18 Feb 2002

Prudential plc implements new ABI guidance for Achieved Profits basis reporting

The Association of British Insurers (ABI) issued new guidance for Achieved Profits in December 2001. Prudential prepares its Achieved Profits results in accordance with ABI guidance and will adopt its new guidance for reporting its 2001 preliminary results.

The revised guidance requires the economic assumptions used for the projection of cashflows to be on an "active" basis, that is primarily based on appropriate government bond returns at each period end. These assumptions will be reflected in the profit reported for the year to 31 December 2001. Previously, Prudential has used a "passive" basis, which uses stable assumptions based on a long-term economic view. Passive assumptions are revised only when it is judged that the economic environment has changed substantially. Results prepared under the Modified Statutory basis are not affected by this change.

The achieved profits results for 2001 will also reflect the changes in assumptions that would have been made regardless of whether the active or passive basis was being used.

Implementation of the active assumption basis

The implementation of the revised assumptions under the active basis will apply primarily to the UK and the US operations, and those countries in Asia where there are well-developed government bond markets (Japan, Korea and US$ business in Hong Kong). Assumptions in other Asian territories will continue to be based on an assessment of long-term economic conditions.

Key changes to economic assumptions arising from the implementation of the active basis are as follows:-

2001 2000
UK Investment return 7.1% 8.0%
Risk discount rate 7.7% 8.5%
US (Jackson National Life)
Risk discount rate 7.7% 8.5%

The Group reports its 2001 preliminary results on 26 February 2002.

Notes to Editors:-

Although the 2000 numbers will not be restated, the ABI guidance requires disclosure of how the changes in assumptions would have affected prior period results. The effect on Europe and Asia would not have been significant. The effect on the 2000 results of the UK and US businesses is estimated to be:


UK:
£m
New business profit (pre-tax) (22)
In-force business operating profit (pre-tax) (68)
AP shareholders’ funds (298)

USA:
£m
New business profit (pre-tax) 22
In-force business operating profit (pre-tax) (10)
AP shareholders’ funds 99

Jackson National Life Insurance Company

Prudential

You are about to enter the website of our US affiliate Jackson National Life Insurance Company, an indirect subsidiary of Prudential plc of the United Kingdom.

Proceed to the site

Prudential

If you are looking for an affiliate of Prudential Financial, Inc, whose principal place of business is in the United States of America.

Proceed to the site

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).

PPM America

Prudential

You are about to enter the website of our US affiliate PPM America, an indirect subsidiary of Prudential plc of the United Kingdom.

Proceed to the site

Prudential

If you are looking for an affiliate of Prudential Financial, Inc, whose principal place of business is in the United States of America.

Proceed to the site

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).