International Financial Reporting Standards (IFRS) basis results

Condensed consolidated income statement

  Note 2009 £m   2008 £m
Half
year		 Half
year		 Full
year
Earned premiums, net of reinsurance   9,518   8,926 18,789
Investment return   3,625   (9,752) (30,202)
Other income   574   453 1,146
Total revenue, net of reinsurance   13,717   (373) (10,267)
Benefits and claims and movement in unallocated surplus of with-profits funds, net of reinsurance   (10,783)   1,479 10,824
Acquisition costs and other operating expenditure   (2,446)   (1,763) (2,459)
Finance costs: interest on core structural borrowings of shareholder-financed operations   (84)   (82) (172)
Loss on sale of Taiwan agency business G (559)   – –
Total charges, net of reinsurance   (13,872)   (366) 8,193
Loss before tax (being tax attributable to shareholders’ and policyholders’ returns)*   (155)   (739) (2,074)
Tax credit attributable to policyholders’ returns   79   637 1,624
Loss before tax attributable to shareholders C (76)   (102) (450)
Tax (charge) credit H (103)   625 1,683
Less: tax credit attributable to policyholders’ returns   (79)   (637) (1,624)
Tax (charge) credit attributable to shareholders’ returns H (182)   (12) 59
Loss from continuing operations after tax/Loss for the period   (258)   (114) (391)
Attributable to:          
Equity holders of the Company   (254)   (116) (396)
Minority interests   (4)   2 5
Loss for the period   (258)   (114) (391)

* This measure is the formal loss before tax measure under IFRS but it is not the result attributable to shareholders.

Earnings per share (in pence)

    2009   2008
Half
year		 Half
year		 Full
year
Based on loss for the period attributable to the equity holders of the Company:          
Basic I (10.2)p   (4.7)p (16.0)p
Diluted I (10.2)p   (4.7)p (16.0)p

Condensed consolidated statement of comprehensive income*

  Note 2009 £m   2008 £m
Half
year		 Half
year		 Full
year
Loss for the period   (258)   (114) (391)
Other comprehensive income (loss):          
Exchange movements on foreign operations and net investment hedges:          
Exchange movements arising during the period   (292)   32 391
Related tax   (6)   14 119
    (298)   46 510
Available-for-sale securities:          
Unrealised valuation movements on securities of US insurance operations classified as available-for-sale:          
Unrealised holding gains (losses) arising during the period   662   (774) (2,482)
Add back net losses included in the income statement on disposal and impairment   146   97 378
Total M 808   (677) (2,104)
Related change in amortisation of deferred income and acquisition costs   (235)   244 831
Related tax   (150)   148 442
    423   (285) (831)
Other comprehensive income (loss) for the period, net of related tax   125   (239) (321)
           
Total comprehensive loss for the period   (133)   (353) (712)
Attributable to:          
Equity holders of the Company   (129)   (355) (717)
Minority interests   (4)   2 5
Total comprehensive loss for the period   (133)   (353) (712)

* This consolidated statement of comprehensive income has been introduced as a result of the adoption of amendments to IAS 1 ‘Presentation of Financial Statements: A Revised Presentation’. See note B.

Condensed consolidated statement of changes in equity

  Period ended 30 Jun 2009 £m
Share capital Share premium Retained earnings Trans-lation reserve Available-for-sale securities reserve Share-holders' equity Minority interests Total equity
Reserves                
Total comprehensive income (loss) for the period – – (254) (298) 423 (129) (4) (133)
Dividends – – (322) – – (322) – (322)
Reserve movements in respect of share-based payments – – 18 – – 18 – 18
Change in minority interests arising principally from purchase and sale of property partnerships of the PAC with-profits fund and other consolidated investment funds – – – – – – (22) (22)
Share capital and share premium                
New share capital subscribed 1 95 – – – 96 – 96
Transfer to retained earnings in respect of shares issued in lieu of cash dividends – (95) 95 – – – – –
Treasury shares                
Movement in own shares in respect of share-based payment plans – – 7 – – 7 – 7
Movement in Prudential plc shares purchased by unit trusts consolidated under IFRS – – (8) – – (8) – (8)
Net increase (decrease) in equity 1 – (464) (298) 423 (338) (26) (364)
At beginning of period 125 1,840 3,604 398 (909) 5,058 55 5,113
At end of period 126 1,840 3,140 100 (486) 4,720 29 4,749
  Period ended 30 Jun 2008 £m
Share capital Share premium Retained earnings Trans-lation reserve Available-for-sale securities reserve Share-holders' equity Minority interests Total equity
Reserves                
Total comprehensive income (loss) for the period – – (116) 46 (285) (355) 2 (353)
Dividends – – (304) – – (304) – (304)
Reserve movements in respect of share-based payments – – 14 – – 14 – 14
Change in minority interests arising principally from purchase and sale of property partnerships of the PAC with-profits fund and other consolidated investment funds – – – – – – (6) (6)
Share capital and share premium                
New share capital subscribed 1 136 – – – 137 – 137
Transfer to retained earnings in respect of shares issued in lieu of cash dividends – (126) 126 – – – – –
Treasury shares                
Movement in own shares in respect of share-based payment plans – – 6 – – 6 – 6
Movement in Prudential plc shares purchased by unit trusts consolidated under IFRS – – (8) – – (8) – (8)
Net increase (decrease) in equity 1 10 (282) 46 (285) (510) (4) (514)
At beginning of period 123 1,828 4,301 (112) (78) 6,062 102 6,164
At end of period 124 1,838 4,019 (66) (363) 5,552 98 5,650
  Year ended 31 Dec 2008 £m
Share capital Share premium Retained earnings Trans-lation reserve Available-for-sale securities reserve Share-holders' equity Minority interests Total equity
Reserves                
Total comprehensive income (loss) for the year – – (396) 510 (831) (717) 5 (712)
Dividends – – (453) – – (453) (2) (455)
Reserve movements in respect of share-based payments – – 18 – – 18 – 18
Change in minority interests arising principally from purchase and sale of property partnerships of the PAC with-profits fund and other consolidated investment funds – – – – – – (50) (50)
Share capital and share premium                
New share capital subscribed 2 168 – – – 170 – 170
Transfer to retained earnings in respect of shares issued in lieu of cash dividends – (156) 156 – – – – –
Treasury shares                
Movement in own shares in respect of share-based payment plans – – 3 – – 3 – 3
Movement in Prudential plc shares purchased by unit trusts consolidated under IFRS – – (25) – – (25) – (25)
Net increase (decrease) in equity 2 12 (697) 510 (831) (1,004) (47) (1,051)
At beginning of year 123 1,828 4,301 (112) (78) 6,062 102 6,164
At end of year 125 1,840 3,604 398 (909) 5,058 55 5,113

As a result of the introduction of the consolidated statement of comprehensive income there has been a reclassification of £240 million of exchange losses from the Available-for-sale securities reserve to the Translation reserve in the 2008 full year comparatives as explained in note B.

Condensed consolidated statement of financial position

Assets

  Note 2009 £m   2008 £m
30 Jun 30 Jun 31 Dec
Intangible assets attributable to shareholders:          
Goodwill   1,310   1,341 1,341
Deferred acquisition costs and other intangible assets P 4,045   3,290 5,349
    5,355   4,631 6,690
Intangible assets attributable to with-profits funds:          
In respect of acquired subsidiaries for venture fund and other investment purposes   159   174 174
Deferred acquisition costs and other intangible assets   111   18 126
    270   192 300
Total   5,625   4,823 6,990
Other non-investment and non-cash assets:          
Property, plant and equipment   428   1,038 635
Reinsurers’ share of insurance contract liabilities   1,114   971 1,240
Deferred tax asset H 2,149   1,250 2,886
Current tax recoverable   389   244 657
Accrued investment income   2,366   2,209 2,513
Other debtors   1,311   1,108 1,232
Total   7,757   6,820 9,163
Investments of long-term business and other operations:          
Investment properties   10,479   13,529 11,992
Investments accounted for using the equity method   6   16 10
Financial investments:          
Loans K 8,613   8,719 10,491
Equity securities and portfolio holdings in unit trusts   56,069   75,876 62,122
Debt securities L 89,399   83,806 95,224
Other investments   6,085   4,528 6,301
Deposits   8,806   8,194 7,294
Total   179,457   194,668 193,434
Properties held for sale   5   – –
Cash and cash equivalents   6,542   4,844 5,955
Total assets D 199,386   211,155 215,542

Equity and liabilities

  Note 2009 £m   2008 £m
30 Jun 30 Jun 31 Dec
Equity          
Shareholders’ equity   4,720   5,552 5,058
Minority interests   29   98 55
Total equity   4,749   5,650 5,113
Liabilities          
Policyholder liabilities and unallocated surplus of with-profits funds          
Contract liabilities (including amounts in respect of contracts classified as investment contracts under IFRS 4)   165,047   169,113 173,977
Unallocated surplus of with-profits funds   7,061   12,560 8,414
Total   172,108   181,673 182,391
Core structural borrowings of shareholder-financed operations:          
Subordinated debt   2,198   1,603 1,987
Other   701   923 971
Total N 2,899   2,526 2,958
Other borrowings:          
Operational borrowings attributable to shareholder-financed operations O 2,855   2,908 1,977
Borrowings attributable to with-profits operations O 1,349   937 1,308
Other non-insurance liabilities:          
Obligations under funding, securities lending and sale and repurchase agreements   4,218   5,053 5,572
Net asset value attributable to unit holders of consolidated unit trusts and similar funds   2,706   3,755 3,843
Current tax liabilities   663   952 842
Deferred tax liabilities H 2,651   2,843 3,229
Accruals and deferred income   626   773 630
Other creditors   1,640   1,956 1,496
Provisions   614   488 461
Derivative liabilities   1,379   723 4,832
Other liabilities   929   918 890
Total   15,426   17,461 21,795
Total liabilities   194,637   205,505 210,429
Total equity and liabilities D 199,386   211,155 215,542

Condensed consolidated statement of cash flows

  Note 2009 £m   2008 £m
Half
year		 Half
year		 Full
year
Cash flows from operating activities          
Loss before tax (being tax attributable to shareholders' and policyholders' returns)note i   (155)   (739) (2,074)
Changes in operating assets and liabilitiesnote ii   1,068   1,236 3,978
Other itemsnote ii   633   (325) (760)
Net cash flows from operating activities   1,546   172 1,144
Cash flows from investing activities          
Net cash flows from purchases and disposals of property, plant and equipment   (22)   (55) (229)
Disposal of Taiwan agency businessnote iii G (436)   – –
Net cash flows from investing activities   (458)   (55) (229)
Cash flows from financing activities          
Structural borrowings of the Group:          
Shareholder-financed operations:note iv N        
Issue of subordinated debt, net of costs   379   – –
Redemption of senior debt   (249)   – –
Interest paid   (98)   (91) (167)
With-profits operations:note v O        
Interest paid   (9)   (9) (9)
Equity capital:note vi          
Issues of ordinary share capital   –   10 12
Dividends paid   (226)   (177) (297)
Net cash flows from financing activities   (203)   (267) (461)
Net increase (decrease) in cash and cash equivalents   885   (150) 454
Cash and cash equivalents at beginning of period   5,955   4,951 4,951
Effect of exchange rate changes on cash and cash equivalents   (298)   43 550
Cash and cash equivalents at end of periodnote vii   6,542   4,844 5,955

Notes

  • i
    This measure is the formal loss before tax measure under IFRS but it is not the result attributable to shareholders.
  • ii

    The adjusting items to loss before tax include changes in operating assets and liabilities, and other items including adjustments in respect of non-cash items, together with operational interest receipts and payments, dividend receipts, and tax paid. The figure of £633 million for other items at half year 2009 includes £559 million for the loss on disposal of Taiwan agency business. The most significant elements of the adjusting items within changes in operating assets and liabilities are as follows:

      2009
    Half
    year
    £m    		 2008
    Half
    year
    £m    		 2008
    Full
    year
    £m
    Deferred acquisition costs (excluding changes taken directly into equity) 226 (464) (1,149)
    Other non-investment and non-cash assets (234) (742) (510)
    Investments (841) 9,166 33,255
    Policyholder liabilities (including unallocated surplus) 2,265 (9,194) (26,987)
    Other liabilities (including operational borrowings) (348) 2,470 (631)
    Changes in operating assets and liabilities 1,068 1,236 3,978
  • iii
    The amount of £436 million in respect of the disposal of the Taiwan agency business shown above, represents the cash and cash equivalents of £388 million held by Taiwan agency business transferred on disposal and restructuring costs paid in cash in the period of £3 million. In addition, the cash flow for the disposal includes a £45 million outflow to purchase a 9.99 per cent stake in China Life.
  • iv
    Structural borrowings of shareholder-financed operations comprise core debt of the holding company and Jackson surplus notes. Core debt excludes borrowings to support short-term fixed income securities programmes, non-recourse borrowings of investment subsidiaries of shareholder-financed operations and other borrowings of shareholder-financed operations. Cash flows in respect of these borrowings are included within cash flows from operating activities. In May 2009, the Company repaid maturing £249 million senior debt. In the same month, the Company issued £400 million subordinated debt in part to replace the maturing debt.
  • v
    Structural borrowings of with-profits operations relate solely to the £100 million 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 in respect of other borrowings of with-profits funds, which principally relate to consolidated investment funds, are included within cash flows from operating activities.
  • vi
    Cash movements in respect of equity capital exclude scrip dividends.
  • vii
    Of the cash and cash equivalents amounts reported above, £638 million (half year 2008: £361 million; full year 2008: £165 million) were held centrally.

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