ANNUAL REPORT 2001 - Prudential plc

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NOTES ON THE FINANCIAL STATEMENTS CONTINUED 33. Cash Flow continued 2001 2000 Acquisitions £m £m Net assets acquired: Goodwill on acquisitions 171 108 Cash and short-term deposits – 16 Banking business assets – 714 Banking business liabilities – (535) Interest in associate undertaking – (79) Net assets held in long-term business operations 2 184 Minority interests in Egg – (120) Other net assets 9 (24) Net assets acquired 182 264 Cash consideration (paid) received after expenses (182) 12 Net impact on shareholders’ funds 0 276 Comprising: Short-term fluctuations in investment returns after tax – 19 Profit on business disposals after tax – 167 Goodwill credited to reserves – 90 34. Acquisitions Acquisitions in 2001 principally relate to the purchase of Orico Life Insurance Company of Japan and YoungPoong Life in Korea. The effect of these transactions, which have been accounted for as acquisitions, was: 0 276 Japan Korea Other Total £m £m £m £m Fair value of consideration (including expenses) 139 23 20 182 Net assets acquired: Financial investments 578 50 5 633 Technical provisions (587) (44) – (631) Other 9 – – 9 Book and fair value of assets at acquisition 0 6 5 11 Goodwill recognised on acquisitions 139 17 15 171 The amounts included in the profit and loss account for 2001 in respect of these operations are not material. The goodwill is being amortised from the date of acquisition over a period of 20 years. 35. Post Balance Sheet Events Sale of UK General Insurance Business In November 2001, the Company agreed to transfer its UK home and motor general business operations to Winterthur Insurance and the Churchill Group, its UK subsidiary. On 31 December 2001 the insurance liabilities of the business were almost wholly reassured, to Winterthur. The related cash transfer for this reinsurance was offset in January 2002 against the sale proceeds of the business. The sale was completed on 4 January 2002 for a consideration of £353m. After allowing for the costs of the sale and other related items, it is anticipated that the profit on sale recorded in the 2002 results will be approximately £360m before tax. 36. Transactions with Directors At 31 December 2001, transactions, arrangements and agreements entered into by the Group with directors and connected persons included: Number of persons £000 Mortgages and other borrowings from Egg plc 3 575 These transactions are on normal commercial terms and in the ordinary course of business. 70 Prudential plc Annual Report 2001
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF PRUDENTIAL PLC We have audited the financial statements on pages 36 to 70. Respective Responsibilities of Directors and Auditors The directors are responsible for preparing the Annual Report. As described on page 25 this includes responsibility for preparing the financial statements in accordance with applicable United Kingdom law and accounting standards. Our responsibilities, as independent auditors, are established in the United Kingdom by statute, the Auditing Practices Board, the Listing Rules of the Financial Services Authority, and by our profession’s ethical guidance. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the directors’ report is not consistent with the financial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law or the Listing Rules regarding directors’ remuneration and transactions with the Group is not disclosed. We review whether the statement on pages 24 to 26 reflects the Company’s compliance with the seven provisions of the Combined Code specified for our review by the Listing Rules, and we report if it does not. We are not required to consider whether the Board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and control procedures. We read the other information contained in the Annual Report, including the corporate governance statement, and consider whether it is consistent with the audited financial statements. We consider the implications for our report if we become aware of any apparent mis-statements or material inconsistencies with the financial statements. Basis of Audit Opinion We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material mis-statement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 31 December 2001 and of the profit of the Group for the year then ended and have been properly prepared in accordance with the Companies Act 1985. KPMG Audit Plc Chartered Accountants Registered Auditor London 14 March 2002 71 Prudential plc Annual Report 2001
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PRUDENTIAL PLC ANNUAL REPORT 2001
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PRUDENTIAL AT A GLANCE PRUDENTIAL
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GROUP FINANCIAL HIGHLIGHTS 2001 200
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GROUP CHIEF EXECUTIVE’S REVIEW WE
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The fastest growing age group in th
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est growth prospects in the market
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Egg 2001 was another year of outsta
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Over the last five years, JNL has m
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equivalent (APE) basis were £434 m
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69 per cent). The new business marg
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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 and 64: 15. Investment Expenses and Charges
Page 65 and 66: 16. Tax continued 2001 2000 £m £m
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: 32. Contingencies and Related Oblig
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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