RNS Number:0573O
Prudential PLC
29 July 2003
EMBARGO: 0700 hrs, Tuesday 29 July 2003
PRUDENTIAL PLC 2003 INTERIM RESULTS
* Total Group insurance and investment sales of #15.5 billion, up 8 per cent
on first half of 2002
* Total investment product funds under management of #28.2 billion, up 11
per cent from 2002 year end
* Group insurance sales on an annual premium equivalent (APE) basis of #824
million, down 4 per cent
* New business achieved profit of #303 million, down 18 per cent; over 70
per cent generated outside the UK
* Interim dividend of 5.3 pence, with full year dividend expected to total
16 pence per share
(Comparisons above are quoted at constant exchange rates)
H1 2003 H1 2002 %
#m #m
Total Group insurance and investment sales 15,519 15,427 1
New business achieved profit 303 397 (24)
Achieved profits basis operating profit 397 543 (27)
Modified statutory basis operating profit 172 317 (46)
Dividend per share 5.3p 8.9p (40)
Shareholders' funds -achieved profits basis 7,101 8,053 (12)
(Figures in table are at actual exchange rates)
Commenting on the results, Jonathan Bloomer, Prudential's Group Chief Executive,
said:
"The first half of 2003 has been the harshest operating environment for life
insurers in the UK and the US for a long time. Against this backdrop Prudential
has delivered a solid set of results, demonstrating the benefits of our strategy
of international diversification in markets with strong growth prospects.
"Our Asian business continues to see strong and profitable growth despite the
occurrence of SARS and some economic weakening. But in the US and UK, the
economic climate, with the lowest long-term interest rates since the 1960s and
volatile equity markets, is affecting our insurance businesses. These factors
are reducing retail investor demand in these markets and putting pressure on
pricing. However, as in the past, we continue to focus on return on capital and
putting the value of new business ahead of volume.
"The remainder of 2003 will continue to be challenging. But, looking further
forward, as economics improve, particularly in the US and UK, retail confidence
will return and we are well placed to grow and gain market share. This effect
will be magnified in the US and UK markets where we will also see significant
consolidation.
"To take advantage of these opportunities it is important that we retain
financial flexibility and use our capital efficiently to optimise future growth.
This is especially important following the reduction in the group's cash flows
of approximately #100 million per annum as a result of previously announced cuts
in UK bonus rates.
Dividend
"In February, we said that we would review our dividend. Since then the board
has determined a dividend policy which will reflect our operating cash flows
and, crucially, our strategy to invest in the business for long-term growth.
"Our work has confirmed our belief in the value of all our businesses in the UK,
the US and Asia and we have no plans to dispose of any of them. Their diversity
gives us the flexibility and versatility to respond to different market
conditions by directing our capital resources to the most attractive markets and
products.
"The interim dividend will be 5.3 pence per share, and for the full year, we
expect to pay a total dividend of 16 pence per share. The board believes that
this reflects an appropriate balance between the cash generated by the group,
the ability to finance growth, the cost of finance and dividends to
shareholders. It is the board's intention to grow the dividend from this new
base. The level of growth will be determined after considering the opportunities
to invest in those areas of our business offering attractive growth prospects,
our financial flexibility and the development of our statutory profits over the
medium term.
Group Results
"Total Group insurance and investment sales increased by 1 per cent to #15.5
billion, while new business achieved profit declined by 24 per cent to #303
million in the first half of 2003, reflecting lower sales volumes in the UK and
US and our expectation of lower nominal returns in the future. Without the
effect of a depreciation in the US and leading Asian currencies relative to
sterling, new business achieved profit was down 18 per cent.
Prudential Corporation Asia
"Prudential Corporation Asia maintained its strong track record of delivery
during the first half of 2003, continuing to show the highest growth rates and
returns in the group and contributing #123 million new business achieved profit.
Asia remains an attractive market and we intend to maintain our investment in
its long-term development. Net investment in the first half of 2003 was #56
million, and we expect to invest approximately #100 million net for this year
and the next two, at which time the net capital requirement will drop
significantly in 2006.
Jackson National Life
"Despite difficult market conditions in the US, due to a combination of very low
interest rates and consumer uncertainty about equity markets, Jackson National
Life (JNL) delivered #94 million new business achieved profit. JNL is one of the
few providers to have a significant market position across the range of fixed,
variable and equity-indexed annuity products. In the short term, JNL will
continue to focus on delivering value from retail markets while actively
managing capital. It is well positioned to take advantage of any upturn in the
market and to participate, in due course, in the inevitable consolidation in the
industry.
Prudential UK
"The UK savings market is currently the most challenging in which we operate.
Volatile equity markets, low interest rates and the continuing debate on the
future of the industry have caused consumers' appetite for medium to long term
savings to remain weak. In this context, Prudential UK delivered new business
achieved profits of #86 million primarily due to its lower with profit bond
sales. However, there was strong growth in APE sales of corporate pensions
through direct channels, up 14 per cent, and individual annuities, which
increased by 24 per cent. We believe that the long-term demographics are
attractive and, with its strong brand and strong life fund (our free asset ratio
has improved from 8.4 per cent at December 2002 to 8.9 per cent at June 2003)
Prudential UK is well positioned to take advantage when recovery occurs. At
present, the business is focussed on sustaining its financial strength,
developing profitable products, strengthening and diversifying its distribution
capability and driving down unit costs.
M&G
"In a difficult period for the fund management industry, M&G has increased its
operating profit by 12 per cent to #38 million and UK investment funds under
management increased by 10 per cent from the 2002 year end. This reflects its
effective cost control and the strengths of its diversified product range in
retail fund management, institutional fixed income, pooled life and pension
funds, property and private finance.
Egg
"Egg UK continued to grow strongly, showing a profit of #37 million (up from #12
million in first half of 2002). It gained another 340,000 net new customers
bringing the total number to 2.9 million. Compared to the first half of 2002,
unsecured lending balances increased by 42 per cent to #3.95 billion and there
was personal loan net balance growth of #340 million. Egg is investing in the
development of its French business and, as it did with its UK model, will
monitor both the performance of the business and the market environment. The
increased investment in France resulted in a total Egg group loss of #23 million
in the first half.
Outlook
"While we are cautious about the economic environment and therefore prospects
for growth for the remainder of 2003, we are optimistic for the medium to long
term. We are well positioned across the markets in which we operate. The balance
and diversity of the Group will enable us to generate attractive returns for
shareholders."
- ENDS -
Enquiries to:
Media Investors/Analysts
Geraldine Davies 020 7548 3911 Rebecca Burrows 020 7548 3537
Clare Staley 020 7548 3719 Laura Presland 020 7548 3511
Ben Forsyth 020 7548 3500
Notes to Editors:
1. There will be a conference call today for wire services hosted by Jonathan
Bloomer, Group Chief Executive and Philip Broadley, Group Finance Director
at 07:45. Dial-in number: +44(0)208 28 84 53 0. Participants to quote
"Prudential" to access the call.
2. A presentation to analysts will take place at 09:30 today at Prudential plc,
Governor's House, Laurence Pountney Hill, London, EC4R 0HH. A webcast of the
presentation and the presentation slides will be available on the Group's
web site, www.prudential.co.uk
3. A press conference will take place today at 11:45 at Prudential plc,
Governor's House, Laurence Pountney Hill, London, EC4R 0HH. If journalists
wish to attend, please call the Group Press Office in advance on 020 7548
3712.
4. There will be a conference call today for investors hosted by Jonathan
Bloomer, Group Chief Executive and Philip Broadley, Group Finance Director
at 14:30.
Dial-in number: +44(0)207 16 20 18 5, US dial-in: +1 334 420 4950.
Participants to quote "Prudential plc Interim results" to access the call.
A recording of this call will be available for replay for one week by
dialling:
Dial in: +44(0)208 28 84 45 9, passcode: 217492
US dial in: +1 334 323 6222, passcode: 217492
5. High resolution photographs are available to the media free of charge at
www.newscast.co.uk (+44 (0)207 60 81 00 0).
6. An interview with Jonathan Bloomer (in video/audio/text) will be available on
www.cantos.com and www.prudential.co.uk from 07:00 on 29 July 2003.
7. Annual premium equivalent (APE) sales comprise regular premium insurance
sales plus one-tenth of single premium insurance sales.
8. The Free Asset Ratio is a common measure of financial strength in the UK for
long-term insurance business. It is the ratio of assets less liabilities
(before deduction of the required regulatory minimum solvency margin) to
liabilities, and is expressed as a percentage of liabilities.
9. In determining constant exchange rate information the prior period
comparatives have been recalculated using current average exchange rates for
the period ended 30 June 2003.
10. Total number of Prudential plc shares in issue as at 30 June 2003 was
2,007,015,441.
11. Financial Calendar:
2003
Record date Friday 22 August 2003
Third-quarter New Business Figures Thursday 16 October 2003
Payment of interim dividend Friday 31 October 2003
2004
2003 Full-year New Business Figures Thursday 22 January 2004
2003 Full-year Results Announcement Tuesday 24 February 2004
First-quarter New Business Figures Friday 23 April 2004
Prudential plc Annual General Meeting Thursday 6 May 2004
12. In addition to the interim financial statements provided with this press
release additional financial schedules are available on the web site at
www.prudential.co.uk
This statement may contain certain "forward-looking statements" with respect to
certain of Prudential's plans and its current goals and expectations relating to
its future financial condition, performance and results. By their nature, all
forward-looking statements involve risk and uncertainty because they relate to
future events and circumstances which are beyond Prudential's control including
among other things, UK domestic and global economic and business conditions,
market related risks such as fluctuations in interest rates and exchange rates,
the policies and actions of regulatory authorities, the impact of competition,
inflation, deflation, the timing, impact and other uncertainties of future
acquisitions or combinations within relevant industries, as well as the impact
of tax and other legislation and other regulations in the jurisdictions in which
Prudential and its affiliates operate. As a result, Prudential's actual future
financial condition, performance and results may differ materially from the
plans, goals, and expectations set forth in Prudential's forward-looking
statements.
Prudential undertakes no obligation to update the forward-looking statements
contained in this statement or any other forward-looking statements it may make.
PRUDENTIAL PLC 2003 UNAUDITED INTERIM RESULTS
Half Year
ended 30 June Full
Year
Results Summary 2003 #m 2002 #m 2002 #m
--------------------------
Achieved Profits Basis Results
UK and Europe Insurance Operations 174 337 524
M&G 38 34 71
Egg (23) 1 (20)
----- ----- -----
UK and Europe Operations 189 372 575
US Operations 144 104 265
Prudential Asia 162 169 516
Other Income and Expenditure (including development expenses) (98) (102) (223)
----- ----- -----
Operating profit from continuing operations before amortisation of 397 543 1,133
goodwill and exceptional items
Amortisation of goodwill (49) (49) (98)
Short-term fluctuations in investment returns 316 (661) (1,406)
Effect of changes in economic assumptions (487) (22) (467)
Profit on sale of UK general business operations - 355 355
----- ----- -----
Profit (loss) on ordinary activities before tax 177 166 (483)
Operating earnings per share 13.8p 18.4p 42.8p
Shareholders' funds #7.1bn #8.05bn #7.2bn
Statutory Basis Results
Operating profit before amortisation of goodwill and exceptional 172 317 432
items
Profit on ordinary activities before tax 195 471 484
Operating earnings per share 6.3p 11.4p 15.8p
Shareholders' funds #3.7bn #4.1bn #3.7bn
Dividend Per Share 5.3p 8.9p 26.0p
Insurance and Investment Funds under Management #162bn #159bn #155bn
Banking Deposit Balances under Management #8.0bn #8.3bn #8.7bn
Operating profit includes investment returns at the expected long-term rate of return but excludes
amortisation of goodwill and exceptional items. The directors believe that operating profit, as
adjusted for these items, better reflects underlying performance. Profit on ordinary activities
includes these items together with actual investment returns. This basis of presentation has been
adopted consistently throughout the Interim Report.
BUSINESS REVIEW
UK AND EUROPEAN INSURANCE OPERATIONS
The UK savings market continues to be the most challenging in which Prudential
operates, with market conditions continuing to adversely affect customers'
appetite for investment based products. In particular the with-profit bond
market has significantly contracted, with sales across the industry in the first
quarter of 2003 nearly 75 per cent lower than the same period in 2002.
Half year sales of #329 million on the Annual Premium Equivalent (APE) basis are
18 per cent lower than the comparative period in 2002, largely due to the
reduction in sales of with-profit bonds. Excluding with-profit bond sales,
Prudential's UK and European Insurance Operations recorded APE sales 9 per cent
higher than 2002 reflecting continued strong sales of individual annuities.
New business achieved profit (NBAP) of #86 million was 41 per cent lower than
2002, and on a like-for-like basis (after applying revised economic assumptions)
was 37 per cent lower. This was due to a combination of lower new business
sales, and reduced new business margins of 27 per cent which compares to 37 per
cent for the comparative period in 2002. Margins have been adversely affected by
the mix of business sold with reduced with-profit bond sales and lower
expectations for future investment returns.
Prudential believes that the long-term demographics within the UK savings market
are attractive and that it is well positioned for market recovery. Market share
is increasingly concentrated among a few large providers. To take advantage of
this concentration, Prudential is focused on sustaining its financial strength
and brand recognition, developing profitable product segments, strengthening and
diversifying distribution capability and driving down unit costs.
The free asset ratio of the Prudential Assurance Company long-term fund was
approximately 8.9 per cent on the statutory basis at the end of June 2003
(without taking account of future profits), slightly higher than at the end of
2002. On the realistic basis the fund is stronger. During the first six months
of 2003 Prudential's with-profits fund has earned a return of 6.7 per cent,
compared with the 4.5 per cent return on the FTSE 100 share index. This compares
with a return on the long-term fund of negative 8.1 per cent for the 2002 full
year and negative 2.6 per cent for the comparative period last year.
Sales through direct channels were #178 million (APE), 14 per cent higher than
the equivalent period in 2002. This reflects considerable success particularly
in selling individual annuities. Sales of corporate pensions through direct
channels were #95 million (APE), 14 per cent higher than 2002 as a result of
strong sales through employer sponsored schemes. These have more than doubled
over the last 12 months.
Total sales of single premium individual annuities, were up 23 per cent to #866
million compared with the same period last year. Prudential believes it is the
market leader in the important and growing market for the provision of annuities
and that it has increased its market share over the last 12 months.
Recent partnership agreements with Abbey National, to sell with-profit bonds,
and with Zurich, to underwrite annuities, resulted in sales of #45 million for
the half year. These sales are in line with Prudential's expectations, given
current market conditions, and it continues to work with its partners to build
on this base.
Intermediated sales on the APE basis of #143 million were 39 per cent lower than
the comparative period in 2002, reflecting a considerable reduction in sales of
with-profit bonds. Prudential has not been alone in experiencing these sales
reductions and consequently at the end of March 2003 had retained its position
as a leading distributor of with-profit bonds through IFAs. Sales of other
products through the IFA channel were 6 per cent higher than 2002 principally
reflecting a 25 per cent increase in single premium individual annuity sales.
Prudential understands the Government's objectives in the promotion of 100:0
funds for the smoothed investment fund option. However, the 100:0 structure and
smoothing requirements mean that new shareholder capital will be needed to back
these products, and it remains to be seen in the current climate how many
companies will be prepared to provide this. We are also concerned that with the
level of 'smoothed returns' available, funds might fail to meet customers
expectations.
Prudential is pleased that life companies will still have the ability to run,
market and promote products based on a 90:10 fund outside the Sandler suite as
these have provided, and will continue to provide, stable returns for the
consumer at a critical time for the long-term savings culture in the UK.
Prudential UK's strategy is to focus on its core product lines. The extension of
the annuities product range through the launch of the equity release product
with Northern Rock reflects this strategy.
In November 2001 Prudential UK announced a target for cost savings of #175
million and in July 2002 increased this target to #200 million. Strong progress
has been made in the first half of 2003 and #155 million of savings have been
delivered to date, with an annualised value of #180 million. Prudential is on
schedule to deliver #200 million of annualised cost savings by the end of 2003
(#175 million of actual savings). These savings are vital to ensuring the
operating base is sustainable in the current challenging market environment.
In May 2003 Prudential UK opened a customer service centre in India. The centre,
which currently employs over 200 people, is expected to be fully operational in
the first half of 2004. This initiative is expected to result in approximately
#16 million of additional gross cost savings per annum by the end of 2006, of
which it is estimated approximately #4 million per annum (on an achieved profits
basis) will be attributable to shareholders.
Early in 2002 Prudential reviewed the strategy for its long-term business within
continental Europe. This review concluded that an organic strategy based on
investment in the German and French markets would be unlikely to meet return on
capital targets. As a result, in January 2003 Prudential completed the sale of
its German life business for #82 million. In June 2003, Prudential announced
that it would cease writing new insurance business in France beyond the end of
the year. Prudential will continue to administer existing policies and provide
customer support to policyholders in France.
Prudential UK expects the remainder of 2003 to be as difficult as the first
half, but believes it is well positioned to take advantage of the recovery in
the savings market when it occurs.
M&G
Against an exceptionally difficult operating environment, M&G has delivered
total profit for the first six months of the year of #38 million, a 12 per cent
increase on the same period last year. This reflects M&G's strengths in retail
fund management, institutional fixed income, pooled life and pension funds,
property and private finance, combined with a broad distribution base. The
result was achieved despite the FTSE All-Share Index averaging 632 points (25
per cent) less in the first half of 2003 compared to the same period in 2002
leading to lower gross revenues.
M&G outperformed the industry with gross retail inflows of #610 million, down 10
per cent on the first half of 2002. This compares with an 18 per cent fall
across the industry according to the latest figures from the Investment
Management Association (IMA) to the end of May and reflects retail investors'
continuing concerns about stock markets and geopolitical events.
M&G's net retail fund inflows also fell, down 19 per cent to #130 million.
However, the latest IMA figures also show that M&G has increased its market
share of net sales in the distribution channels in which it operates from 4 per
cent in 2002 to 7 per cent in 2003. This increase in market share reflects M&G's
strong retail brand, improved fund performance, diversified distribution
strategy and focus on fund retention. M&G is the UK's second largest retail fund
manager in terms of assets under management according to figures published by
the IMA, as at 31 May 2003.
The success of M&G's new brand positioning, first introduced in January 2002,
has received both national and international recognition and has now won
thirteen marketing and advertising industry awards. In addition, M&G's customer
service continues to be ranked as one of the best in the fund management
industry and earlier this year M&G's telemarketing team was named best inbound
contact centre at the National Sales Awards.
M&G has continued to develop its position as a leading innovator in fixed income
and private finance and to leverage these skills to create diversified, enhanced
yield products which can be marketed externally. M&G's strategic decision three
years ago to exit balanced and equity institutional pension fund management and
focus on fixed income and pooled pension funds has continued to bring
significant benefits as the industry moves towards more specialist offerings. In
addition, M&G's scale in fixed income and its strong market position have
enabled it to enter transactions to earn additional profit and bring significant
benefits to client portfolios. Net institutional fund inflows for the first six
months of the year were #704 million.
EGG
Egg announced its interim results on 23 July. Egg is an innovative financial
services company, providing a range of banking and financial services products
primarily through its internet site.
The UK business is growing strongly, attracting another 340,000 customers in the
first half of the year taking the total to 2.9 million. Unsecured lending
balances of #3.95 billion are up 42 per cent on prior year balances with a #650
million increase for the first half of 2003. Personal loan sales have been
particularly successful with disbursements of #711 million, and net balance
growth of #340 million, almost five times the level of net balance growth
achieved in the first half of 2002. Looking at the second quarter of 2003 in
particular, revenues exceeded #100 million in the quarter for the first time
with strong growth in fees and commissions, especially from cross selling
insurance products to new loan and card customers.
Egg UK contributed a profit before tax of #37 million in the period. This
represents excellent progress in an increasingly competitive market.
In France, while there are encouraging signs with both card usage and percentage
of balances that revolve trending upwards in line with Egg's forecasts and brand
awareness now being a very creditable 77 per cent, sales volumes are lower than
plan. Egg continues to closely monitor performance having regard to its planned
investment of Euro300 million (#209 million).
JACKSON NATIONAL LIFE
During the first half of 2003 Jackson National Life (JNL) has continued to focus
on retail markets and, despite the lowest interest rates since the 1960s and
volatile equity markets, has delivered strong results. JNL is one of only a few
providers in the United States to have a significant market position across the
range of fixed, variable and equity-indexed annuity products. It also offers
life and stable value products.
In the first half of 2003 JNL recorded total retail sales of #2.0 billion, 32
per cent higher than the same period of 2002 at constant exchange rates, driven
by strong sales of variable annuities. At reported exchange rates total retail
sales were up 18 per cent. Total sales were down 5 per cent on prior year at
constant exchange rates (15 per cent at reported exchange rates) due to lower
levels of stable value business, reflecting JNL's increased focus on retail
sales, consistent with its strategy of maximising returns on capital.
At constant exchange rates, new business achieved profits fell by 10 per cent on
prior year to #94 million (20 per cent at reported exchange rates), due to lower
APE sales and a fall in margin from 39 per cent to 37 per cent. The fall in
margin was principally due to the net impact of economic assumption changes.
Relative to the first half of 2002, the US dollar has depreciated by 10 per cent
relative to the pound.
Despite the continued difficult market conditions, JNL recorded excellent
variable annuity sales. Total sales of #910 million were up 110 per cent at
constant exchange rates in the first half of 2003 (88 per cent at reported
exchange rates). As expected in volatile equity markets, a significant
proportion of variable annuity investors continue to elect the fixed account
option, with 57 per cent of variable annuity sales going into fixed accounts
during the first half of 2003, compared with 58 per cent during the full year
2002.
Fixed annuity sales of #953 million were 1 per cent higher than prior year at
constant exchange rates, (9 per cent lower at reported exchange rates). The
market has benefited from continued consumer preference for guaranteed returns,
with JNL benefiting from its strong position in bank and independent agent
distribution channels. In the current low interest rate environment, JNL
continues to enjoy greater flexibility as a result of its strategy to sell
products with annually resettable crediting rates. Over 94 per cent of JNL's
existing in force fixed annuity book has annually resettable crediting rates.
Stable value product sales for the first half of 2003 of #465 million are 56 per
cent down on prior year at constant exchange rates (61 per cent at reported
exchange rates). This is in line with JNL's previously stated position of
primarily focusing on retail sales throughout 2003.
In March 2003 JNL began operating in the Registered Investor Adviser (RIA)
channel, with the launch of Curian Capital, LLC, which provides innovative
fee-based separately managed accounts and investment products to advisers
through a state-of-the-art technology platform. The RIA market began as a
service offered to high-net worth investment clients, providing
institutional-quality management, custom portfolios and tax services. However,
the industry has evolved to offer personalised investment advice, quality money
management, good returns and reasonable costs to a broader range of clients.
Curian Capital, LLC will enable advisers to manage clients' assets more
efficiently and economically and therefore can serve customers with smaller
amounts to invest. The launch into this channel further expands JNL's
distribution reach and Curian Capital now has approximately $70 million funds
under management.
While JNL delivered a strong performance in the first half of 2003 Prudential
anticipates testing market conditions in the months ahead, reflecting both the
low interest rate environment and the volatile equity markets. Looking to the
second half of 2003, given current interest rates sales of fixed annuities,
which require a greater degree of capital, are expected to be less than the
record levels achieved during the second half of 2002. JNL will continue to
focus on delivering value from retail markets while actively managing its
capital.
PRUDENTIAL CORPORATION ASIA
Prudential Corporation Asia (PCA) maintained its strong track record of delivery
during the first half of 2003 despite slower regional economic growth, the
impact of SARS and the weakening of a number of Asian currencies relative to
sterling.
Sales of insurance products on the APE basis for the first half of 2003
increased 26 per cent to #243 million compared with the first half of 2002 at
constant exchange rates (12 per cent at reported exchange rates). APE sales of
#110 million in the second quarter of 2003 slowed compared with the first
quarter's #133 million, principally due to the impact of SARS in Taiwan.
NBAP of #123 million was up 3 per cent on the first half of 2002. However, at
reported exchange rates NBAP was down 9 per cent. The average new business
margin reduced from 60 per cent at the full year 2002 to 51 per cent for the
first half of 2003 principally reflecting a revision to economic assumptions,
together with a combination of product and country mix effects.
PCA's seven smaller life operations (China, India, Indonesia, Korea, the
Philippines, Thailand and Vietnam - collectively classified as 'Other' in the
schedules) continue to build scale very successfully and APE sales increased by
53 per cent compared with the same period last year. Prudential's Indonesian
Life operation was recently named as the country's "Best Insurance Company" by
Business Indonesia and ICICI-Prudential Life is now the leading private sector
life company in India by new business market share.
Total investment funds under management in Asia at 30 June 2003 were #5.9
billion, up from #5.2 billion at 31 March 2003 reflecting strong net inflows of
over #700 million. PCA's current mutual fund mix also reflects market conditions
with customers preferring money market and bond funds to equity based ones.
The impact of SARS on PCA's half year results, aside from new business in
Taiwan, was not material. In Taiwan APE sales in the second quarter were #18
million, versus #47 million in the first quarter. APE sales in Hong Kong for the
second quarter 2003 actually increased strongly, up 47 per cent compared with
the first quarter. Although PCA experienced a small number of SARS related
claims, total claims remained within the expected range and achieved profit
claims experience variances for the first half of 2003 have improved over 2002.
However, the longer term impacts of SARS on the region's economies remain
uncertain at this stage as much depends on how quickly key industries such as
tourism recover. PCA expects the second half of 2003 to remain challenging and
does not anticipate that the shortfall in Taiwanese life sales in the first half
of 2003 will be fully recovered in the second half.
PCA plans to launch its new Beijing life operation joint venture with CITIC in
August 2003, leveraging the success of its Guangzhou operation that launched in
October 2000. It will be the first foreign life insurance joint venture to
operate in Beijing.
Overall PCA's strategy remains firmly in place and its focus continues to be on
securing long term, profitable and sustainable growth.
FINANCIAL REVIEW
Insurance and investment new business
Prudential continued to benefit from the strength of its international
operations with total new business inflows reaching #15.5 billion, 8 per cent
ahead of the comparative period last year on constant exchange rates despite
difficult market conditions. At reported exchange rates total new business
inflows were up 1 per cent.
Total insurance sales were down 14 per cent at constant exchange rates to #5.1
billion, while sales on the annual premium equivalent (APE) basis were down 4
per cent at constant exchange rates to #824 million compared with the same
period last year. At reported exchange rates total insurance sales were down 19
per cent and APE insurance sales were down 10 per cent.
Total investment products funds under management increased by 11 per cent in the
six months to #28.2 billion with net investment inflows of #1.46 billion and net
market and other movements of positive #1.24 billion. Gross investment inflows
increased 14 per cent to #10.4 billion but net investment inflows fell 33 per
cent. Net investment inflows in Asia were #628 million, down 9 per cent while
total net investment inflows by M&G were #834 million, a 44 per cent decline
over the prior year. At constant exchange rates net investment inflows were down
30 per cent.
New business achieved profit (NBAP)
Group NBAP from insurance business of #303 million was down 18 per cent on the
prior year at constant exchange rates, reflecting lower sales volumes in the US
and UK and lower margins. The average Group new business achieved profit margin
fell from 40 per cent for the 2002 full year to 37 per cent. At reported
exchange rates, NBAP was down 24 per cent.
During the first half of 2003, over 70 per cent of the Group's NBAP was
generated from its overseas operations compared with 64 per cent for the first
half of 2002.
UK and European Insurance Operations new business achieved profit of #86 million
was 41 per cent lower than the equivalent period in the prior year, reflecting
lower sales and an adverse sales mix as a result of disproportionately lower
sales of higher margin with-profit bonds.
Margins for the UK and European long-term businesses were 27 per cent compared
with 37 per cent for the first half of 2002.
Although the aggregate margin was adversely affected by mix, annuity margins
have increased significantly over the past two years reflecting the volume of
business being written in Prudential Retirement Income Limited (PRIL),
Prudential's shareholder backed annuity company owned by the Prudential
Assurance Company's (PAC) shareholder fund. In the first six months of the year,
NBAP from annuities accounted for nearly half of total UK NBAP. At present
Prudential writes 97 per cent of its bulk annuities and 27 per cent of its
individual annuities in PRIL. The remainder are reinsured into Prudential
Annuities Limited, which is a subsidiary of the PAC 90:10 fund.
Prudential's focus on profitable corporate pensions has seen its contribution to
NBAP increase from 14 per cent for the first half of 2002 to over 20 per cent
for the first half of 2003.
As a result of the lower level of total sales, higher margin Department of Work
and Pensions rebates in respect of contracted out pension business, primarily
recorded in the first quarter of the year, represent a significantly higher
proportion of total sales. Consequently if the current mix is maintained,
margins will remain under pressure.
JNL new business achieved profit fell by 10 per cent on prior year at constant
exchange rates to #94 million (20 per cent at reported exchange rates due to a
10 per cent depreciation in the US dollar relative to the pound), due to lower
APE sales and a fall in margin from 39 per cent to 37 per cent. The fall in
margin was principally due to the net impact of economic assumption changes,
including reductions in the projected fund earned and crediting rates, lower
spread assumptions for Equity Indexed Annuities and a reduction in the separate
account return assumption for variable annuity business. Fixed annuity spread
assumptions have improved slightly, in line with current experience.
New business achieved profit in Asia of #123 million was 3 per cent higher than
2002 at constant exchange rates. However at reported exchange rates NBAP was
down 9 per cent. Average new business margin reduced from 60 per cent for the
full year 2002 to 51 per cent for the half year 2003. This reflects a revision
to economic assumptions, which had a 5 per cent adverse impact on the average
margin, combined with changes to the product and country mix in Asia, which each
adversely impacted the average margin by 2 per cent.
During the first half of 2003 Prudential Corporation Asia (PCA) reviewed the
economic assumptions underpinning the new business achieved profit calculations
and in light of current economic conditions increased the differential between
risk free rates and assumed discount rates, and revised a number of fund earned
rate assumptions. As a result and as a consequence of a change in country mix in
Asia, the weighted risk discount rate for PCA increased from 9.6 per cent for
full year 2002 to 10.5 per cent for the half year 2003.
Investment market conditions in the first half of 2003 have also meant that an
increased number of customers have a preference for traditional products
compared to unit-linked products. Consequently, PCA's proportion of NBAP from
traditional products increased from 21 per cent for the full year 2002 to 29 per
cent for the first half of 2003.
In-force achieved profit
UK and European Insurance Operations in-force profit of #88 million is down 54
per cent on the first half of 2002, reflecting lower expected returns from the
in-force business as a result of reduced assumptions for future investment
returns and bonus rates. In addition a #50 million charge for changes to
persistency assumptions for personal pensions has been made reflecting negative
persistency experience on business originally sold through the now closed direct
sales force channel. Prudence Bond surrenders increased in January and February
and this is reflected in a negative persistency charge of #17 million.
Experience has improved since and consequently no change in assumption is
necessary. No significant adjustment has been made for mortality experience, as
Prudential is already pricing at the Continuous Mortality Investigation bureau
mid intensity cohort projection.
The US in-force result of #41 million is up from the half year 2002 result of
negative #23 million. This improvement is primarily due to a revision to the
unit expense assumption which resulted in a #56 million charge being recorded in
the first half of 2002. There are no operating assumption changes for the first
half of 2003.
As in previous periods, defaults and impairments on bonds are recognised in
operating profit on a five-year average basis, with a charge for the first half
of 2003 of #77 million, compared with a #71 million charge for the first half of
2002. Actual losses for the first half of 2003 were #57 million and compare
favourably to #158 million in the first half of 2002. The 2003 losses include
#20 million relating to Ahold and Healthsouth. The #77 million charge for the
first half of 2003 is #38 million higher than the long term default assumption.
The US in-force result has also benefited from a reduction of #31 million in
negative spread variance to negative #21 million, offset by the fall in the
unwind of discount.
PCA's in-force profit (before development expenses) has increased from #34
million for the first half of 2002 to #39 million for the first half of 2003.
The unwind of discount of #55 million is partially offset by net experience
variances of #16 million. These variances principally reflect adverse cost
variances in PCA's newer operations as they build scale.
Non-insurance operations
M&G increased its profit to #38 million from #34 million for the first half of
2002. Despite the FTSE All-Share Index averaging 632 points (25 per cent) less
in the first half of 2003 compared to the same period in 2002, M&G increased its
profit due to the diversified nature of its revenues, a growing contribution
from its market leading fixed income business, strong net sales and effective
cost control. M&G has not recognised any performance-related fee in respect of
its management of the Prudential Life Fund at the half-year. The fee is based on
the performance of the fund over a three-year period relative to its benchmark
and will not be determined until the end of the year.
Egg's UK banking operation generated a profit of #37 million for the first half
of 2003, an increase of #25 million on prior year. Egg's UK banking operation is
now an established business, with over 2.9 million customers and continues to
grow strongly acquiring 340,000 new customers in the first half of 2003. Egg's
international businesses recorded a loss of #52 million, including #49 million
of losses related to the recently launched Egg France operation. Including Egg
France and Egg's other operations, the total loss for the first six months was
#23 million versus a profit of #1 million in the first half of 2002. Egg's
results were presented in their own report issued on 23 July.
National Planning Holdings, Prudential's US broker-dealer, and PPM America,
Prudential's US fund manager together delivered profits of #9 million, broadly
in line with the first half of 2002.
Development expenses of #12 million relate to PCA's operations and include #7
million in relation to the development of the Japanese life business.
Other net expenditure remained constant at #86 million with interest payable on
core debt of #67 million and Group corporate expenses (including PCA head office
costs) of #31 million, partially offset by other income of #12 million.
Achieved profit - profit before tax
Total achieved profit before tax and minority interests was #177 million
compared with #166 million for the first half of 2002. This reflects a decline
in operating profit from #543 million to #397 million due largely to lower NBAP
described earlier.
The total achieved profit for the first half of 2003 also includes an adjustment
for short-term fluctuations in investment returns of positive #316 million
offset by changes in economic assumptions of negative #487 million.
Consistent with prior year the achieved profits basis results for long-term
business are prepared in accordance with the ABI guidance for Achieved Profits
reporting. This guidance requires the economic assumptions used for the
projection of cash flows to be on an 'active' basis, that is primarily based on
appropriate government bond returns at each period end. The effects of changed
assumptions caused by movements in bond returns are reflected in the profit
reported for the half year to June 2003.
The active basis is applied to the UK and the US operations, and those countries
in Asia where there are well-developed government bond markets (Japan, Korea and
US$ denominated business in Hong Kong). Assumptions in other Asian countries
continue to be based on an assessment of long-term economic conditions.
The UK and European Insurance Operations short-term investment return variance
largely relates to the Life Fund and reflects the difference between an actual
investment return for the first half of 2003 of positive 6.7 per cent and a long
term assumed return of 3.2 per cent for the half year. This has resulted in a
positive variance of #195 million. The UK and Europe total achieved profit
result was also affected by revisions to the economic assumptions resulting in a
#104 million charge against total achieved profit. This reflects reductions in
expected future investment returns partially offset by reductions in the risk
discount rate. As in previous years, UK economic assumptions including risk
discount rate and the investment return are linked to the yield on the 15 year
gilt index which has reduced during the first half of 2003.
The US total achieved profit result includes a positive short-term investment
return variance of #54 million, of which #35 million relates to changed
expectations of future profitability on variable annuity business in force due
to the actual separate account return exceeding the long term return reported
within operating profit. In addition the short-term investment return variance
includes #19 million in respect of the excess of the actual investment return
over the investment return included in operating profit for the period. The US
total achieved profit result was also affected by revisions to the economic
assumptions of negative #167 million. This primarily reflects the reductions in
the projected fund earned and crediting rates on in-force business which result
in lower projected policyholder liabilities on which future spread will be
earned, offset by a reduction in the risk discount rate.
The PCA result includes positive short-term fluctuations in investment return of
#67 million offset by the impact of economic assumption changes of #216 million
during the first half of 2003. The economic assumption changes are principally a
prudent increase in the differential between the risk free and assumed discount
rates reflecting current market conditions and a revision to the long term
investment return assumptions. Economic assumption changes also include the
impact of the introduction by the regulator of a Risk Based Capital regime in
Taiwan.
Achieved profit - profit after tax
Profit after tax and minority interests was #76 million. The tax charge of #106
million compares with a tax credit of #34 million for the first half of 2002,
which reflected the utilisation of capital losses available to the Group.
Minority interests in the Group results were a credit of #5 million.
Modified statutory basis - operating profit
Group operating profit before tax on the modified statutory basis (MSB) was #172
million, #128 million lower than for the first half of 2002 at constant exchange
rates. At reported exchange rates, the profit was down #145 million.
UK and European Insurance Operations operating profit for the first half of 2003
was #133 million, 38 per cent lower than 2002. This reflected a reduction of #76
million as a result of previously announced lower with-profits bonus rates.
The US Operations operating profit of #86 million for the first half of 2003 is
#48 million lower than prior year at constant exchange rates (#64 million at
reported exchange rates). This is primarily due to increased average realised
bond losses, higher deferred acquisition cost (DAC) amortisation, reduced fee
income and development costs at Curian Capital, LLC.
The Guaranteed Minimum Death Benefit (GMDB) provisions held by the US operations
on variable annuity products were reviewed and strengthened at the end of 2002.
In addition, an increase to the recurring charge was required in respect of
GMDB, which is included within the result for the first half of 2003.
The amortisation of variable annuity DAC for the first half of 2003 is in line
with that expected at year end 2002. As previously disclosed at year end, this
amortisation is calculated using a long-term return assumption which is
implemented through the use of a mean reversion methodology. If the mean
reversion was eliminated as of 30 June 2003, the variable annuity DAC carrying
value would be reduced by approximately #24 million. Should these assumptions
not be met in future periods, a further increase in variable annuity DAC
amortisation may be required.
PCA's operating profit, before development expenses and PCA head office costs
was #36 million for the first half of 2003 compared with #16 million for the
same period in 2002. PCA's more established life operations (Singapore, Hong
Kong and Malaysia) saw MSB operating profits increase by 51 per cent to #40
million compared with the first half of 2002. However, these profits have been
offset by losses at some of PCA's newer operations as these operations continue
to build scale.
Looking forward, Prudential anticipates higher costs in PCA during the second
half of 2003 reflecting further brand, marketing and infrastructure costs
combined with the impact of new business strain.
Modified statutory basis - profit before tax
MSB profit before tax and minority interests was #195 million for the first half
of 2003, compared with #471 million for the first half of 2002. This decline
principally reflects lower operating profit and the impact of the profit on the
sale of UK general insurance operations that was recorded in the first half of
2002 (#355 million). Short-term fluctuations in investment returns were positive
#72 million compared to negative #152 million in 2002. Amortisation of goodwill
was #49 million, in line with prior year.
Modified statutory basis - profit after tax
MSB profit after tax and minority interests was #139 million, reflecting a tax
charge of #61 million, and a credit in respect of minority interests of #5
million. The effective rate of tax on total profit in 2003 was 31 per cent,
compared with 11 per cent for the first half of 2002. The 2002 tax charge
benefited from the utilisation of capital losses available to the Group.
Earnings and dividend per share
Earnings per share based on achieved operating profit after tax and related
minority interests but before amortisation of goodwill were down 4.6 pence to
13.8 pence. Earnings per share on an MSB basis were down 5.1 pence to 6.3 pence.
The interim dividend per share of 5.3 pence represents an approximate reduction
of 40 per cent, and will be paid on 31 October 2003.
Cash flow
The table below shows the Group holding company cash flow. Prudential believes
that this format gives a clearer presentation of the use of the Group's
resources than the FRS 1 statement required in the financial statements.
H1 2003 H1 2002
#m #m
UK life fund transfer 286 324
Cash remitted by business units 66 139
Total cash remitted to Group 352 463
Interest (76) (71)
Dividends paid (341) (332)
Cash remittances after interest and dividends (65) 60
Tax received / (paid) 40 (6)
Equity (scrip dividends and share options) 21 19
Corporate activities 44 (12)
Proceeds from sale of UK general insurance operations 0 386
Cash flow before investment in businesses 40 447
Capital invested in business units
Asia (82) (59)
Other business units (9) (34)
PLC cashflow post dividends paid (51) 354
Increase / (decrease) in debt (pre foreign exchange) 51 (354)
* in respect of prior year bonus declarations
The Group received #352 million in cash remittances from business units in the
first half of 2003 (2002: #463 million) comprising the shareholders' statutory
life fund transfer relating to earlier bonus declarations, together with
dividends and interest from subsidiaries. After dividends and interest paid,
there was a net outflow of #65 million (2002: #60 million net inflow). The Group
also received #44 million from corporate activities, and together with the
proceeds of equity issuance and group relief, this gave rise to a total net
surplus of #40 million (2002: #447 million including #386 million cash proceeds
arising from the sale of the UK general insurance operations). During the first
half of 2003 the Group invested #91 million (2002: #93 million), primarily in
its Asian operations. In aggregate this gave rise to a financing requirement of
#51 million (2002: #354 million excess) which was satisfied through an increase
in net core debt.
Shareholders' borrowings and financial flexibility
Net core structural borrowings at 30 June 2003 were #2.3 billion, #0.1 billion
up on the 2002 year-end position. This reflects the net cash outflow of #51
million referred to earlier.
Prudential continues to manage its balance sheet efficiently with regard to both
ratings and capital efficiency and manages its interest cover and gearing ratios
to AA rating levels.
In the first half of 2003 Prudential issued a US$1 billion Perpetual
Subordinated Bond in Asia to optimise its balance sheet structure and financial
flexibility. The Asian retail market has recently experienced strong demand for
this type of security and Prudential achieved the lowest pricing yet for this
type of transaction as a result of the demand among Asian investors for its
paper. The coupon on the bond was 6.5 per cent which has now been swapped into
floating rate payments at 3 month $US LIBOR + 80 basis points. This gives a
current after tax rate of 1.3 per cent (1.83 per cent pre tax). The proceeds of
the issue have been used to refinance existing senior debt, primarily commercial
paper.
Prudential maintains the capacity to borrow up to #500 million of senior debt or
commercial paper as needed. In addition, the Group has access to #1.3 billion
committed bank facilities provided by 13 major international banks and a #500
million committed securities lending liquidity facility. These facilities have
not been drawn on this year.
Prudential enjoys strong debt ratings from both Moody's and Standard & Poor's.
It has a long-term debt rating of A2 and AA- respectively, while short-term
ratings are P-1 and A-1+.
Funds under management
Insurance and investment funds under management across the Group at 30 June 2003
totalled #162 billion, compared with #155 billion at the end of 2002. The total
includes #136 billion of Group internal funds under management and #26 billion
of external funds under management.
Shareholders' funds
On the achieved profits basis, which recognises shareholders' interest in
long-term businesses, shareholders' funds at 30 June 2003 were #7,101 million, a
decrease of one per cent since 31 December 2002. The decrease principally
reflects adverse economic assumption changes and exchange rate movements, offset
by operating profits net of tax and dividends, and positive short-term
fluctuations in investment returns.
Statutory basis shareholders' funds, which are not affected by fluctuations in
the value of investments in the Prudential Assurance Company (PAC) long-term
fund, were largely unchanged from the year end at #3,667 million.
Financial strength of insurance operations
A common measure in the UK of the financial strength of long-term insurance
business is the free asset ratio. The free asset ratio is the ratio of assets
less liabilities to liabilities, and is expressed as a percentage of
liabilities. The free asset ratio of the PAC long-term fund was estimated as 8.9
per cent at the end of June 2003 compared with 8.4 per cent at the end of 2002,
and has been calculated on the statutory basis.
The valuation has been prepared on a conservative basis in accordance with the
Financial Services Authority (FSA) valuation rules, and without use of implicit
items. No credit has been taken for the present value of future profits. The PAC
long-term fund has not entered into any financial reinsurance contracts, with
the exception of certain treaties with a value of approximately #69 million
which were transferred from the Scottish Amicable Life linked fund following a
reorganisation at the end of 2002.
As a result of the FSA's initiative to bring forward the implementation of
realistic solvency, Prudential, along with a number of other insurers, received
waivers in respect of certain solvency rules from the FSA allowing it to move
towards the new basis. Prudential has applied to the FSA to extend these
waivers. This is entirely in the normal course of business and Prudential
expects the FSA to respond in due course. Prudential has managed its long-term
fund on a realistic basis for a number of years and, as a result, does not
expect any change to the investment strategy of the fund.
All the long-term funds in the Group remain well capitalised, with the PAC long
term fund being rated AA+ by Standard & Poor's and Aa1 by Moody's.
Given current market conditions, Prudential does not anticipate any
reattribution of the surplus assets within the PAC long-term fund in the near
future. However, at the end of 2002 the value of these assets was around #5
billion and Prudential estimates that this balance had increased slightly at 30
June 2003.
ACHIEVED PROFITS BASIS RESULTS
Half Year
ended 30 June Full Year
Summarised Consolidated Profit and Loss Account 2003 #m 2002 #m 2002 #m
------------------------------------------------------------------------- --------- ---------- ----------
UK and Europe Insurance Operations 174 337 524
M&G 38 34 71
Egg (23) 1 (20)
----- ----- -----
UK and Europe Operations 189 372 575
US Operations 144 104 265
Prudential Asia 162 169 516
Other Income and Expenditure (including development expenses) (98) (102) (223)
----- ----- -----
Operating profit from continuing operations before amortisation of goodwill and 397 543 1,133
exceptional items
Amortisation of goodwill (49) (49) (98)
Short-term fluctuations in investment returns 316 (661) (1,406)
Effect of changes in economic assumptions (487) (22) (467)
Profit on sale of UK general business operations - 355 355
----- ----- -----
Profit (loss) on ordinary activities before tax (including actual investment returns) 177 166 (483)
Tax (106) 34 329
----- ----- -----
Profit (loss) for the period before minority interests 71 200 (154)
Minority interests 5 1 9
----- ----- -----
Profit (loss) for the period after minority interests 76 201 (145)
Dividends (106) (178) (519)
----- ----- -----
Retained (loss) profit for the period (30) 23 (664)
----- ----- -----
Basic Earnings Per Share
------------------------------------
Based on operating profit after tax and related minority interests before amortisation
of goodwill and exceptional items of #275m (#365m and #851m) 13.8p 18.4p 42.8p
Adjustment for amortisation of goodwill (2.5)p (2.5)p (4.9)p
Adjustment from post-tax long-term investment returns to post-tax actual investment
returns (after related minority interests) 11.7p (22.2)p (48.0)p
Adjustment for post-tax effect of changes in economic assumptions (19.2)p (0.9)p (14.4)p
Adjustment for post-tax profit on sale of UK general business operations - 17.3p 17.2p
----- ----- -----
Based on profit (loss) for the period after minority interests of #76m (#201m and # 3.8p 10.1p (7.3)p
(145)m)
----- ----- -----
Average number of shares 1,995m 1,986m 1,988m
----- ----- -----
Dividend Per Share 5.3p 8.9p 26.0p
-------------------------- ----- ----- -----
TOTAL INSURANCE AND INVESTMENT NEW BUSINESS
Insurance Products and Investment Products
Insurance Products Investment Products Total
Half Year ended 30 June Half Year ended 30 June Half Year ended 30 June
2003 #m 2002 #m 2003 #m 2002 #m 2003 #m 2002 #m
-------- -------- --------- -------- -------- --------
UK and Europe Operations 2,301 3,041 2,016 2,441 4,317 5,482
US Operations 2,448 2,869 - - 2,448 2,869
Prudential Asia 391 407 8,363 6,669 8,754 7,076
------ ------ ------ ------ ------ ------
Group Total 5,140 6,317 10,379 9,110 15,519 15,427
------ ------ ------ ------ ------ ------
Insurance Products - New Business Premiums
Single Regular Annual Premium Equivalents
Half Half Full Half Half Year Full Half Half Full
Year Year year Year Year Year Year Year
2003 2002 2002 2003 2002 #m 2002 #m 2003 2002 #m 2002 #m
#m #m #m #m #m
------ ------ ------ ------ ------ ------ ------ ------ ------
UK and Europe Insurance Operations
Direct distribution
Individual pensions 6 10 15 5 7 11 5 8 12
Corporate pensions 248 294 660 70 54 114 95 83 180
Life 7 37 59 2 2 4 3 6 10
Individual annuities 472 391 895 - - - 47 39 90
Department of Work and Pensions rebate 280 195 215 - - - 28 19 22
business
------ ------ ------ ------ ------ ------ ------ ------ ------
Total 1,013 927 1,844 77 63 129 178 155 314
------ ------ ------ ------ ------ ------ ------ ------ ------
Intermediated distribution
Individual pensions 33 57 85 13 18 34 16 24 42
Corporate pensions 23 52 77 3 9 14 5 14 22
Life 441 1,350 2,190 17 8 18 61 143 237
Individual annuities 390 312 860 - - - 39 31 86
Bulk annuities 157 163 710 - - - 16 16 71
Department of Work and Pensions 60 45 90 - - - 6 5 9
rebate business
------ ------ ------ ------ ------ ------ ------ ------ ------
Total 1,104 1,979 4,012 33 35 66 143 233 467
------ ------ ------ ------ ------ ------ ------ ------ ------
Partnerships
Life 41 - - - - - 4 - -
Individual annuities 4 - - - - - 1 - -
------ ------ ------ ------ ------ ------ ------ ------ ------
Total 45 - - - - - 5 - -
------ ------ ------ ------ ------ ------ ------ ------ ------
Europe
Insurance products 29 27 42 - 10 25 3 13 30
------ ------ ------ ------ ------ ------ ------ ------ ------
Total UK and Europe Insurance 2,191 2,933 5,898 110 108 220 329 401 811
Operations
------ ------ ------ ------ ------ ------ ------ ------ ------
US Operations
Fixed annuities 953 1,053 2,708 - - - 95 105 271
Equity linked indexed 112 129 254 - - - 11 13 25
annuities
Variable annuities 910 484 1,363 - - - 91 49 136
Guaranteed Investment Contracts 186 282 292 - - - 19 28 29
GIC - Medium Term Notes 279 909 1,118 - - - 28 91 112
Life - - - 8 12 22 8 12 22
------ ------ ------ ------ ------ ------ ------ ------ ------
Total 2,440 2,857 5,735 8 12 22 252 298 595
------ ------ ------ ------ ------ ------ ------ ------ ------
Prudential Asia 164 211 479 227 196 465 243 217 513
------ ------ ------ ------ ------ ------ ------ ------ ------
Group Total 4,795 6,001 12,112 345 316 707 824 916 1,919
------ ------ ------ ------ ------ ------ ------ ------ ------
Annual premium equivalents are calculated as the aggregate of regular new business premiums and one tenth of single new
business premiums. Single new business premiums include increments under existing group pension schemes and pensions
vested into annuity contracts (at the annuity purchase price). Regular new business premiums are determined on an
annualised basis.
Investment Products - Funds Under Management (FUM)
FUM
1 Jan 2003 Gross Markets and FUM
Inflows Redemptions Other Movements 30 June 2003
#m #m #m #m #m
UK and Europe Operations 20,284 2,016 (1,182) 1,212 22,330
Prudential Asia 5,232 8,363 (7,734) 26 5,887
------- ------- ------- ------- -------
Group Total 25,516 10,379 (8,916) 1,238 28,217
------- ------- ------- ------- -------
ACHIEVED PROFITS BASIS RESULTS
Operating Profit before Amortisation of Goodwill and Exceptional Items
Half Year
ended 30 June Full Year
Results Analysis by Business Area 2003 #m 2002 #m 2002 #m
--------------------------------------------------- ----------- ----------- -----------
UK and Europe Operations
Insurance Operations:
New business 86 145 233
Business in force 88 192 307
UK re-engineering costs - - (16)
----- ----- -----
Long-term business 174 337 524
Development expenses - (5) (8)
M&G 38 34 71
Egg (23) 1 (20)
----- ----- -----
Total 189 367 567
----- ----- -----
US Operations
New business 94 117 234
Business in force 41 (23) 17
----- ----- -----
Long-term business 135 94 251
Broker dealer and fund management 9 10 14
----- ----- -----
Total 144 104 265
----- ----- -----
Prudential Asia
New business 123 135 307
Business in force 39 34 209
----- ----- -----
Long-term business 162 169 516
Development expenses (12) (11) (26)
----- ----- -----
Total 150 158 490
----- ----- -----
Other Income and Expenditure
Investment return and other income 12 12 3
Interest payable on core structural borrowings of shareholder (67) (67) (130)
financed operations
Corporate expenditure:
Group Head Office (19) (17) (36)
Asia Regional Head Office (12) (14) (26)
----- ----- -----
Total (86) (86) (189)
----- ----- -----
Operating profit from continuing operations before amortisation of
goodwill and exceptional items 397 543 1,133
----- ----- -----
Analysed as profits (losses) from:
New business 303 397 774
Business in force 168 203 533
----- ----- -----
Long-term business 471 600 1,307
Prudential Asia and Prudential Europe development expenses (12) (16) (34)
Other operating results (62) (41) (124)
UK re-engineering costs - - (16)
----- ----- -----
Total 397 543 1,133
----- ----- -----
ACHIEVED PROFITS BASIS RESULTS
Half Year
ended 30 June Full Year
Summarised Consolidated Balance Sheet 2003 #m 2002 #m 2002 #m
----------------------------------------------------------- ----------- ----------- -----------
Total assets less liabilities, excluding insurance funds 131,830 131,158 126,325
Less insurance funds:
Technical provision (net of reinsurers' share) 118,294 117,747 114,994
Fund for future appropriations 9,869 9,303 7,663
Less shareholders' accrued interest in the long-term business (3,434) (3,945) (3,528)
----------- ----------- -----------
124,729 123,105 119,129
----------- ----------- -----------
Achieved profits basis net assets 7,101 8,053 7,196
----------- ----------- -----------
Share capital 100 100 100
Share premium 550 541 550
Statutory basis retained profit 3,017 3,467 3,018
Additional achieved profits basis retained profit 3,434 3,945 3,528
----------- ----------- -----------
Achieved profits basis capital and reserves 7,101 8,053 7,196
----------- ----------- -----------
Half Year
ended 30 June Full Year
Movement in Shareholders' Capital and Reserves 2003 #m 2002 #m 2002 #m
----------------------------------------------------------------------
Profit (loss) for the period after minority interests 76 201 (145)
Exchange movements (86) (139) (330)
New share capital subscribed 21 19 40
Dividends (106) (178) (519)
----------- ----------- -----------
Net decrease in shareholders' capital and reserves (95) (97) (954)
Shareholders' capital and reserves at beginning of period 7,196 8,150 8,150
----------- ----------- -----------
Shareholders' capital and reserves at end of period 7,101 8,053 7,196
----------- ----------- -----------
Comprising
----------------
UK and Europe Operations:
Long-term business 3,107 3,538 3,026
M&G 347 354 382
Egg 353 382 369
----------- ----------- -----------
3,807 4,274 3,777
US Operations 2,705 2,637 2,732
Prudential Asia 1,342 1,153 1,407
Other operations (including central goodwill and borrowings) (753) (11) (720)
----------- ----------- -----------
7,101 8,053 7,196
----------- ----------- -----------
ACHIEVED PROFITS BASIS RESULTS
Basis of Preparation of Results
The achieved profits basis results have been prepared in accordance with the guidance issued by the Association of
British Insurers in December 2001 "Supplementary Reporting for long-term insurance business (the achieved profits
method)".
Under this guidance, the basis for setting long-term expected rates of return on investments and risk discount rates
are, for countries with developed long-term fixed income securities markets, set by reference to period end rates of
return on fixed income securities. This "active" basis of assumption setting has been applied in preparing the results
of the Group's UK, European and US operations. For the Group's Asian operations, the active basis is appropriate for
business written in Japan and Korea and for US dollar denominated business written in Hong Kong.
For countries where long-term fixed income markets are underdeveloped, investment return assumptions and risk discount
rates are based on an assessment of long-term economic conditions. Except for the countries listed above, this basis is
appropriate to the Group's Asian operations.
The key economic assumptions are set out below:
Half Year Half Year Full Year
2003 2002 2002
UK and Europe Insurance Operations ---------------- ---------------- --------------
Pre-tax expected long-term nominal rate of
investment return:
UK equities 6.9% 7.5% 7.0%
Overseas equities 6.2% to 7.5% 7.5% to 7.8% 7.0% to 7.8%
Property 6.2% 7.5% 6.75%
Gilts 4.4% 5.0% 4.5%
Corporate bonds 5.4% 6.0% 5.5%
PAC with-profits fund assets
(applying the rates listed above to the investments held by the 6.4% 7.1% 6.6%
fund)
Expected long-term rate of inflation 2.9% 2.6% 2.5%
Post-tax expected long-term nominal rate of
return:
Pension business (where no tax applies) 6.4% 7.1% 6.6%
Life business 5.6% 6.3% 5.7%
Risk margin included within the risk discount rate 2.6% 2.6% 2.6%
Risk discount rate 7.0% 7.7% 7.1%
US Operations (Jackson National Life)
Expected long-term spread between earned rate and rate credited to 1.75% 1.75% 1.75%
policyholders
US 10 year treasury bond rate 3.5% 4.9% 3.9%
Risk margin included within the risk discount rate 3.1% 2.6% 3.1%
Risk discount rate 6.6% 7.5% 7.0%
Prudential Asia
Weighted pre-tax expected long-term nominal rate of investment return 7.2% 7.2% 7.1%
Weighted expected long-term rate of inflation 3.3% 3.0% 3.0%
Weighted risk discount rate 10.5% 9.9% 9.6%
The Prudential Asia weighted economic assumptions have been determined by weighting each country's assumptions by
reference to the Achieved Profits basis operating results for new business written in the relevant period.
ACHIEVED PROFITS BASIS RESULTS
Notes on the Unaudited Achieved Profits Basis Results
(1) The achieved profits basis results for the 2003 and 2002 Half Years are unaudited. The results for the 2002
Full Year have been derived from the achieved profits basis supplement to the Company's statutory accounts
for that year. The supplement included an unqualified audit report from the auditors.
(2) Under the achieved profits basis, the operating profit from new business represents the profitability of new
long-term insurance business written in the period and the operating profit from business in force
represents the profitability of business in force at the start of the period with, for Asia, the statutory
basis results of non-insurance operations. These results are combined with the statutory basis results of
the Group's other operations including banking, mutual funds and other non-insurance investment management
business. The effects of short-term fluctuations in investment returns and the impact of changes in economic
assumptions on shareholders' funds at the start of the reporting period are excluded from operating profit
but included in total profit. In the directors' opinion, the achieved profits basis results provide a more
realistic reflection of the performance of the Group's long-term business operations than results under the
statutory basis.
(3) The proportion of surplus allocated to shareholders from the UK with-profits business has been based on the
present level of 10%. Future bonus rates have been set at levels which would fully utilise the assets of the
with-profits fund over the lifetime of the business in force.
STATUTORY BASIS RESULTS
Half Year
ended 30 June Full Year
Summarised Consolidated Profit and Loss Account 2003 #m 2002 #m 2002 #m
------------------------------------------------------------------------- ---------- ---------- ---------
Continuing operations:
Long-term business gross premiums written (note 3) 7,301 8,326 16,669
Investment product contributions (note 4) 10,379 9,110 17,392
------ ------ ------
17,680 17,436 34,061
------ ------ ------
Discontinued operations:
General business gross premiums written (note 5) - 185 329
17,680 17,621 34,390
------ ------ ------
Operating profit from continuing operations before amortisation of goodwill and 172 317 432
exceptional items
Amortisation of goodwill (49) (49) (98)
Short-term fluctuations in investment returns 72 (152) (205)
Profit on sale of UK general business operations - 355 355
------ ------ ------
Profit on ordinary activities before tax (including actual investment returns) 195 471 484
Tax (note 6) (61) (50) (44)
------ ------ ------
Profit for the period before minority interests 134 421 440
Minority interests 5 1 9
------ ------ ------
Profit for the period after minority interests 139 422 449
Dividends (note 7) (106) (178) (519)
------ ------ ------
Retained profit (loss) for the period 33 244 (70)
------ ------ ------
Basic Earnings Per Share
------------------------------------
Based on operating profit after tax and related minority interests before amortisation
of goodwill and exceptional items of #125m (#227m and #314m) 6.3p 11.4p 15.8p
Adjustment for amortisation of goodwill (2.5)p (2.5)p (4.9)p
Adjustment from post-tax long-term investment returns to post-tax actual investment
returns (after related minority interests) 3.2p (5.0)p (5.5)p
Adjustment for post-tax profit on sale of UK general business operations - 17.3p 17.2p
------ ------ ------
Based on profit for the period after minority interests of #139m (#422m and #449m) 7.0p 21.2p 22.6p
------ ------ ------
Average number of shares 1,995m 1,986m 1,988m
------ ------ ------
Dividend Per Share 5.3p 8.9p 26.0p
------ ------ ------
STATUTORY BASIS RESULTS
Operating Profit before Amortisation of Goodwill and Exceptional Items
Half Year
ended 30 June Full
Year
Results Analysis by Business Area 2003 #m 2002 #m 2002 #m
------------------------------------------------- ------- ------- -------
UK and Europe Operations
UK and Europe Insurance Operations 133 213 355
M&G 38 34 71
Egg (23) 1 (20)
------- ------- -------
Total 148 248 406
------- ------- -------
US Operations
Jackson National Life 77 140 139
Broker dealer and fund management 9 10 14
------- ------- -------
Total 86 150 153
------- ------- -------
Prudential Asia
Long-term business and investment products 36 16 88
Development expenses (12) (11) (26)
------- ------- -------
Total 24 5 62
------- ------- -------
Other Income and Expenditure
Investment return and other income 12 12 3
Interest payable on core structural borrowings of shareholder financed (67) (67) (130)
operations
Corporate expenditure:
Group Head Office (19) (17) (36)
Asia Regional Head Office (12) (14) (26)
------- ------- -------
Total (86) (86) (189)
------- ------- -------
Operating profit from continuing operations before amortisation of
goodwill and exceptional items 172 317 432
STATUTORY BASIS RESULTS
Half Year
ended 30 June Full Year
Summarised Consolidated Balance Sheet 2003 #m 2002 #m 2002 #m
------------------------------------------------------------ ---------- ---------- ----------
Goodwill 1,555 1,637 1,604
Investments in respect of non-linked business:
Equities 31,145 36,722 30,007
Fixed income securities 66,689 61,220 63,200
Properties 10,788 10,376 10,766
Deposits with credit institutions 4,109 4,510 5,840
Other investments (principally mortgages and loans) 5,887 5,573 5,325
------- ------- -------
118,618 118,401 115,138
Assets held to cover linked liabilities 17,498 16,918 15,763
Banking business assets 12,104 10,569 11,502
Deferred acquisition costs 3,214 3,222 3,218
Minority interests (103) (117) (108)
Fund for future appropriations (9,869) (9,303) (7,663)
Insurance technical provisions (net of reinsurers' share):
UK and Europe Operations (87,466) (88,038) (85,379)
US Operations (24,859) (24,278) (24,074)
Prudential Asia (5,969) (5,431) (5,541)
------- ------- -------
(118,294) (117,747) (114,994)
Deferred tax (680) (1,564) (696)
Debenture loans (note 8) (3,154) (2,329) (2,293)
Other borrowings (note 8) (2,736) (1,945) (2,080)
Banking business liabilities (note 9) (11,150) (9,843) (10,784)
Obligations of Jackson National Life under funding and stocklending (4,274) (5,211) (5,098)
arrangements
Dividend payable (106) (178) (341)
Other net assets 1,044 1,598 500
------- ------- -------
Total net assets 3,667 4,108 3,668
------- ------- -------
Shareholders' Capital and Reserves
----------------------------------------------------
Share capital 100 100 100
Share premium 550 541 550
Statutory basis retained profit 3,017 3,467 3,018
------- ------- -------
Shareholders' capital and reserves 3,667 4,108 3,668
------- ------- -------
Movement in Shareholders' Capital and Reserves
-----------------------------------------------------------------------
Profit for the period after minority interests 139 422 449
Exchange movements (55) (105) (252)
New share capital subscribed 21 19 40
Dividends (106) (178) (519)
------- ------- -------
Net (decrease) increase in shareholders' capital and reserves (1) 158 (282)
Shareholders' capital and reserves at beginning of period 3,668 3,950 3,950
------- ------- -------
Shareholders' capital and reserves at end of period 3,667 4,108 3,668
------- ------- -------
STATUTORY BASIS RESULTS
Half Year
ended 30 June Full
Year
FRS 1 Consolidated Cash Flow Statement 2003 #m 2002 #m 2002 #m
------------------------------------------------------------ ------- ------- -------
Operations
Net cash inflow from operating activities# 55 61 31
------ ------ ------
Servicing of finance
Interest paid (88) (90) (180)
Tax ------ ------ ------
Tax received 81 45 299
------ ------ ------
Acquisitions and disposals
Net cash inflow from:
Acquisition of subsidary undertakings - - (12)
Disposal of UK general business operations - 353 353
------ ------ ------
Net cash inflow from acquisitions and disposals - 353 341
------ ------ ------
Equity dividends
Equity dividends paid (341) (332) (509)
------- ------- -------
Net cash (outflow) inflow before financing (293) 37 (18)
------- ------- -------
Financing
Issue of borrowings 811 75 86
Movement on credit facility utilised by investment subsidiaries (141) (39) (165)
managed by PPM America*
Issues of ordinary share capital 21 19 40
------- ------- -------
Net cash inflow (outflow) from financing 691 55 (39)
Net cash inflow (outflow) for the period 398 92 (57)
------- ------- -------
The net cash inflow (outflow) was invested (financed) as follows:
Net purchases (sales) of portfolio investments 9 (91) (83)
Increase in cash and short-term deposits, net of overdrafts 389 183 26
------- ------- -------
398 92 (57)
------- ------- -------
In accordance with FRS 1, this statement excludes the cash flows of long-term business funds.
*The holders of the credit facility utilised by these investment subsidiaries do not have recourse beyond
the assets of these subsidiaries.
#The reconciliation from statutory basis operating profit to net cash inflow from operating activities is
set out below:
Half Year
ended 30 Full
June Year
2003 #m 2002 #m 2002 #m
------- ------- -------
Operating profit before amortisation of goodwill 172 317 432
Add back interest charged to operating profit(^) 91 91 190
Adjustments for non-cash items:
Tax on long-term business profits (66) (113) (174)
Amounts retained in long-term business operations and Egg, timing (142) (234) (417)
differences and other items
------ ------ ------
Net cash inflow from operating activities (as shown above) 55 61 31
(^)This adjustment comprises interest payable on core structural borrowings, commercial paper and other
borrowings, non-recourse borrowings of investment subsidiaries managed by PPM America and structural
borrowings of Egg. Interest payable on long-term business with-profits fund borrowings and other trading
activities has been excluded from this adjustment.
STATUTORY BASIS RESULTS
Notes on the Unaudited Statutory Basis Results
(1) The statutory basis results for the 2003 and 2002 Half Years are unaudited. The 2003 Half Year results
have been prepared using the same accounting policies as were used in the 2002 statutory accounts. The
2002 Full Year results have been derived from those accounts. The auditors have reported on the 2002
statutory accounts and they have been delivered to the Registrar of Companies.The auditors' report was
not qualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985.
(2) The long-term business profit of the UK Insurance Operations has been calculated assuming that the
shareholder proportion of surplus allocated to shareholders from the with-profits business of The
Prudential Assurance Company Limited remains at 10 per cent. Provision has been made for possible
reductions in bonus rates arising from the fund valuation at 31 December 2003.
(3) An analysis of long-term business gross premiums written is set out below:
Half Year ended 30 June Full Year
2003 #m 2002 #m 2002 #m
---------- ---------- ---------
UK and Europe Insurance Operations 3,803 4,423 8,675
Jackson National Life 2,604 3,048 6,098
Prudential Asia 894 855 1,896
------- ------- -------
Group Total 7,301 8,326 16,669
------- ------- -------
(4) Investment product contributions for the 2003 Half Year include contributions relating to M&G's
institutional business. The figures for 2002 have been restated accordingly.
(5) Following the sale of the UK general business operations, all gross premiums written in 2002 were
reinsured.
(6) The tax charge of #61m for the 2003 Half Year (2002 Half Year : #50m) comprises #28m (#38m) UK tax and
#33m (#12m) overseas tax.
(7) The interim dividend of 5.3p per share will be paid on 31 October 2003 to shareholders on the register
at the close of business on 22 August 2003. A scrip dividend alternative will be offered to
shareholders.
(8) An analysis of borrowings is set out below:
Half Year ended 30 June Full Year
2003 #m 2002 #m 2002 #m
----------- ----------- -----------
Net core structural borrowings of shareholder financed operations 2,262 1,767 2,226
Add back holding company net cash and short-term investments 364 288 226
------- ------- -------
Core structural borrowings of shareholder financed operations 2,626 2,055 2,452
Commercial paper and other borrowings to support a short-term
fixed income securities reinvestment programme 1,184 1,428 1,241
Non-recourse borrowings of investment subsidiaries managed by PPM 224 474 365
America
Egg debenture loans 451 202 202
UK Insurance Operations long-term business with-profits fund 100 100 100
debenture loan
Obligations of Jackson National Life under sale and repurchase 1,290 - -
agreements
Other borrowings of shareholder financed operations 15 15 13
------- ------- -------
5,890 4,274 4,373
------- ------- -------
This total is recorded in the statutory basis summarised
consolidated balance sheet as:
Debenture loans 3,154 2,329 2,293
Other borrowings 2,736 1,945 2,080
------- ------- -------
5,890 4,274 4,373
------- ------- -------
(9) An analysis of banking business liabilities is set out below:
Half Year ended 30 June Full Year
2003 #m 2002 #m 2002 #m
------------ ------------ ------------
Egg 10,241 8,970 9,882
US Operations 909 873 902
------- ------- -------
11,150 9,843 10,784
------- ------- -------
Comprising
Banking deposit balances 7,967 8,335 8,666
Debt securities issued and other liabilities 3,183 1,508 2,118
------- ------- -------
11,150 9,843 10,784
------- ------- -------
Independent Review Report by KPMG Audit Plc to Prudential plc, extracted from
the Interim Report 2003
"Introduction
We have been engaged by the Company to review the financial information set out
on page 10 and pages 15 to 19 prepared on a modified statutory basis and the
financial information set out on page 9 and pages 11 to 14 prepared on an
achieved profits basis and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the Company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Company for
our review work, for this report, or for the conclusion we have reached.
Directors' Responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where they
are to be changed in the next annual accounts in which case any changes, and the
reasons for them, are to be disclosed.
Review Work Performed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4: Review of interim financial information, issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review is substantially less
in scope than an audit performed in accordance with Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly we do
not express an audit opinion on the financial information.
Review Conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2003.
KPMG Audit Plc
Chartered Accountants
London
28 July 2003"
Schedule 1
PRUDENTIAL PLC - NEW BUSINESS - HALF YEAR 2003
TOTAL INSURANCE AND INVESTMENT BUSINESS
UK & Europe US Asia Total
HY 2003 HY 2002 +/- (%) HY 2003 HY 2002 +/- (%) HY 2003 HY 2002 +/- (%) HY 2003 HY 2002 +/- (%)
#m #m #m #m #m #m #m #m
Total Insurance
Products 2,301 3,041 (24%) 2,448 2,869 (15%) 391 407 (4%) 5,140 6,317 (19%)
Total Investment
Products - Gross
Inflows (1) 2,016 2,441 (17%) - - - 8,363 6,669 25% 10,379 9,110 14%
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Group Total 4,317 5,482 (21%) 2,448 2,869 (15%) 8,754 7,076 24% 15,519 15,427 1%
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Single Regular Total Annual Equivalents (2)
HY 2003 HY 2002 +/- (%) HY 2003 HY 2002 +/- (%) HY 2003 HY 2002 +/- (%) HY 2003 HY 2002 +/- (%)
#m #m #m #m #m #m #m #m
UK Insurance
Operations : (11)
Direct Distribution:
Individual Pensions 6 10 (40%) 5 7 (29%) 11 17 (35%) 6 8 (25%)
Corporate Pensions 248 294 (16%) 70 54 30% 318 348 (9%) 95 83 14%
Life 7 37 (81%) 2 2 0% 9 39 (77%) 3 6 (50%)
Individual Annuities 472 391 21% - - - 472 391 21% 47 39 21%
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Sub-Total 733 732 0% 77 63 22% 810 795 2% 150 136 10%
DWP Rebates 280 195 44% - - - 280 195 44% 28 20 40%
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total 1,013 927 9% 77 63 22% 1,090 990 10% 178 156 14%
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Intermediated
Distribution :
Individual Pensions 33 57 (42%) 13 18 (28%) 46 75 (39%) 16 24 (33%)
Corporate Pensions 23 52 (56%) 3 9 (67%) 26 61 (57%) 5 14 (64%)
Life 441 1,350 (67%) 17 8 113% 458 1,358 (66%) 61 143 (57%)
Individual Annuities 390 312 25% - - - 390 312 25% 39 31 26%
Bulk Annuities 157 163 (4%) - - - 157 163 (4%) 16 16 0%
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Sub-Total 1,044 1,934 (46%) 33 35 (6%) 1,077 1,969 (45%) 137 228 (40%)
DWP Rebates 60 45 33% - - - 60 45 33% 6 5 20%
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total 1,104 1,979 (44%) 33 35 (6%) 1,137 2,014 (44%) 143 233 (39%)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Partnerships :
Life 41 - - - - - 41 - - 4 - -
Individual Annuities 4 - - - - - 4 - - 1 - -
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total 45 - - - - - 45 - - 5 - -
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total:
Individual Pensions 39 67 (42%) 18 25 (28%) 57 92 (38%) 22 32 (31%)
Corporate Pensions 271 346 (22%) 73 63 16% 344 409 (16%) 100 98 2%
Life 489 1,387 (65%) 19 10 90% 508 1,397 (64%) 68 149 (54%)
Individual Annuities 866 703 23% - - - 866 703 23% 87 70 24%
Bulk Annuities 157 163 (4%) - - - 157 163 (4%) 16 16 0%
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Sub-Total 1,822 2,666 (32%) 110 98 12% 1,932 2,764 (30%) 292 365 (20%)
DWP Rebates 340 240 42% - - - 340 240 42% 34 24 42%
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total UK Insurance
Operations 2,162 2,906 (26%) 110 98 12% 2,272 3,004 (24%) 326 389 (16%)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
European Insurance
Operations: (4)
Insurance Products 29 27 7% - 10 - 29 37 (22%) 3 13 (77%)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total European
Insurance 29 27 7% - 10 - 29 37 (22%) 3 13 (77%)
Operations
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total UK & European
Insurance 2,191 2,933 (25%) 110 108 2% 2,301 3,041 (24%) 329 401 (18%)
Operations
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
US Insurance
Operations: (4)
Fixed Annuities 953 1,053 (9%) - - - 953 1,053 (9%) 95 105 (10%)
Equity Linked
Indexed Annuities 112 129 (13%) - - - 112 129 (13%) 11 13 (15%)
Variable Annuities 910 484 88% - - - 910 484 88% 91 49 86%
Life - - - 8 12 (33%) 8 12 (33%) 8 12 (33%)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Sub-Total Retail 1,975 1,666 19% 8 12 (33%) 1,983 1,678 18% 206 179 15%
Guaranteed Investment
Contracts 186 282 (34%) - - - 186 282 (34%) 19 28 (32%)
GIC - Medium Term Note 279 909 (69%) - - - 279 909 (69%) 28 91 (69%)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total US Insurance
Operations 2,440 2,857 (15%) 8 12 (33%) 2,448 2,869 (15%) 252 298 (15%)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Asian Insurance
Operations: (4)
Singapore 51 138 (63%) 26 21 24% 77 159 (52%) 31 35 (11%)
Hong Kong 76 44 73% 34 43 (21%) 110 87 26% 42 47 (11%)
Malaysia 6 7 (14%) 24 24 0% 30 31 (3%) 25 25 0%
Taiwan 9 9 0% 64 50 28% 73 59 24% 65 51 27%
Japan 5 5 0% 20 18 11% 25 23 9% 20 19 5%
Other (3) 17 8 113% 59 40 48% 76 48 58% 61 40 53%
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Asian Insurance
Operations 164 211 (22%) 227 196 16% 391 407 (4%) 243 217 12%
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Group Total 4,795 6,001 (20%) 345 316 9% 5,140 6,317 (19%) 824 916 (10%)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Notes to Schedules:
(1) Represents cash received from sale of investment products.
(2) Annual Equivalents (AE), calculated as regular new business contributions + 10% single new business contributions,
are subject to roundings.
(3) In Asia, 'Other' insurance operations include Thailand, Indonesia, The Philippines, Vietnam, India (26% interest),
China and Korea.
(4) Sales for overseas operations have been calculated using average exchange rates. The applicable rate for Jackson
National Life is 1.61 (2002 - 1.44).
(11) Reflecting the expanded investment business new business analysis on Schedule 2, certain investment fund mandates
previously classified from UK Corporate Pensions sales are now reported as M&G institutional funds under management.
2002 UK insurance sales now reflect this change in presentation.
Schedule 2
PRUDENTIAL PLC - NEW BUSINESS - HALF YEAR 2003
INVESTMENT OPERATIONS
Opening Gross Redemptions Net Other Market & Net Closing
FUM inflows inflows movements currency movement in FUM
movements FUM
2003
M&G (11)
M&G branded retail 7,587 534 ( 401) 133 - 394 527 8,114
investment products
Prudential branded UK 1,137 76 ( 79) ( 3) - 61 59 1,196
retail investment
products (6)
M&G institutional (9) 11,560 1,406 ( 702) 704 - 757 1,461 13,021
------- ------- ------- ------- ------- ------- ------- -------
Total M&G 20,284 2,016 ( 1,182) 834 - 1,212 2,047 22,331
------- ------- ------- ------- ------- ------- ------- -------
Asia
India 1,372 3,333 ( 3,084) 249 ( 16) 65 298 1,670
Taiwan 2,425 3,609 ( 3,520) 89 - ( 24) 65 2,490
Korea 993 1,043 ( 1,083) ( 40) ( 13) ( 6) ( 59) 934
Other Mutual Fund 306 339 ( 36) 303 - 18 321 627
Operations
------- ------- ------- ------- ------- ------- ------- -------
Total Asian Mutual Fund 5,096 8,324 ( 7,723) 601 ( 29) 53 625 5,721
Operations
------- ------- ------- ------- ------- ------- ------- -------
Hong Kong MPF Products 136 39 ( 11) 27 - 2 29 165
(5)
------- ------- ------- ------- ------- ------- ------- -------
Total Asian Investment 5,232 8,363 ( 7,734) 628 ( 29) 55 654 5,886
Operations
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
Total Investment Products 25,516 10,379 ( 8,916) 1,462 ( 29) 1,267 2,701 28,217
------- ------- ------- ------- ------- ------- ------- -------
Opening Gross Redemptions Net Other Market & Net Closing
FUM inflows inflows movements currency movement in FUM
movements FUM
2002
M&G
M&G branded retail 8,890 609 ( 375) 234 ( 108) ( 767) ( 641) 8,249
investment products (8)
Prudential branded UK 1,546 71 ( 144) ( 73) - ( 349) ( 422) 1,124
retail investment
products (6)
M&G institutional (9) 9,873 1,761 ( 438) 1,322 - 117 1,439 11,312
------- ------- ------- ------- ------- ------- ------- -------
Total M&G 20,309 2,441 ( 957) 1,483 ( 108) ( 999) 376 20,685
------- ------- ------- ------- ------- ------- ------- -------
Asia
India 1,072 1,611 ( 1,634) ( 23) ( 19) ( 5) ( 47) 1,025
Taiwan 2,076 4,888 ( 4,338) 550 - ( 55) 495 2,571
Korea - - - - - - - -
Other Mutual Fund 57 130 ( 2) 128 - ( 1) 127 185
Operations
------- ------- ------- ------- ------- ------- ------- -------
Total Asian Mutual Fund 3,206 6,629 ( 5,974) 655 ( 19) ( 61) 575 3,781
Operations
------- ------- ------- ------- ------- ------- ------- -------
Hong Kong MPF Products 90 40 ( 6) 34 - ( 7) 27 117
(5)
------- ------- ------- ------- ------- ------- ------- -------
Total Asian Investment 3,296 6,669 ( 5,980) 689 ( 19) ( 68) 602 3,898
Operations
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
Total Investment Products 23,605 9,110 ( 6,937) 2,172 ( 127) ( 1,067) 978 24,583
------- ------- ------- ------- ------- ------- ------- -------
Opening Gross Redemptions Net Other Market & Net Closing
FUM inflows inflows movements currency movement in FUM
movements FUM
2003 movement relative to 2002
M&G
M&G branded retail (15%) (12%) (7%) (43%) - 151% 182% (2%)
investment products
Prudential branded UK (26%) 7% 45% 96% - 117% 114% 6%
retail investment
products (6)
M&G institutional (9) 17% (20%) (60%) (47%) - 547% 2% 15%
------- ------- ------- ------- ------- ------- ------- -------
Total M&G (0%) (17%) (24%) (44%) - 221% 444% 8%
------- ------- ------- ------- ------- ------- ------- -------
Asia
India 28% 107% (89%) 1183% 16% 1400% 734% 63%
Taiwan 17% (26%) 19% (84%) - 56% (87%) (3%)
Korea - - - - - - - -
Other Mutual Fund 437% 161% (1700%) 137% - 1900% 153% 239%
Operations
------- ------- ------- ------- ------- ------- ------- -------
Total Asian Mutual Fund 59% 26% (29%) (8%) (53%) 187% 9% 51%
Operations
------- ------- ------- ------- ------- ------- ------- -------
Hong Kong MPF Products 51% (3%) (83%) (21%) - - 7% 41%
(5)
------- ------- ------- ------- ------- ------- ------- -------
Total Asian Investment 59% 25% (29%) (9%) (53%) 181% 9% 51%
Operations
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
Total Investment Products 8% 14% (29%) (33%) 77% 219% 176% 15%
------- ------- ------- ------- ------- ------- ------- -------
US BANKING PRODUCTS
HY HY +/- (%)
2003 2002
#m #m
US Banking Products (7)
Total Deposit Liabilities 650 668 (3%)
Retail Assets 705 685 3%
Notes to Schedules:
(5) Mandatory Provident Fund product sales in Hong Kong are included at Prudential's 36% interest of the Hong
Kong MPF operation.
(6) Scottish Amicable and Prudential branded Investment Products.
(7) Balance sheet figures have been calculated at closing exchange rates.
(8) Balance restated to include M&G South Africa retail investment operations.
(9) Balance includes segregated pensions fund business, private finance flows and M&G South Africa institutional
business. M&G institutional funds under management restated during the quarter to include funds managed on behalf
of the Prudential Staff Pension Scheme previously categorised as internal funds.
(11) Reflecting the expanded investment business new business analysis above, certain investment fund mandates
previously classified from UK Corporate Pensions sales are now reported as M&G institutional funds under
management. 2002 UK insurance sales now reflect this change in presentation.
Schedule 3
PRUDENTIAL PLC - NEW BUSINESS - QUARTER 2 2003 VERSUS QUARTER 2 2002
INSURANCE OPERATIONS
Single Regular Total Annual Equivalents (2)
Q2 Q2 +/-(%) Q2 Q2 +/-(%) Q2 Q2 +/-(%) Q2 Q2 +/-(%)
2003 2002 2003 2002 2003 2002 2003 2002
#m #m #m #m #m #m #m #m
UK Insurance Operations:(11)
Direct Distribution:
Individual Pensions 3 5 (40%) 3 4 (25%) 6 9 (33%) 4 5 (20%)
Corporate Pensions 52 86 (40%) 46 31 48% 98 117 (16%) 51 39 31%
Life 3 20 (85%) 1 1 0% 4 21 (81%) 2 3 (33%)
Individual Annuities 201 201 0% - - - 201 201 0% 20 20 0%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Sub-Total 259 312 (17%) 50 36 39% 309 348 (11%) 76 67 13%
DWP Rebates - - - - - - - - - - - -
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total 259 312 (17%) 50 36 39% 309 348 (11%) 76 68 12%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Intermediated Distribution:
Individual Pensions 16 25 (36%) 7 9 (22%) 23 34 (32%) 8 12 (33%)
Corporate Pensions 11 32 (66%) 1 2 (50%) 12 34 (65%) 2 5 (60%)
Life 207 555 (63%) 9 4 125% 216 559 (61%) 30 59 (49%)
Individual Annuities 151 187 (19%) - - - 151 187 (19%) 15 19 (21%)
Bulk Annuities 86 105 (18%) - - - 86 105 (18%) 9 10 (10%)
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Sub-Total 471 904 (48%) 17 15 13% 488 919 (47%) 64 105 (39%)
DWP Rebates - - - - - - - - - - - -
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total 471 904 (48%) 17 15 13% 488 919 (47%) 64 105 (39%)
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Partnerships :
Life 9 - - - - - 9 - - 1 - -
Individual Annuities 4 - - - - - 4 - - 1 - -
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total 13 - - - - - 13 - - 2 - -
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total:
Individual Pensions 19 30 (37%) 10 13 (23%) 29 43 (33%) 12 16 (25%)
Corporate Pensions 63 118 (47%) 47 33 42% 110 151 (27%) 53 45 18%
Life 219 575 (62%) 10 5 100% 229 580 (61%) 32 63 (49%)
Individual Annuities 356 388 (8%) - - - 356 388 (8%) 36 39 (8%)
Bulk Annuities 86 105 (18%) - - - 86 105 (18%) 9 10 (10%)
------- ---- ---- ---- ---- ---- ----- ----- ---- ----- ---- ----
Sub-Total 743 1,216 (39%) 67 51 31% 810 1,267 (36%) 141 173 (18%)
DWP Rebates - - - - - - - - - - - -
------- ---- ---- ---- ---- ---- ----- ----- ---- ----- ---- ----
Total UK Insurance 743 1,216 (39%) 67 51 31% 810 1,267 (36%) 141 173 (18%)
Operations
------- ---- ---- ---- ---- ---- ----- ----- ---- ----- ---- ----
European Insurance
Operations: (4)
Insurance Products 17 13 31% - 5 - 17 18 (6%) 2 7 (71%)
------- ---- ---- ---- ---- ---- ----- ----- ---- ----- ---- ----
Total European Insurance 17 13 31% - 5 - 17 18 (6%) 2 7 (71%)
Operations
------- ---- ---- ---- ---- ---- ----- ----- ---- ----- ---- ----
------- ---- ---- ---- ---- ---- ----- ----- ---- ----- ---- ----
Total UK & European 760 1,229 (38%) 67 56 20% 827 1,285 (36%) 143 179 (20%)
Insurance Operations
------- ---- ---- ---- ---- ---- ----- ----- ---- ----- ---- ----
US Insurance
Operations: (10)
Fixed Annuities 421 625 (33%) - - - 421 625 (33%) 42 62 (32%)
Equity Linked Indexed 68 72 (6%) - - - 68 72 (6%) 7 7 0%
Annuities
Variable Annuities 468 301 55% - - - 468 301 55% 47 31 52%
Life - - - 5 7 (29%) 5 7 (29%) 5 7 (29%)
------- ---- ---- ---- ---- ---- ----- ----- ---- ----- ---- ----
Sub-total Retail 957 998 (4%) 5 7 (29%) 962 1,005 (4%) 101 107 (6%)
Guaranteed Investment 186 169 10% - - - 186 169 10% 19 17 12%
Contracts
GIC - Medium Term Note 279 384 (27%) - - - 279 384 (27%) 28 38 (26%)
------- ---- ---- ---- ---- ---- ----- ----- ---- ----- ---- ----
Total US Insurance 1,422 1,551 (8%) 5 7 (29%) 1,427 1,558 (8%) 147 162 (9%)
Operations
------- ---- ---- ---- ---- ---- ----- ----- ---- ----- ---- ----
Asian Insurance
Operations: (4)
Singapore 22 86 (74%) 14 12 17% 36 98 (63%) 16 21 (24%)
Hong Kong 42 35 20% 20 23 (13%) 62 58 7% 25 26 (4%)
Malaysia 3 4 (25%) 11 13 (15%) 14 17 (18%) 12 14 (14%)
Taiwan 8 5 60% 17 27 (37%) 25 32 (22%) 18 28 (36%)
Japan 2 1 100% 8 9 (11%) 10 10 0% 8 10 (20%)
Other (3) 10 3 233% 31 23 35% 41 26 58% 32 22 45%
------- ---- ---- ---- ---- ---- ----- ----- ---- ----- ---- ----
Total Asian Insurance 87 134 (35%) 101 107 (6%) 188 241 (22%) 110 121 (9%)
Operations
------- ---- ---- ---- ---- ---- ----- ----- ---- ----- ---- ----
------- ---- ---- ---- ---- ---- ----- ----- ---- ----- ---- ----
Group Total 2,269 2,914 (22%) 173 170 2% 2,442 3,084 (21%) 400 462 (13%)
------- ---- ---- ---- ---- ---- ----- ----- ---- ----- ---- ----
INVESTMENT OPERATIONS
M&G (9) & UK Operations Asia Mutual Funds Hong Kong MPF Products (5) Total Investment Products
Q2 2003 Q2 2002 +/- (%) Q2 2003 Q2 2002 +/- (%) Q2 2003 Q2 2002 +/- (%) Q2 2003 Q2 2002 +/- (%)
#m #m #m #m #m #m #m #m
Opening FUM 20,677 21,040 (2%) 5,022 3,438 46% 151 111 36% 25,850 24,588 5%
Gross inflows 832 1,140 (27%) 4,552 3,481 31% 21 20 5% 5,405 4,640 16%
Less redemptions ( 627) ( 400) (57%) ( 3,853)( 2,946) (31%) ( 8) ( 4) (100%) ( 4,488) ( 3,350) (34%)
------ ------ ----- ------ ------ ---- ---- ---- ---- ------ ------ ---
Net flows 205 740 (72%) 699 535 31% 12 16 (25%) 916 1,290 (29%)
Other movements ( 4) - - ( 16) - - - - - ( 20) - -
Market and
currency 1,452 ( 1,095) 233% 16 ( 191) 108% 2 ( 9) - 1,470 ( 1,296) 213%
movements
------ ------ ----- ------ ------ ---- ---- ---- ---- ------ ------ ---
Net movement
in FUM 1,653 ( 355) 566% 699 343 104% 14 7 100% 2,367 ( 6) -
------ ------ ----- ------ ------ ---- ---- ---- ---- ------ ------ ---
Closing FUM 22,331 20,685 8% 5,721 3,781 51% 165 117 41% 28,217 24,583 15%
------ ------ ----- ------ ------ ---- ---- ---- ---- ------ ------ ---
Notes to Schedules:
(2) Annual Equivalents (AE), calculated as regular new business contributions + 10% single new business contributions,
are subject to roundings.
(3) In Asia, 'Other' insurance operations include Thailand, Indonesia, The Philippines, Vietnam, India (26% interest),
China and Korea.
(4) Sales for overseas operations have been calculated using average exchange rates.
(5) Mandatory Provident Fund product sales in Hong Kong are included at Prudential's 36% interest of the Hong Kong MPF
operation.
(9) Balance includes segregated pensions fund business, private finance flows and M&G South Africa institutional
business. M&G institutional funds under management restated during the quarter to include funds managed on behalf of the
Prudential Staff Pension Scheme previously categorised as internal funds.
(10) Sales for overseas operations are converted to sterling using the year to date average exchange rate applicable at
the time. The sterling results for individual quarters represent the difference between the year to date reported
sterling results at successive quarters and will include foreign exchange movements from earlier periods.
(11) Reflecting the expanded investment business new business analysis on Schedule 2, certain investment fund mandates
previously classified from UK Corporate Pensions sales are now reported as M&G institutional funds under management.
2002 UK insurance sales now reflect this change in presentation.
Schedule 4
PRUDENTIAL PLC - NEW BUSINESS - QUARTER 2 2003 VERSUS QUARTER 1 2003
INSURANCE OPERATIONS
Single Regular Total Annual Equivalents (2)
Q2 Q1 Q2 Q1 Q2 Q1 Q2 Q1
2003 2003 +/- (%) 2003 2003 +/- (%) 2003 2003 +/- (%) 2003 2003 +/- (%)
#m #m #m #m #m #m #m #m
UK Insurance
Oper-
ations :(11)
Direct
Distribution:
Individual
Pensions 3 3 0% 3 2 50% 6 5 20% 4 2 100%
Corporate
Pensions 52 196 (73%) 46 24 92% 98 220 (55%) 51 44 16%
Life 3 4 (25%) 1 1 0% 4 5 (20%) 2 1 100%
Individual
Annuities 201 271 (26%) - - - 201 271 (26%) 20 27 (26%)
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Sub-Total 259 474 (45%) 50 27 85% 309 501 (38%) 76 74 3%
DWP Rebates - 280 - - - - - 280 - - 28 -
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Total 259 754 (66%) 50 27 85% 309 781 (60%) 76 102 (25%)
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Inter-
mediated
Distri-
bution :
Individual
Pensions 16 17 (6%) 7 6 17% 23 23 0% 8 8 0%
Corporate
Pensions 11 12 (8%) 1 2 (50%) 12 14 (14%) 2 3 (33%)
Life 207 234 (12%) 9 8 13% 216 242 (11%) 30 31 (3%)
Individual
Annuities 151 239 (37%) - - - 151 239 (37%) 15 24 (38%)
Bulk
Annuities 86 71 21% - - - 86 71 21% 9 7 29%
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Sub-Total 471 573 (18%) 17 16 6% 488 589 (17%) 64 73 (12%)
DWP Rebates - 60 - - - - - 60 - - 6 -
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Total 471 633 (26%) 17 16 6% 488 649 (25%) 64 79 (19%)
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Part
nerships :
Life 9 32 (72%) - - - 9 32 (72%) 1 3 (67%)
Individual
Annuities 4 - - - - - 4 - - 1 - -
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Total 13 32 (59%) - - - 13 32 (59%) 2 3 (33%)
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Total:
Individual
Pensions 19 20 (5%) 10 8 25% 29 28 4% 12 10 20%
Corporate
Pensions 63 208 (70%) 47 26 81% 110 234 (53%) 53 47 13%
Life 219 270 (19%) 10 9 11% 229 279 (18%) 32 36 (11%)
Individual
Annuities 356 510 (30%) - - - 356 510 (30%) 36 51 (29%)
Bulk
Annuities 86 71 21% - - - 86 71 21% 9 7 29%
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Sub-Total 743 1,079 (31%) 67 43 56% 810 1,122 (28%) 141 151 (7%)
DWP Rebates - 340 - - - - - 340 - - 34 -
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Total
UK
Insurance 743 1,419 (48%) 67 43 56% 810 1,462 (45%) 141 185 (24%)
Operations
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
European
Insurance
Opera-
tions: (4)
Insurance
Products 17 12 42% - - - 17 12 42% 2 1 100%
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Total
European
Insurance 17 12 42% - - - 17 12 42% 2 1 100%
Operations
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Total
UK &
European 760 1,431 (47%) 67 43 56% 827 1,474 (44%) 143 186 (23%)
Insurance
Operations
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
US
Insurance
Oper-
ations:(10)
Fixed
Annuities 421 532 (21%) - - - 421 532 (21%) 42 53 (21%)
Equity
Linked
Indexed 68 44 55% - - - 68 44 55% 7 4 75%
Annuities
Variable
Annuities 468 442 6% - - - 468 442 6% 47 44 7%
Life - - - 5 3 67% 5 3 67% 5 3 67%
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Sub-total
Retail 957 1,018 (6%) 5 3 67% 962 1,021 (6%) 101 105 (4%)
Guaranteed
Investment 186 - - - - - 186 - - 19 - -
Contracts
GIC -
Medium
Term Note 279 - - - - - 279 - - 28 - -
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Total US
Insurance 1,422 1,018 40% 5 3 67% 1,427 1,021 40% 147 105 40%
Operations
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Asian
Insurance
Oper-
ations:(4)
Singapore 22 29 (24%) 14 12 17% 36 41 (12%) 16 15 7%
Hong Kong 42 34 24% 20 14 43% 62 48 29% 25 17 47%
Malaysia 3 3 0% 11 13 (15%) 14 16 (13%) 12 13 (8%)
Taiwan 8 1 700% 17 47 (64%) 25 48 (48%) 18 47 (62%)
Japan 2 3 (33%) 8 12 (33%) 10 15 (33%) 8 12 (33%)
Other (3) 10 7 43% 31 28 11% 41 35 17% 32 29 10%
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Total
Asian
Insurance 87 77 13% 101 126 (20%) 188 203 (7%) 110 133 (17%)
Operations
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
Group
Total 2,269 2,526 (10%) 173 172 1% 2,442 2,698 (9%) 400 424 (6%)
----- ------ ----- ----- ----- ------ ------ ------ ----- ---- ---- -----
INVESTMENT OPERATIONS
M&G (9) & UK Operations Asia Mutual Funds Hong Kong MPF Products (5) Total Investment Products
Q2 Q1 Q2 Q1 Q2 Q1 Q2 Q1
2003 2003 +/- (%) 2003 2003 +/- (%) 2003 2003 +/- (%) 2003 2003 +/- (%)
#m #m #m #m #m #m #m #m
Opening
FUM 20,677 20,284 2% 5,022 5,096 (1%) 151 136 11% 25,850 25,516 1%
Gross
inflows 832 1,184 (30%) 4,552 3,772 21% 21 18 17% 5,405 4,974 9%
Less
redemp-
tions ( 627) ( 555) (13%) ( 3,853) ( 3,870) 0% ( 8) ( 3) (167%) ( 4,488) ( 4,428) (1%)
------ ------ ----- ------ ------ ------ ------ ----- ----- ----- ----- -----
Net flows 205 629 (67%) 699 ( 98) 813% 12 15 (20%) 916 546 68%
Other
movements ( 4) 4 (200%) ( 16) ( 13) (23%) - - - ( 20) ( 9) (122%)
Market
and
currency 1,452 ( 240) 705% 16 37 (57%) 2 - - 1,470 ( 203) 824%
movements
------ ------ ----- ------ ------ ------ ------ ----- ----- ----- ----- -----
Net
movement
in FUM 1,653 394 320% 699 ( 74) 1045% 14 15 (7%) 2,367 334 609%
------ ------ ----- ------ ------ ------ ------ ----- ----- ----- ----- -----
Closing
FUM 22,331 20,677 8% 5,721 5,022 14% 165 151 9% 28,217 25,850 9%
------ ------ ----- ------ ------ ------ ------ ----- ----- ----- ----- -----
Notes to Schedules:
(2) Annual Equivalents (AE), calculated as regular new business contributions + 10% single new business contributions,
are subject to roundings.
(3) In Asia, 'Other' insurance operations include Thailand, Indonesia, The Philippines, Vietnam, India (26% interest),
China and Korea.
(4) Sales for overseas operations have been calculated using average exchange rates.
(5) Mandatory Provident Fund product sales in Hong Kong are included at Prudential's 36% interest of the Hong Kong MPF
operation.
(9) Balance includes segregated pensions fund business, private finance flows and M&G South Africa institutional
business. M&G institutional funds under management restated during the quarter to include funds managed on behalf of the
Prudential Staff Pension Scheme previously categorised as internal funds.
(10) Sales for overseas operations are converted to sterling using the year to date average exchange rate applicable at
the time. The sterling results for individual quarters represent the difference between the year to date reported
sterling results at successive quarters and will include foreign exchange movements from earlier periods.
(11) Reflecting the expanded investment business new business analysis on Schedule 2, certain investment fund mandates
previously classified from UK Corporate Pensions sales are now reported as M&G institutional funds under management.
2002 UK insurance sales now reflect this change in presentation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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