ANNUAL REPORT 2001 - Prudential plc

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NOTES ON THE ACHIEVED PROFITS BASIS SUPPLEMENTARY INFORMATION CONTINUED 9. Operating Profit from Business in Force continued 2001 2000 £m £m Prudential Asia Unwind of discount 78 58 Change in operating assumptions 66 – Other items and experience variances 16 2 160 60 Prudential Europe Unwind of discount 9 8 Experience variances against current assumptions (9) 0 0 8 Total 673 544 * The unwind of discount for UK long-term business operations represents the unwind of discount on the value of in force business at the beginning of the year (adjusted for the effect of current year assumption changes), the expected return on smoothed surplus assets retained within the main with-profits fund (see note 13), and the expected return on shareholders' assets held in other UK long-term business operations. Surplus assets retained within the main with-profits fund are smoothed for this purpose to remove the effects of short-term investment volatility. 10. Short-term Fluctuations in Investment Returns 2001 2000 £m £m Long-term business: UK Operations* (764) (218) Jackson National Life** (521) (171) Prudential Asia (9) (46) Prudential Europe – (3) Share of investment return of US managed investment funds consolidated into Group results that is attributable to external investors (13) (13) General insurance and shareholders: Relating to investment in St James's Place Capital plc – 17 Other (95) (6) Total (1,402) (440) * UK Operations Short-term fluctuations in investment returns represent the difference between actual investment returns attributable to shareholders on the achieved profits basis and the expected returns as described in note 3. ** Jackson National Life – Summary Short-term fluctuations comprise: 2001 2000 £m £m Actual investment return on investments less longer-term returns included within operating profit*** (413) (109) Actual return on Separate Account business less return based on longer-term rate (85) (62) Transition writedown on implementation of EITF 99-20 for interests in securitised financial assets (23) – (521) (171) *** Jackson National Life – Actual investment return on investments less longer-term returns for the year ended 31 December 2001 This comprises: Actual less averaged realised gains and losses (including impairments) for fixed income securities**** (295) Actual less longer-term return on equity based investments (124) Gains on preference shares 6 2001 £m (413) 80 Prudential plc Annual Report 2001
10. Short-term Fluctuations in Investment Returns continued **** Jackson National Life – Actual less averaged realised gains and losses (including impairments for fixed income securities) Gains (losses) arising in years 1997 to 2001 1997 30 1998 54 1999 3 2000 (90) 2001 (532) £m $m equivalent Five year total (535) Five year average included in operating result (see note 9) (107) (74) Actual losses less averaged losses for 2001 (425) (295) Averaged realised gains differ from those reported on the statutory basis for the impact of amortisation of policy acquisition costs attributable to realised gains and losses. These have been included in the statutory basis gains averaging calculation for the years 1998 to 2001. On the achieved profits basis deferred acquisition costs do not feature as part of the methodology. Accordingly the realised gains and losses included in the averaging process are exclusive of the amortisation of policy acquisition costs attributable to realised gains and losses. 11. Effect of Revised Economic Assumptions (Losses) profits on change in economic assumptions included within the (loss) profit on ordinary activities before tax arise as follows: 2001 2000 £m £m UK long-term business operations (426) – Jackson National Life (including revised spread assumption) 1 – Prudential Asia (57) – Total (482) – 12. Taxation Charge The profit for the year is in most cases calculated initially at the post-tax level. The post-tax profit is then grossed up for presentation purposes at the effective rates of tax applicable to the countries and periods concerned. For Jackson National Life the profit is calculated at the pre-tax level and the effective tax rate is the rate expected to be applicable on average over the remaining lifetimes of the policies. The tax charge comprises: Restated † 2001 2000 £m £m Tax charge on operating profit Long-term business: UK Operations* 173 212 Jackson National Life 127 44 Prudential Asia** 133 61 Prudential Europe** (2) 0 431 317 General insurance and shareholders (61) (29) Total tax on operating profit 370 288 Tax on items not included in operating profit Tax credit on short-term fluctuations in investment returns (422) (104) Tax effect of change of economic assumptions (167) – Tax charge on merger break fee, net of expenses (after utilisation of available capital losses) 6 – Tax on profit on Egg flotation and business disposals – 57 Total tax on items not included in operating profit (583) (47) Tax (credit) charge on (loss) profit on ordinary activities (including tax on actual investment returns) (213) 241 † Comparative figures for 2000 have been restated for the implementation of FRS 19 on deferred tax, see note 15. * Including tax relief on shareholders' portion of UK re-engineering costs borne by the main with-profits fund. ** Including tax relief on development costs where applicable. 81 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
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However, we have not been discussin
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CORPORATE SOCIAL RESPONSIBILITY REV
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Executive Directors 1. Jonathan Blo
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Nomination Committee Sir Roger Hurn
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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 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: 6. Cost of Capital On the achieved
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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