22 Feb 2001

Prudential plc 2000 Unaudited Results

  • Record group insurance and investment sales of £13.9 billion, up 13 per cent on 1999
  • Overseas new business achieved profits increased to £383 million, up 30 per cent on 1999
  • New business achieved profits in Asia up 70 per cent
  • Record new business achieved profits at Jackson National Life
  • Margins maintained in the UK
  • Strong investment performance at M&G
  • Egg on track with total customer numbers increasing to 1.35 million
  • Total dividend up 6.5 per cent to 24.5p per share
New business achieved profits 613 603 2%
Achieved basis operating profit 1,029 1,098 (6)%
Statutory basis operating profit 840 776 8%
Statutory basis profit before tax 947 750 26%
Full year dividend per share 24.5p 23.0p 6.5%
Shareholders’ funds - achieved profits basis 8,833 8,342 6%

Commenting on the results, Jonathan Bloomer, Prudential's group chief executive said:

"2000 has been a year of significant international development for the Prudential group. This reflects the fundamental transformation that has taken place across the group over the last five years, which has established us as a major international financial services company.

"The continued diversification of our product range, broadened distribution reach, increased access to our chosen markets and the quality of our partners and staff have resulted in a record inflow of new insurance and investment funds of almost £14 billion in 2000. The changing business mix is reflected in the fact that 25 per cent of this total came from investment product sales.

"Statutory basis operating profit grew by 8 per cent to £840 million in 2000 and new business achieved profits, which exclude any profit from investment sales, increased to a record £613 million. Achieved basis operating profit fell 6 per cent to £1,029 million due to lower in-force profits from our US operations.

"Value creation involves growing the business in the most appropriate way by deploying capital in the most efficient markets, and can involve taking some difficult decisions. The recently announced decision to restructure our direct sales channels and customer service operations in the UK was taken in the long-term interests of our customers and shareholders.

"Understanding customer needs in individual marketplaces has been paramount in helping us design the products and channels of delivery to suit consumers and keep us ahead of the competition.

"During the year we have expanded our operations by reaching new markets as well as broadening our services in existing markets. We are a scale player in the UK, the United States and Asia, and we manage £165 billion of client funds world-wide. With over 50 per cent of our new business revenue and over 60 per cent of our new business achieved profits in 2000 coming from overseas, we have established our position as a leading international retail financial services group, with a focus on long-term savings.

"One of the key initiatives in 2000 was our listing in June on the New York Stock Exchange. This reflects the increasingly international nature of our business and will enable us to widen our international shareholder base. The listing also offers us flexibility in respect of funding any future expansion in the United States.

"We also completed an Initial Public Offering (IPO) of a minority share of Egg, our internet financial service business, on the London Stock Exchange. The IPO has promoted the continued growth of Egg and has given Egg's management team the currency to expand the business further. We have retained 79 per cent of the company to ensure that Prudential shareholders benefit in the future growth of Egg.

"At M&G, fund performance has been extremely strong across all activities in 2000. We have seen excellent performance in a number of our flagship retail equity funds as well as in fixed income, and new funds including the Innovator fund and the Global Technology fund have shown market leading returns. In addition, despite difficult market conditions globally, the life fund has outperformed its competitors and its strategic benchmarks due in particular to strong relative returns from UK and European equities, as well as fixed income.

"During 2000 we have made great progress in developing our presence in Asia where we have seen total insurance sales grow by 75 per cent over the year to £504 million. We entered two of the largest life markets, China and India, and the business will be further enhanced by our acquisition of Orico Life Insurance Co. Ltd in Japan, which we announced in January 2001. Orico is a modern and innovative life business and the acquisition gives us access to one of the world's largest life insurance markets.

"In the United States, Jackson National Life has leading positions in a number of product areas and has continued to drive forward its strategy of broadening its distribution reach. During the year, JNL acquired Highland Bancorp, which was merged with Jackson Federal Bank, a wholly owned subsidiary of JNL. This has given our banking operation scale and enabled JNL to broaden its product range to incorporate banking products for national distribution. JNL also acquired IFC Holdings, the leading bank third-party marketing organisation in the US, which has significantly enhanced its distribution through both banks and its broker-dealer network.

"The markets in which we operate around the world are experiencing tremendous change, bringing with it both enormous opportunities and challenges. We have continued to adapt to meet these changes and we have a significant brand and distribution presence in each of our chosen markets. I am confident that the group is well placed for the future and that our focus on value rather than volume will enable us to deliver superior investment returns to our customers and to our shareholders."

The final dividend of 16.3p per share will be paid on 30 May 2001 to shareholders on the register at the close of business on 30 March 2001. Shareholders will once more be offered a scrip dividend alternative.

Media Enquiries:

Geraldine Davies - 020 7548 3911 Rebecca Burrows - 020 7548 3537
Steve Colton - 020 7548 3721 Andrew Crossley - 020 7548 3166
Tina Christou - 020 7548 3719

Notes to Editors:

  1. There will be a conference call today for wire services at 7.30am on 020 8240 8242. This conference call will be hosted by Jonathan Bloomer, Group Chief Executive.
  2. A presentation to analysts will take place at 10:00am at Governor’s House, Laurence Pountney Hill, London, EC4R 0EU. A webcast of the presentation and the presentation slides will be available on the group's website, www.prudential.co.uk
  3. A press conference will take place at 11:45am at Governor’s House, Laurence Pountney Hill, London, EC4R 0EU.
Results Summary 2000
Statutory operating profit(based on longer-term investment returns) before amortisation of goodwill
UK Insurance Operations
Long-term business 468 454
General business 33 61
501 515
M&G 125 87
Egg (155) (150)
UK Operations 471 452
US Operations 466 451
Prudential Asia 22 15
Prudential Europe (10) 6
Other income and expenditure (109) (78)
Re-engineering costs - (70)
Operating profit before amortisation of goodwill 840 776
Amortisation of goodwill (84) (54)
Short-term fluctuations in investment returns (48) 28
Profit on sale and flotation of holding in Egg 119 -
Share of exceptional gain of associate company 21 -
Profit on sale of holding in associate company 99 -
Profit before tax (including actual investment returns) 947 750
Earnings per share
Based on operating profit after tax and minority interests before amortisation of goodwill 31.5p 29.1p
Based on profit after tax and minority interests - basic 35.1p 27.8p
Based on profit after tax and minority interests - diluted 35.0p 27.7p
Dividend per share 24.5p 23.0p
Achieved profits basis shareholders' funds £8.8bn £8.3bn
Insurance and investment funds under management £165bn £170bn
Banking deposit balances under management £7.6bn £8.2bn
Profit before tax includes actual investment returns. The Company believes that operating profit, which is based on longer-term investment returns, before amortisation of goodwill better reflects the Group's underlying performance.


United Kingdom

Insurance Operations

Prudential is one of the leading UK life insurers and is well placed to be a significant player in the Stakeholder market. Operating under both the Prudential and Scottish Amicable brands, we are a leading provider of pension annuities and with-profits bonds in the UK. Statutory basis operating profit from our UK insurance operations fell 3 per cent to £501 million in 2000 and achieved basis operating profit grew 11 per cent to £708 million.

The UK pensions market has undergone significant change ahead of the launch of stakeholder pensions in April 2001. In preparation for the lower charging environment of stakeholder pensions, we are investing in alternative lower-cost distribution models. Our considerable investment in distribution and technology, coupled with the strength of our brand in that market gives us a considerable advantage. We have already announced agreements with the Trades Union Congress and the British Chambers of Commerce to be their preferred provider of stakeholder pensions. With these two agreements in place, we have the potential to be the leading player in this new market.

The benefit of lower pensions charging will not be confined solely to new stakeholder pensions customers. Our existing UK individual pensions customers will also benefit from reduced pension charges with effect from April 2001, to reflect the one per cent stakeholder charges.

During 2000, we restructured our UK operations into three key areas: Prudential Financial Services, Prudential Intermediary Business and Prudential Insurance Services. Prudential Financial Services is responsible for all direct distribution of Prudential-branded products; Prudential Intermediary Business, for all distribution of products via the Independent Financial Adviser channel; and Prudential Insurance Services, for all administration of in-force products under the Prudential brand, together with our successful and profitable General Insurance business. This reorganisation reflects the importance of focusing on the needs of our customers, while recognising the importance of the low cost business models necessary for the low margin environment in which we will be operating.

In addition, we recently announced changes to our direct sales channels and customer service operations in the UK. These changes, which are being implemented in order to continue to meet changing customer needs and to ensure we operate cost-effectively as a scale player in the UK marketplace, represent a further evolution of the group’s business model in the UK to improve our service offering to over six million customers.

In the IFA sector, our UK intermediary business continues to develop, offering products under both the Scottish Amicable and Prudential brands. In March 2001, we will be bringing together our two sales forces (Scottish Amicable and Prudential) into a new integrated structure that will more effectively bring our products and services to a wider group of financial advisers. The development of our adviser extranet which provides on-line servicing, product information and highlights sales opportunities is part of our overall aim of adding value to the IFA sales process and has been a key differentiator for us in this market place. In 2000 sales of Prudence Bond were £1.5 billion, bringing the total sold in the last 10 years to £10 billion, ensuring we remain a leading player in the market, despite increased competition from new players and very aggressive pricing from other life companies.

We have integrated our annuities business with that of our intermediaries business, predominantly to capitalise on opportunities in the over 50s market where we expect to see substantial and profitable growth. We are well placed to take advantage of the potential of this market through our existing Prudential Annuities business and by leveraging the additional sales potential available through our intermediaries’ distribution capability. In 2001 this business will build through the impetus of its recent profitable growth and maintain the shift in focus from annuities at the point of retirement to income through retirement.


M&G is our UK and European fund manager, responsible for managing £126 billion of funds. Since its acquisition in 1999, M&G has been successfully integrated into the group and we have restructured our entire European fund management business under this single investment brand, while the PPM brand continues in the United States and Asia. During 2000, we completed the sale of part of our institutional business, as previously announced, and focused M&G on its core strengths in unit trusts, specialist fixed income, and pooled life and pension fund management.

Profits increased from £87 million to £125 million in 2000, reflecting a full 12 months’ contribution (compared to eight months in 1999) as well as increased fees from Prudential’s life funds which had a particularly strong performance.

Fund performance has been extremely strong across all activities in 2000 on the back of M&G’s merged investment team and research process. We have seen excellent performance in a number of our flagship retail equity funds as well as in fixed income, and some of our new funds have shown market-leading returns. The breadth of this achievement is shown through the M&G Managed Growth Fund’s top quartile performance over three and five years, as this directly reflects the success of its underlying fund-of-fund portfolio of 22 M&G unit trusts.

The integration of PPM in the UK and M&G allowed us to extend this process across our internal funds, including the £80 billion managed on behalf of the Prudential Assurance Company’s long-term fund. In 2000, despite difficult market conditions globally, this fund beat its competitor and strategic benchmarks due to strong relative returns from UK and European equities as well as fixed income. This was an exceptional result. Most impressively, the UK equities portfolio outperformed its benchmark in all four quarters of 2000 despite the radically different investment characteristics in these periods.

Product innovation is key for M&G. In June 2000, we launched the Innovator Fund which aims to pick fast growing companies with the potential to become the market heavyweights of the future. Both this and our Global Technology Fund have performed particularly strongly since they were launched. Building on our success in this area, M&G is expanding its range of global thematic funds and launched the Global Financials and Global Media and Communications funds in February 2001.

M&G continued to develop its business in 2000 with one of the most exciting initiatives being Cofunds, a fund supermarket for intermediaries, founded through a joint venture with Gartmore, Jupiter and Threadneedle. Mutual fund supermarkets have proved to be extremely successful in the US and Cofunds’ exclusive focus on the intermediary market offers it exciting growth opportunities in the UK and potentially in Europe. M&G has also won the contract to provide the third party administration capability for Cofunds, which opened for business in February 2001.

M&G has made considerable progress throughout its refocused wholesale division with the specialist fixed income business, which we retained due to its competitive advantages and growth potential, winning £2.1 billion of net new mandates in 2000. This was due to increasing demand from defined benefit pension schemes for corporate bonds and sophisticated liability matching services, both team specialities. In pooled funds, our flagship UK equity and balanced funds have shown improved performance during the year. In addition, the private finance group continues to expand its innovative capabilities and launched the UK’s first sterling Collateralised Debt Obligation in early 2001.

During 2000, we also established M&G Europe to target the increasing appetite for equity investment on the Continent. We will initially look at entry into Germany, with the intention of launching before the end of this year, and plan subsequent entry into other European markets from 2002 onwards.

Prudential Property Investment Managers (PruPIM) continues to manage in excess of £10 billion worth of property and in 2000 consolidated its outstanding long-term performance record. PPM Ventures (PPMV) has continued to build its global private equity investment capability and now has over £600 million invested on behalf of its clients. PPMV has also continued its successful investment record during 2000.

Overall, this has been an outstanding year for our investment businesses in the UK with strong performance across our entire range of activities, continued product and business innovation and a clear focus on our core strengths going forward.


Prudential launched Egg in October 1998 as a division of Prudential Banking. Since then Egg has become a leading internet financial services brand providing banking products and intermediation services over the internet. Egg currently offers customers deposit accounts, credit cards, personal loans, mutual funds, general insurance and online shopping.

2000 was an important year for Egg in terms of investing in and developing its business model and customer acquisition. This continuing investment resulted in Egg reporting losses of £155 million for the year, which was in line with expectations. Customer acquisition has continued to grow rapidly with 559,000 net new customers joining Egg during the year, giving an impressive customer base of just over 1.35 million at the year-end. Cross-sales numbers are also showing encouraging signs, with nearly 400,000 products cross-sold since launch.

We successfully completed a public offering of just over a 20 per cent share in Egg in June. This will enable Egg to maximise the potential for growth in the business both in the UK domestic market and, over time, internationally. Egg has continued to develop and enhance its range of products and services, adopting new technologies for the benefit of customers, while growing rapidly and retaining its market leading brand position.

Product innovation and partnership remains integral to Egg’s philosophy. In April, Egg announced its joint venture with leading retailer Boots, whereby Boots’ highly successful "advantage" loyalty card has combined with Egg to create a combined credit and loyalty card. The rate of customer acquisition for the card has started well and we expect this growth to continue over the coming months.

Egg remains at the forefront of adopting the latest technology to open up new channels for customers to access its services. Egg has a multi-channel strategy, encompassing internet, telephone, WAP and interactive digital television. In addition, it has introduced several new products and services during the year including the launch of the first mutual fund supermarket in the UK, a share trading service, and a general and home insurance online supermarket.

The year ahead is of equal importance for Egg. The early part of the year will see continued focus on acquiring credit card customers, as well as capitalising on the forthcoming ISA season with the expansion of its range of pre-packaged easy choice ISAs.

The senior management team remains committed to achieving a break-even position for the existing UK business during the fourth quarter of 2001 and we are confident that they are on track to meet this target.


Prudential Europe was formed in 1999 and is responsible for spearheading Prudential’s expansion into continental Europe. We currently have operations in France and Germany where we have established distribution agreements with strong local partners. In addition, we have established a leading position in the unit-linked market through our German broker business. New business achieved profits increased in 2000 by £2 million to £9 million.

Our strategy is to capture a significant and profitable share of the growing European savings market, building a substantial market presence through a business model that unbundles the value chain. We will provide competitive and relevant products, support and service, tailored to meet local markets requirements through an open platform in partnership with distributors and local market participants.

2000 was a significant year for our operations in Europe. We continued to develop our presence in our chosen markets, taking advantage of the growing European medium and long-term savings market. We expanded our offering of products and services, and increased our range of distribution partners and channels.

In Germany, we have continued the development of our broker business, with the establishment of a local front office customer service infrastructure to better support the activity. Through our joint venture agreement with Signal Iduna, we have begun distribution of a long-term care bond product through Signal Iduna’s sales force. We aim to be in a position to capture the significant opportunities expected to arise through future legislative and competitive changes.

In France, we have established a branch of the Prudential Assurance Company in Paris, clearly demonstrating our commitment to becoming a major long-term player in the French market. Our first product launched in France was Prudential Europe Vie, an innovative equity-backed single premium savings product that offers a choice of investment through the Prudential life fund or Réactif, a unit-linked fund provided by Véga Finance. This product is now selling through the Centre Français du Patrimoine (CFP), the largest multi-product broking network in France and early indications are that it has been extremely well received.

Co-operation with our joint venture partner CNP Assurances has continued with an objective to begin operating in both the French and the UK markets in the near future.

We will combine the local expertise of country teams and partners with our global product and service capability. Our approach integrates a range of specialist capabilities to deliver unique and innovative offerings to European markets and provides Prudential with significant scope for large scale, profitable distribution and brand promotion.

Jackson National Life, USA

In the United States, Jackson National Life is the 20th largest life insurance company in terms of total assets. JNL offers a range of products including fixed and equity-indexed annuities, variable annuities, life insurance and stable value products which consist of guaranteed investment contracts and funding agreements.

Despite an increasingly competitive environment, Jackson National Life has continued to perform strongly, with sales in 2000 amounting to £4.9 billion, an increase of 19 per cent on 1999. Statutory basis operating profit increased by £15 million to £466 million, despite operating in a market experiencing high policy surrenders, adverse investment performance and growing pressures on spreads. Achieved basis operating profit fell from £469 million to £226 million, reflecting changes in persistency and expense assumptions following an increase in the level of fixed annuity surrenders and the development of systems designed to handle higher volumes of our increased product range.

Jackson National Life has continued to expand distribution, both by adding representatives to our broker-dealer network and through strategic acquisitions. These included the acquisitions of Highland Federal Bank and IFC Holdings. The acquisition of Highland Federal doubled its retail branch network and assisted it in obtaining critical mass in its banking operations. IFC Holdings further strengthens JNL’s presence in the broker-dealer market, giving it the largest bank broker-dealer, and increases the scale and profitability of Jackson’s own broker-dealer business, National Planning Holdings, the fifth largest independent financial planner broker-dealer in the USA.

Excellent growth in retail sales has been achieved predominantly through increased sales through bank and broker-dealer channels. JNL continues to expand its distribution capability, which will assist with future acquisitions or joint ventures.

JNL has continued to expand and improve its product portfolio including an equity-index linked banking deposit product, MarketPath, available throughout the United States, and Target Select, an innovative multi-year guarantee fixed annuity. JNL has also expanded its client base by adapting the Medium Term Note programme to reach Australian investors, and has begun developing a client base in Asia.

Building on its established website, JNL has made significant progress in incorporating internet efficiencies into the service areas of the business. It has launched an internet-based variable annuity application, allowing producers to complete and submit applications electronically. It has also completed the installation of a fully automated new business system for life insurance. This will eliminate the processing of paperwork and therefore shorten the time required to issue a policy.

In November JNL relocated its headquarters to a new award-winning office complex. This move enabled JNL to consolidate its staff, previously housed in five different locations and allowed it to make significant gains in productivity. JNL has also reorganised its service centre along product lines to improve the quality and efficiency of customer service and to lower marginal cost, allowing it to make more profit from expanded premium sales.

In 2000 Standard and Poor’s raised its insurer financial strength rating on Jackson National Life and Jackson National Life of New York to AAA. According to S&P, the rating upgrade reflected JNL’s improving risk profile and the view that JNL has become a core operation to Prudential based on its significant contribution to group earnings.


In Asia we have operations in 11 countries, offering life insurance with health insurance options, investment products and general insurance tailored to each local market. We distribute these products primarily through our high quality agency sales forces and through strong bank and broker arrangements. Total insurance sales of £504 million in 2000 were 75 per cent up on 1999. New business achieved profits were 70 per cent higher at £153 million and statutory basis operating profit rose 47 per cent to £22 million.

We now have strong and expanding businesses with growing customer recognition of our brand name and values across the region. Life insurance remains our core business, and continues to offer major opportunities for further growth. We also have a growing mutual fund presence and will continue to expand our product range to serve our customers’ lifetime financial services needs as profitable opportunities arise. Building professional agency distribution remains one of our core strengths in the region, however we are widening our distribution channels with a growing number of bank distribution arrangements. All our expansion and development plans have a clear focus on adding significant value to our customers and shareholders.

During 2000 we had three significant new market launches. In China, the UK's first life operation had a high profile launch with our CITIC (China International Trust & Investment Corporation) Prudential joint venture in Guangzhou. We re-entered the Indian life market after nearly 50 years’ absence with the launch of ICICI Prudential Life in December. Our joint venture with Bank of China had great success in signing up employers for Hong Kong's Mandatory Provident Fund during the year and the first round of collections commenced in early 2001.

We also made two important acquisitions. In October, we acquired Prudential Taiwan SITE, a mutual fund operation with around £1 billion of funds under management underlining our commitment to the growing Taiwanese market for high quality financial services products. This also gives us a great opportunity to leverage synergies from our successful mutual fund business in India. In February this year, we acquired Orico Life in Japan, an operationally and financially sound, modern Japanese life insurance company. Major changes are underway in the Japanese life insurance market and Orico Life provides us with a very strong platform to effectively apply our distribution management and product innovation skills to rapidly build scale in one of the world's largest life insurance markets.

Our existing operations continue to make good progress. Prudential Taiwan Life now has more than three times the number of agents compared to when we acquired the business in November 1999. New business volumes also continue to grow strongly. Prudential Hong Kong has also considerably strengthened its agency force and at the year-end, was fourth in the market in terms of new business, its highest ever ranking. New business sales in Vietnam, our greenfield operation launched in November 1999, continue to exceed all our expectations. These successes illustrate the strength of our approach to building and managing high quality agency forces across the region.

Our bancassurance distribution partnership with Standard Chartered Bank continues to show good growth in new business volumes from Singapore and Hong Kong and was extended to Malaysia in April 2000. Results to date are encouraging.

In 2000 we launched a number of new products, in line with our focus on customer needs. These included our first range of Syariah compliant funds in Malaysia to cater for the Islamic sector of the population, and PRUeSaver in Singapore, our first insurance product specifically designed for distribution via the Internet.

We have continued to make innovative use of technology across Asia during the year to further improve our customer service and efficiency. Our electronic proposal and signature system has been enhanced with the addition of automatic underwriting and in Singapore we were the first insurer to provide customers with WAP phone services including access to policy details. Our comprehensive customer service, including full e-transactional functionality, has helped Prudential ICICI become the largest private sector mutual fund manager in India.

In Singapore, Prudential won Asia’s "Life Insurance Company of the Year" award for its commitment to innovation, responsiveness to customer needs and high quality customer service.

Following another outstanding year of growth, we are now firmly established as a leading life insurer and retail financial services provider in Asia and we will continue to strengthen this position in 2001.


New Insurance and Investment Business

Total insurance and investment sales for full year 2000 amount to £13.9 billion, 13 per cent ahead of prior year. On an annual premium equivalent (APE) basis, sales amounted to £1,904 million, 13 per cent ahead of prior year. The growth in new business volumes reflects strong growth in overseas APE sales, with Asia up 165 per cent and the US up 18 per cent, offsetting a 16 per cent fall in the UK. APE sales of insurance products fell 2 per cent in 2000, while investment products grew 162 per cent and now account for 20 per cent of total group APE sales.

Total Achieved Operating Profit

The group total achieved operating profit before amortisation of goodwill was £1,029 million compared to £1,098 million in 1999. This result reflects a £10 million improvement in new business profits offset by a lower in-force result, down £124 million. The in-force result was affected largely by Jackson National Life (JNL) where adverse persistency and expense experience have resulted in an assumption change impact of £258 million together with current year experience variances of £61 million. Profits from non-long term business improved £45 million in 2000, primarily due to the one-off UK re-engineering charge of £70 million in 1999.

New Business Achieved Profit

Group new business achieved profit from insurance business of £613 million, which excludes profits from investment product sales, is £10 million (2 per cent) ahead of prior year, with strong growth in the US and Asia offsetting a fall in the UK operations. The growth in new business achieved profits, despite a 2 per cent fall in insurance sales, reflects slightly stronger new business margins at group level.

Prudential Asia’s new business achieved profits of £153 million is 70 per cent up on 1999 reflecting strong sales growth across all operations (APE insurance sales growth of 107 per cent). New business achieved profits as a percentage of APE reduced in line with anticipated changes in geographic and product mixes.

The 12 per cent growth in JNL’s new business achieved profits to £221 million is principally driven by an 18 per cent growth in new insurance sales, reflecting a 44 per cent increase in sales of variable annuities and a 28 per cent increase in sales of fixed annuities.

UK Insurance Operations’ new business achieved profit of £230 million is 25 per cent below 1999, primarily reflecting a 24 per cent reduction in sales volumes. Sales volumes reflect lower sales of Prudence Bond and mortgage endowments through the IFA channel, and the significant reduction in the size of the direct sales-force in 2000. Margins from our UK business are in line with 1999.

Prudential Europe’s new business achieved profit of £9 million is £2 million up on 1999. This mostly reflects higher sales through the German broker business.

The ratio of group new business achieved profit to APE has increased to 40 per cent from 39 per cent in 1999 and 36 per cent in 1998, primarily reflecting the growing proportion of higher margin sales in Asia, with broadly maintained margins in the UK and US.

In-force Achieved Operating Profit

UK Insurance Operation’s in-force profits were £478 million, £151 million better than 1999, reflecting the growth in the business and a change in assumptions to reflect an improvement in the persistency of Prudence Bond. No adjustment has been required to the provision established in 1999 in respect of the cost of resolving pensions mis-selling.

JNL’s in-force result was a loss of £2 million, down from a profit of £277 million in 1999, reflecting a higher than expected level of surrenders of fixed annuities, primarily of older policies. Relatively high offered crediting rates and an increasingly competitive market encouraged customers to surrender fixed annuities early, giving rise to an adverse experience variance of £24 million. The level of surrenders peaked during the early summer, falling towards the end of the year due to the effects of JNL’s conservation measures and lowering interest rates. The assumption going forward has been changed to reflect an assumed continuation of the level of surrenders experienced towards the end of the year, giving rise to a charge of £192 million.

In addition, there was an adverse expense variance during the year of £37 million. This reflects changes in the business mix and the development of JNL’s systems to provide the capacity for increased volumes of upscale products at lower cost, continuing the process of creating a balanced product portfolio. This has required a reassessment of the unit cost assumption at current policy volumes, giving rise to a negative assumption change impact of £66 million.

Asia’s in-force achieved operating profit before development costs of £60 million compares to a profit of £35 million in 1999. The result reflects the growth in the business during 2000.

Statutory Basis Operating Profit

Group operating profit of £840 million was £64 million ahead of 1999, which included a £70 million UK re-engineering charge. Excluding the UK re-engineering charge, MSB operating profit was in line with 1999.

UK Insurance Operations operating profit in 2000 was £501 million, £14 million below 1999. Prudential Insurance Services profit of £346 million was £32 million below 1999, as the impact of increased funds under management in the long term result was offset by the impact of lower reversionary bonus rates. The general insurance result was impacted by £33 million as a result of the severe floods in October and November. Profit from Prudential Intermediary Business was up £26 million to £127 million, primarily reflecting a one-off £30 million profit relating to the reinsurance of the M&G life and pensions business and its transfer to Scottish Amicable. Profit from Prudential Financial Services was down £8 million to £28 million in 2000, reflecting increased investment in our new stakeholder platform.

M&G profit increased from £87 million to £125 million in 2000, primarily reflecting a full 12 months contribution from the acquired M&G business compared to 8 months in 1999 and increased life fund fees, the result of out-performance by life fund investments against benchmarks in 2000.

Egg’s reported loss of £155 million is in line with the expectation laid out in its prospectus in 2000. Egg’s results were announced separately on 19 February.

US operations profit of £466 million was £15 million ahead of prior year reflecting increased spread, fee income and expenses at JNL. In addition, there were positive contributions from the US fund manager, PPM America, and the independent brokerage network, National Planning Holdings, and a favourable movement in the exchange rate. The 1999 result benefited from the one-off positive of £17 million arising from a change in accounting for guarantee assessments.

Prudential Asia’s profit of £22 million was £7 million ahead of 1999 despite increased development expenditure and support for new operations.

Prudential Europe reported a £10 million loss in 2000 compared to a £6 million profit in 1999. This is mostly due to development spend for the future platform and set-up costs for the French branch.

Other income and expenditure was £31 million higher than prior year primarily reflecting the full year funding cost of the M&G acquisition and the cost of additional Egg funding up until the date of its IPO.

Profit before Tax

Profit on ordinary activities before tax amounted to £947 million in 2000, compared to £750 million in 1999. This improvement is despite increased goodwill amortisation of £84 million, mainly due to a full 12 months amortisation in respect of the M&G acquisition. The £239 million profit on business disposals represents the sale of the minority stake in Egg and the disposals of our stake in St James’s Place Capital.

Earnings per Share

Earnings per share, based on operating profit after tax and related minority interests before amortisation of goodwill, have improved 8 per cent in 2000 to 31.5p.

Dividend per Share

The final dividend per share is 16.3 pence, resulting in a full year dividend growth of 6.5 per cent to 24.5 pence.

Funds under Management

Insurance and investment funds under management at 31 December 2000 totalled £165 billion, compared to £170 billion at the end of 1999. This reduction is mainly due to the disposal of £12 billion of our institutional equity fund management business during 2000.

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Prudential plc 2000 Unaudited Results

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Prudential plc is an international company incorporated in the United Kingdom, and its affiliated companies constitute one of the world’s leading financial services groups. It provides insurance and financial services directly and through its subsidiaries and affiliates throughout the world, and it has been in existence for over 170 years. Prudential plc is not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America, or the Prudential Assurance Company, a subsidiary of M&G plc (a company incorporated in the United Kingdom).

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Prudential plc is an international company incorporated in the United Kingdom, and its affiliated companies constitute one of the world’s leading financial services groups. It provides insurance and financial services directly and through its subsidiaries and affiliates throughout the world, and it has been in existence for over 170 years. Prudential plc is not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America, or the Prudential Assurance Company, a subsidiary of M&G plc (a company incorporated in the United Kingdom).

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