adoption of IAS 32, IAS 39, and IFRS 4 The impact on total equity of adopting IAS 32, IAS 39 and IFRS 4 at 1 January 2005 was as follows: Shareholders' Minority Total equity interests equity £m £m £m Changes on adoption of IAS 32, IAS 39 and IFRS 4 relating to: UK Insurance Operations (note (i)) (22) (22) Jackson National Life (note (ii)) 273 273 Banking and non-insurance operations (note (iii)) (25) (3) (28) Total 226 (3) 223 Notes The changes shown above reflect the impact of re-measurement for : (i) UK Insurance Operations The reduction in shareholders' equity of £22m includes £20m relating to certain unit-linked and similar contracts that do not contain significant insurance risk and are therefore categorised as investment contracts under IFRS 4. (ii) Jackson National Life Under IAS 39, JNL's debt securities and derivative financial instruments are re-measured to fair value from the lower of amortised cost and, if relevant, impaired value. Fair value movements on debt securities, net of 'shadow' changes to deferred acquisition costs and related deferred tax are recognised directly in equity. Fair value movements on derivatives are recorded in the income statement. (iii) Banking and non-insurance operations Under IAS 39, for Egg, changes to opening equity at 1 January 2005 arise from altered policies for effective interest rate on credit card receivables, impairment losses on loans and advances, fair value adjustments on wholesale financial instruments and embedded derivatives in equity savings products. The net effect on shareholders' equity of these changes, after tax, is a deduction of £15m. A further £10m reduction in equity arises on certain centrally held financial instruments and derivatives. INDEPENDENT REVIEW REPORTS BY KPMG AUDIT PLC TO PRUDENTIAL PLC, extracted from the interim report 2006 'Introduction We have been engaged by the Company to review the IFRS financial information for the six months ended 30 June 2006 set out on pages 18 and 19 and pages 26 to 38. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Listing Rules of the Financial Services Authority. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report or for the conclusions we have reached. Directors' responsibilities The interim report, including the IFRS financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 Review of interim financial information issued by the Auditing Practices Board for use in the UK. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Statements on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the IFRS financial information as presented for the six months ended 30 June 2006. KPMG Audit Plc Chartered Accountants London 27 July 2006 Introduction We have been engaged by the Company to review the European Embedded Value (EEV) basis supplementary information for the six months ended 30 June 2006 set out on page 17 and pages 20 to 25. The supplementary information has been prepared in accordance with the EEV Principles issued in May 2004 by the CFO Forum using the methodology and assumptions set out on pages 22 to 24. The supplementary information should be read in conjunction with the Group's interim IFRS financial information which is set out on pages 18 and 19 and pages 26 to 38. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the supplementary information. This report is made solely to the Company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the Company those matters we have been engaged to state in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report or for the conclusions we have reached. Directors' responsibilities The interim report, including the EEV basis supplementary information contained therein, is the responsibility of, and has been approved by the directors. The directors have accepted responsibility for preparing the supplementary information in accordance with the EEV Principles and for determining the assumptions used in the application of those principles. Review work performed We conducted our review having regard to Bulletin 1999/4 Review of interim financial information issued by the Auditing Practices Board for use in the UK. A review consists principally of making enquiries of management and applying analytical procedures to the supplementary information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the supplementary information. Review conclusion On the basis of our review, we are not aware of any material modifications that should be made to the EEV basis supplementary information as presented for the six months ended 30 June 2006. KPMG Audit Plc Chartered Accountants London 27 July 2006' This information is provided by RNS The company news service from the London Stock Exchange

Companies

Prudential (PRU)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today