ANNUAL REPORT 2001 - Prudential plc

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NOTES ON THE FINANCIAL STATEMENTS CONTINUED 16. Tax continued (c) By source of profit Tax on operating profit (based on long-term investment returns) 2001 2000 £m £m Long-term business: UK Operations 120 125 Jackson National Life 99 161 Prudential Asia 17 8 Prudential Europe (1) (2) Total long-term business* 235 292 General business and shareholders (61) (32) Total tax on operating profit 174 260 Tax on short-term fluctuations in investment returns (159) (3) Tax on profit on business disposals – 57 Tax on merger break fee (after utilisation of available capital losses) 6 – Tax on profit on ordinary activities (including tax on actual investment returns)** 21 314 * The tax charge on long-term business for 2000 excludes the tax related to M&G long-term business that has now been transferred to Scottish Amicable. ** The effective tax rate on total profit was 5% compared to 33% in 2000 due to tax payable on the American General merger break fee being relieved against capital losses available to the Group and acquired during the year. (d) Factors affecting tax charge for period The tax assessed in the period is lower than the standard rate of corporation tax in the UK and the differences are explained below. The standard rate of tax has been determined by using the UK rate of corporation tax enacted for the period for which the profits will be taxed. 2001 2000 £m £m Profit on ordinary activities before tax 385 947 Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% (30%) 116 284 Effects of: Non-taxable book losses (gains) on sales of subsidiaries/associates 0 (44) Utilisation of acquired capital losses against merger break fee (95) – Other capital gains and utilisation of acquired capital losses (22) 27 Different local basis of tax on overseas profits 6 23 Utilisation of brought forward tax losses (1) 0 UK tax bases of insurance profits (8) (8) Non-taxable foreign exchange losses 5 9 Non-taxable amortisation of goodwill 29 25 Deferred tax credit (charge) for the period 54 (24) Other (9) (2) Current tax charge for the period 75 290 Comparative figures for 2000 have been restated for the implementation of FRS 19 on deferred tax. (ii) Deferred tax The components of the net deferred tax liability are as follows. The balances have not been discounted. Liability provided (asset recognised) 2001 2000 £m £m (a) By category of timing difference Unrealised gains on investments 1,857 2,679 Deferred acquisition costs 465 391 Short-term timing differences (471) (359) Long-term business technical provisions and other insurance items 186 107 Capital allowances (32) (41) Total 2,005 2,777 (b) By fund Scottish Amicable Insurance Fund 145 247 PAC with-profits fund* 1,795 2,366 Jackson National Life (45) (7) Other long-term business operations 68 87 Other operations 42 84 Total 2,005 2,777 * Includes deferred tax charges in respect of non-participating annuity business written by a subsidiary, Prudential Annuities Limited, financed by the PAC withprofits fund. A potential deferred tax asset of £17m relating to realised losses has not been recognised. 60 Prudential plc Annual Report 2001
16. Tax continued 2001 2000 £m £m (c) Reconciliation of movements in deferred tax Restated deferred tax liability at beginning of year 2,777 3,541 Deferred tax credited in profit and loss account for the year (772) (764) Deferred tax liability at end of year 2,005 2,777 Comparative figures for 2000 have been restated for the implementation of FRS 19 on deferred tax. 17. Goodwill 2001 2000 £m £m Balance at beginning of year 1,611 1,582 Adjustment in respect of 1999 acquisitions – 5 Additions in respect of acquisitions (note 34): Orico Life Insurance Company, Japan 139 – YoungPoong Life, Korea 17 – Prudential SITE, Taiwan – 63 US banking and broker dealer operations 3 63 Other operations 12 4 Charges to profit and loss account: In respect of the disposal of M&G institutional fund management business – (22) Amortisation (95) (84) Balance at end of year 1,687 1,611 The balance at beginning of 2001 comprises cost of £1,748m less accumulated amortisation of £137m. 18. Present Value of Acquired In Force Long-term Business 2001 2000 £m £m Balance at beginning of year 133 170 Exchange adjustment 4 9 Amortisation: Pre-tax 2 (65) Tax (1) 19 Net 1 (46) Balance at end of year 138 133 The balance at beginning of 2001 comprises cost of £254m less accumulated amortisation of £64m and tax of £57m. Amortisation includes a £20m credit (£47m charge) in respect of in force business of M&G acquired in 1999. 19. Information on Staff and Pension Costs The average numbers of staff employed by the Group during the year were: 2001 2000 UK Operations 15,266 16,652 US Operations 2,580 2,250 Prudential Asia 4,651 2,635 Prudential Europe 550 405 Total 23,047 21,942 The costs of employment were: 2001 2000 £m £m Wages and salaries 734 656 Social security costs 61 55 Other pension costs (see below) 48 46 Total 843 757 Pension costs The Group has chosen not to fully implement FRS 17 ‘Retirement benefits’ for the 2001 financial statements. Pension costs shown above have been determined applying the principles of SSAP 24 ‘Pension costs’. £9m (£7m) of the Group’s pension costs related to overseas schemes. 61 Prudential plc Annual Report 2001
Page 1 and 2:
PRUDENTIAL PLC ANNUAL REPORT 2001
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PRUDENTIAL AT A GLANCE PRUDENTIAL
Page 5 and 6:
GROUP FINANCIAL HIGHLIGHTS 2001 200
Page 7 and 8:
GROUP CHIEF EXECUTIVE’S REVIEW WE
Page 9 and 10:
The fastest growing age group in th
Page 11 and 12:
est growth prospects in the market
Page 13 and 14: Egg 2001 was another year of outsta
Page 15 and 16: Over the last five years, JNL has m
Page 17 and 18: equivalent (APE) basis were £434 m
Page 19 and 20: 69 per cent). The new business marg
Page 21 and 22: differences and other items. The in
Page 23 and 24: However, we have not been discussin
Page 25 and 26: CORPORATE SOCIAL RESPONSIBILITY REV
Page 27 and 28: Executive Directors 1. Jonathan Blo
Page 29 and 30: Nomination Committee Sir Roger Hurn
Page 31 and 32: REMUNERATION REPORT The Remuneratio
Page 33 and 34: Directors’ Long-term Incentive Pl
Page 35 and 36: Directors’ Share Options The Rest
Page 37 and 38: DIRECTORS’ REPORT Principal Activ
Page 39 and 40: SUMMARY OF STATUTORY BASIS RESULTS
Page 41 and 42: Restated † 2001 2000 Long-term Bu
Page 43 and 44: CONSOLIDATED STATEMENT OF TOTAL REC
Page 45 and 46: Restated † 2001 2000 Liabilities
Page 47 and 48: CONSOLIDATED CASH FLOW STATEMENT YE
Page 49 and 50: 3. Significant Accounting Policies
Page 51 and 52: Reinsurance In the normal course of
Page 53 and 54: Linked business funds Certain long-
Page 55 and 56: 5. Supplemental Earnings Informatio
Page 57 and 58: 7. Segmental Information - New Busi
Page 59 and 60: 9. Segmental Information - Net Asse
Page 61 and 62: 11. Jackson National Life - Additio
Page 63: 15. Investment Expenses and Charges
Page 67 and 68: 21. Fees Payable to Auditors KPMG K
Page 69 and 70: 27. Share Capital and Share Premium
Page 71 and 72: 31. Borrowings continued 2001 2000
Page 73 and 74: 32. Contingencies and Related Oblig
Page 75 and 76: INDEPENDENT AUDITORS’ REPORT TO T
Page 77 and 78: 2001 2000 1999 1998 1997 Analysis b
Page 79 and 80: SUMMARISED CONSOLIDATED PROFIT AND
Page 81 and 82: NOTES ON THE ACHIEVED PROFITS BASIS
Page 83 and 84: 6. Cost of Capital On the achieved
Page 85 and 86: 10. Short-term Fluctuations in Inve
Page 87 and 88: 14. Reconciliation of Movement in S
Page 89 and 90: THE ACHIEVED PROFITS BASIS OF FINAN
Page 91 and 92: HOW TO CONTACT US Prudential plc La
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ANNUAL REPORT 2001 - Prudential plc

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