European Embedded Value (EEV) basis results

Operating profit based on longer-term investment returns*i

Results analysis by business area

  Note 2009 £m 2008 £m
Half
year		 Half
year*iv,v		 Full
year*iv,v
Asian operations        
New business   277 289 634
Business in force   124 171 579
Long-term business   401 460 1,213
Asset management   21 29 52
Development expenses   (5) (3) (26)
Total   417 486 1,239
US operations        
New business   292 137 293
Business in force   209 217 293
Long-term business   501 354 586
Broker-dealer and asset management*ii   2 6 7
Total   503 360 593
UK operations        
New business   122 129 273
Business in force   284 361 764
Long-term business   406 490 1,037
General insurance commission   27 14 44
Total UK insurance operations   433 504 1,081
M&G   102 146 286
Total   535 650 1,367
Other income and expenditure        
Investment return and other net income   (3) 51 47
Interest payable on core structural borrowings   (84) (82) (172)
Corporate expenditure:        
Group Head Office   (74) (79) (130)
Asia Regional Head Office   (23) (17) (41)
Charge for share-based payments for Prudential schemes   (11) (4) (6)
Total   (195) (131) (302)
Restructuring costs*iii   (14) (15) (32)
Operating profit based on longer-term investment returns*iv   1,246 1,350 2,865
Analysed as profits (losses) from:        
New business 5 691 555 1,200
Business in force 6 617 749 1,636
Long-term business   1,308 1,304 2,836
Asset management   125 181 345
Other results   (187) (135) (316)
Total   1,246 1,350 2,865
  • *i
    EEV basis operating profit based on longer-term investment returns excludes short-term fluctuations in investment returns, the mark to market value movements on core borrowings, the shareholders’ share of actuarial and other gains and losses on defined benefit pension schemes and the effect of changes in economic assumptions and changes in the time value of cost of options and guarantees arising from changes in economic factors. In addition, in half year 2009 as a result of the exceptional dislocated market conditions, the Group incurred non-recurrent costs from an exceptional overlay short dated hedge to protect against tail events on the Group IGD capital position in addition to our regular operational hedging programme. It also disposed of its Taiwan agency business. These items have been shown separately from operating profit based on longer-term investment returns. The treatment of the Taiwan agency business within the comparatives is discussed below. The amounts for these items are included in total EEV profit attributable to shareholders. The directors believe that operating profit, as adjusted for these items, better reflects underlying performance. Profit before tax includes these items together with actual investment returns. This basis of presentation has been adopted consistently throughout these statements.
  • *ii
    The US broker-dealer and asset management result includes Curian losses of £3 million (half year 2008: £nil; full year 2008: £3 million).
  • *iii
    Restructuring costs comprise the charge of £12 million recognised on an IFRS basis and an additional £2 million recognised on the EEV basis for the shareholders’ share of costs incurred by the PAC with-profits fund.
  • *iv
    In June 2009, the Group completed the previously announced sale of its Taiwan agency business. In order to facilitate comparisons of the results of the Group’s retained businesses the effect of disposal and the results of the Taiwan agency business are shown separately. The presentation of the comparative results for half year and full year 2008 has been adjusted accordingly as explained in note 12.
  • *v
    Exchange translation
    The comparative results have been prepared using previously reported exchange rates.

Summary consolidated income statement

  Note 2009 £m 2008 £m
Half
year		 Half
year		 Full
year
Asian operations   417 486 1,239
US operations   503 360 593
UK operations:        
UK insurance operations   433 504 1,081
M&G   102 146 286
    535 650 1,367
Other income and expenditure   (195) (131) (302)
Restructuring costs   (14) (15) (32)
Operating profit based on longer-term investment returns   1,246 1,350 2,865
Short-term fluctuations in investment returns 7 (707) (1,868) (4,967)
Mark to market value movements on core borrowings   (108) 171 656
Shareholders' share of actuarial and other gains and losses on defined benefit pension schemes   (71) (98) (14)
Effect of changes in economic assumptions and time value of cost of options and guarantees 8 (384) (100) (398)
Profit on sale and results for Taiwan agency business 12 91 (90) (248)
Profit (loss) before tax (including actual investment returns)   67 (635) (2,106)
Tax attributable to shareholders’ profit/loss   (52) 162 771
Profit (loss) for the period   15 (473) (1,335)
Attributable to:        
Equity holders of the Company   14 (475) (1,338)
Minority interests   1 2 3
Profit (loss) for the period   15 (473) (1,335)

Movement in shareholders’ equity (excluding minority interests)

  Note 2009 £m 2008 £m
Half
year		 Half
year		 Full
year
Profit (loss) for the period attributable to equity shareholders   14 (475) (1,338)
Items taken directly to equity:        
Exchange movements 9 (1,098) 35 2,010
Related tax   (6) 14 119
Dividends   (322) (304) (453)
New share capital subscribed   96 137 170
Reserve movements in respect of share-based payments   18 14 18
Treasury shares:        
Movement in own shares in respect of share-based payment plans   7 6 3
Movement on Prudential plc shares purchased by unit trusts consolidated under IFRS   (8) (8) (25)
Mark to market value movements on Jackson assets backing surplus and required capital   63 (42) (148)
Net (decrease) increase in shareholders’ equity   (1,236) (623) 356
Shareholders’ equity at beginning of period (excluding minority interests)   14,956 14,600 14,600
Shareholders' equity at end of period (excluding minority interests)   13,720 13,977 14,956

Summary statement of financial position

  Note 2009 £m 2008 £m
Half
year		 Half
year		 Full
year
Total assets less liabilities, excluding insurance funds   175,714 186,254 186,209
Less insurance funds:*        
Policyholder liabilities (net of reinsurers’ share) and unallocated surplus of with-profits funds   (170,994) (180,702) (181,151)
Less shareholders’ accrued interest in the long-term business   9,000 8,425 9,898
    (161,994) (172,277) (171,253)
Total net assets   13,720 13,977 14,956
Share capital   126 124 125
Share premium   1,840 1,838 1,840
IFRS basis shareholders’ reserves   2,754 3,590 3,093
Total IFRS basis shareholders’ equity   4,720 5,552 5,058
Additional EEV basis retained profit   9,000 8,425 9,898
Shareholders' equity (excluding minority interests)   13,720 13,977 14,956
* Including liabilities in respect of insurance products classified as investment contracts under IFRS 4.
Comprising:        
Asian operations:        
Net assets   5,308 3,831 5,431
Acquired goodwill   141 172 172
    5,449 4,003 5,603
US operations   3,953 3,709 4,453
UK operations:        
Insurance business   4,677 5,956 4,919
M&G:        
Net assets   178 193 147
Acquired goodwill   1,153 1,153 1,153
    6,008 7,302 6,219
Other operations:        
Holding company net borrowings at market value 10 (861) (702) (818)
Other net liabilities   (829) (335) (501)
Shareholders’ equity at end of period (excluding minority interests)   13,720 13,977 14,956
Representing:        
Long-term business operations 11 13,674 13,285 14,522
Other operations   46 692 434
    13,720 13,977 14,956

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