ANNUAL REPORT 2001 - Prudential plc

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