Interim Results - Part 4
Prudential PLC
26 July 2001
PART 4
Schedule 9
2001 Unaudited Interim results
Statutory basis results
Post-tax
and
Minority minority Earnings
Pre-tax Tax Post-tax interests interests per share
Basic earnings per share £m £m £m £m £m (pence)
(note 9a)
Based on operating profit
after tax and minority
related interests
before amortisation of 362 (108) 254 10 264 13.4
goodwill and merger break fee
(note 9b)
Adjustment for amortisation (47) - (47) - (47) (2.4)
of goodwill
Adjustment from post-tax
longer term investment
returns
to post-tax actual (105) 22 (83) 9 (74) (3.7)
investment returns (after
related minority interests
(note 9c))
Adjustment for merger break 338 (98) 240 - 240 12.1
fee, net of related expenses
Based on profit for the 548 (184) 364 19 383 19.4
financial year after minority
interests
Notes
9a Average number of shares for the six months to 30 June 2001 is 1,976m
9b The minority interests in the post-tax operating result relates to Egg.
9c The adjustment from post-tax longer term 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 £9m attributable to these minority interests.
Schedule 10
2001 Unaudited Interim results
Statutory basis results
Half year Full
ended 30 year
June
2001 2000 2000
US operations US$m US$m US$m
UK basis operating result
Jackson National 301 357 695
Life (note 10a)
Broker dealer 16 3 10
and fund
management result
Operating result for UK 317 360 705
reporting purposes
Exchange rate
2001 Unaudited Interim results
Statutory basis results
Half year Full
ended 30 Year
June
2001 2000 2000
US operations £m £m £m
UK basis operating result
Jackson National 209 228 459
Life (note 10a)
Broker dealer 11 2 7
and fund
management result
Operating result for UK 220 230 466
reporting purposes
Exchange rate 1.44 1.57 1.52
Notes
10a Longer-term investment returns included in UK basis operating profit
Half year ended
30 June 2001
UK basis operating profit for the US$m £m
half year ended 30 June 2001
includes the following
longer-term investment returns (net
of related charge to amortisation of
acquisition costs)
Averaged realised gains on fixed (10) (7)
maturities (note 10b)
Longer-term returns on equity based 35 24
investments
In prior periods longer-term investment returns included within UK basis
operating profit were estimated as the aggregate of investment income and
averaged gains for fixed maturities and other types of security.
Longer-term returns now include averaged realised gains for fixed
maturities only, and returns for equity based investments based on a
longer-term rate of return. Comparatives have not been restated for the
refinement in policy as the effect is immaterial to the results for those
periods.
10b Averaged realised gains on fixed maturities
Half year ended
30 June 2001
US$m £m
Realised gains (losses) arising in period (net of related
change to amortisation of acquisition expenses)
Full year 1997 30
1998 34
1999 (1)
2000 (69)
Half year 2001 (46) (32)
Five year average credited to UK (10) (7)
statutory basis operating profit
Shortfall of current period
realised losses over five year
average excluded from statutory basis
operating profit
(but included in profit before tax) (36) (25)
10c Longer-term returns on equity based
investments
Longer-term returns for these investments have been
determined by applying a longer-term rate of return of 7.75%
Schedule 11
2001 Unaudited Interim results
Statutory basis results
Half year ended 30
June 2001
UK GAAP adjustments
Longer-term Segmental
investment result
US returns EITF for UK
GAAP interests 99-20 Modified
Statutory
Basis GAAP
purposes
Jackson National Life US $m US $m US$m US $m £m
Reconciliation of US GAAP basis
result to UK GAAP
Operating profit (note 274 27 301 209
11a)
Realised investment
gains (losses), net of
related
change to amortisation of
acquisition costs (note
11a)
Fixed Maturities (46) 46 0 0
Equities 8 (8) 0 0
Short-term fluctuations
in investment returns (51) (29) (80) (56)
Amortisation of goodwill (3) (3) (2)
Profit before tax 223 14 (29) 218 151
Tax
on operating profit (95) (9) (104) (73)
on short-term-
fluctuations in investment
returns 13 5 10 28 20
total tax charge (82) (4) 10 (76) (53)
Profit after tax 151 10 (19) 142 98
Change of accounting
principle -
implementation
of EITF 99-20 (see note (19) 19 0 0
11b)
Total net income
(note 11c) 132 10 0 142 98
Exchange rate 1.44
Notes
11a US GAAP operating profit and realised investment gains and losses
These items are shown after excluding minority interests. For UK reporting
purposes the segmental result of Jackson National Life reflect
its proportionate interest in the results of two investment funds that are
consolidated as quasi-subsidiaries.
These items also exclude the impact of profits and losses that are
recognised under US GAAP as a result of the implementation of FAS133
on accounting for derivative instruments. Such gains and losses are not
generally recognised for UK GAAP purposes.
11b EITF 99-20
Effective 1 April 2001, EITF 99-20 issued by the US Federal Accounting
Standards Board established new income and impairment recognition
standards for interests in securitised financial assets.
The initial transition write-down is comprised of:
$m £m
Gross write-down (33) (23)
Related change to amortisation
of acquisition costs 4 3
Pre-tax charge (29) (20)
Related tax 10 7
Net of tax charge (19) (13)
11c Total net income
The difference between total US GAAP and UK GAAP basis net income of $10m
represents the movement on unrealised appreciation for equities and
preferred stock. Under US GAAP this amount is credited to Other
Comprehensive Income rather than the income statement.
The $10m includes $5m of accumulated unrealised appreciation as at 1
January 2001 not previously recognised for UK GAAP purposes.
For UK GAAP purposes fixed maturities are normally carried in the balance
sheet at amortised cost rather than market value. Accordingly,
movements on unrealised appreciation for these securities, which are
accounted for under US GAAP within Other Comprehensive Income,
do not feature as a reconciling item in the table shown above.
Schedule 12
2001 Unaudited Interim results
Statutory basis results
Half year ended 30 Full year
June
Short-term fluctuations in 2001 £m 2000 £m 2000
investment returns £m
Long-term business
Jackson National Life (note 12a) (56) (9) (52)
UK non-life long-term (3) (1) 1
Asia (1) - (2)
Share of investment return of US managed investment funds
consolidated into Group (9) - (13)
results that is attributable
to external investors
General business and
shareholders
Relating to investment in St. - 30 24
James's Place Capital plc
Other (note 12c) (36) (3) (6)
Total (105) 17 (48)
Notes
12a Jackson National Life
Short-term fluctuations, net
of related changes to
amortisation of
acquisition costs comprise:
Actual investment return on (36) (9) (52)
investments less longer-term
returns
included within operating
profit
Transition write-down on (20) - -
implementation of EITF 99-20
for interests
in securitised financial
assets (as explained on
schedule 11)
(56) (9) (52)
12b Actual investment return on
investments less longer-term
returns
(net of related changes to
amortisation costs) for the
half year
ended 30 June 2001.
This comprises: £m
Actual less average realised (25)
gains and losses for fixed
maturities
Actual less longer-term return (24)
on equity based investments
Unrealised gains on preference 8
shares
Previously unrecognised 5
unrealised appreciation (gross
of tax)
(36)
Half year ended 30 June Full
year
12c Other general business and 2001 £m 2000 £m 2000 £m
shareholders investment gains
Current period realised and (24) 9 22
unrealised gains
Longer-term gains credited to 12 12 28
operating result
Shortfall of current year
gains over longer-term gains
excluded
from operating result but (36) (3) (6)
included in profit before tax
Schedule 13
2001 Unaudited Interim results
Statutory basis results
Half year ended 30 June Full
year
Taxation charge 2001 £m 2000 £m 2000 £m
Tax charge on operating profit (note 13a)
Long-term business
UK Operations 63 67 125
Jackson National Life (note 13b) 73 68 132
Prudential Asia (note 13c) 3 4 4
Prudential Europe (note 13c) 0 (1) (2)
139 138 259
General insurance and shareholders (31) (19) (24)
(note 13d)
Total tax on operating profit 108 119 235
Tax on items not included in operating
profits
Tax on short-term fluctuations in (22) 10 (8)
investment returns
Tax on profit on business disposals - 33 57
Tax on merger break fee, net of 98 - -
expenses
Total tax on items not included in 76 43 49
operating profits
Tax on profit on ordinary activities
(including tax on actual investment 184 162 284
returns)
Notes
13a Tax on operating profit based on longer-term investment returns,
excluding merger break fee, net of expenses.
13b Excluding tax charge on broker dealer and fund management result
13c Including tax relief on development costs
13d Including tax relief on UK re-engineering costs borne by shareholder
financed operations.
Schedule 14
2001 Unaudited Interim results
Statutory basis results
Half year Full
year
2001 2000 2000
Funds under management - summary £bn £bn £bn
Business Area
UK Operations 102.6 104.0 104.7
US Operations 30.5 27.5 27.8
Prudential Asia 4.6 2.9 3.4
Prudential Europe 0.6 0.5 0.6
Retained centrally 0.3 0.1 0.2
Total group investments under management 138.6 135.0 136.7
(note 14a)
Retail funds 22.8 13.6 22.7
Institutional funds 6.7 7.6 5.9
Total insurance and investment funds under 168.1 156.2 165.3
management
Note
14a As included in the consolidated
balance sheet.
Schedule 15
Funds under management - analysis by business area
Investments
Fixed held to
Income cover
Equities Securities Land and Other linked Total
Buildings Investments liabilities
Half Half Half Half Half Half
year year year year year year
2001 2001 2001 2001 2001 2001
£bn £bn £bn £bn £bn £bn
UK 45.3 30.6 10.2 3.4 13.1 102.6
Operations
US 0.3 21.4 0.1 4.9 3.8 30.5
Operations
(note 15a)
Pruden- 0.8 2.2 0.1 0.7 0.8 4.6
tial
Asia
Pruden- 0.0 0.0 0.0 0.0 0.6 0.6
tial
Europe
Retained 0.0 0.0 0.0 0.3 0.0 0.3
centrally
Group 46.4 54.2 10.4 9.3 18.3 138.6
Total
Funds under management - analysis by business area
Investments
Fixed held to
Income cover
Equities Securities Land and Other linked Total
Buildings Investments liabilities
Full Full Full Full Full Full
year year year year year year
2000 2000 2000 2000 2000 2000
£bn £bn £bn £bn £bn £bn
UK 50.2 28.3 10.1 2.8 13.3 104.7
Operations
US 0.2 18.9 0.1 4.9 3.7 27.8
Operations
(note 15a)
Pruden- 0.8 1.4 0.1 0.5 0.6 3.4
tial
Asia
Pruden- 0.0 0.0 0.0 0.0 0.6 0.6
tial
Europe
Retained 0.0 0.0 0.0 0.2 0.0 0.2
centrally
Group 51.2 48.6 10.3 8.4 18.2 136.7
Total
Note
15a The fixed income securities of US Operations are valued at amortised cost.
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