pru201103096k3.htm
 
SECURITIES AND EXCHANGE COMMISSION
 
 
Washington, D.C. 20549
 
 
FORM 6-K
 
 
REPORT OF FOREIGN PRIVATE ISSUER
 
 
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
 
 
For the month of March, 2011
 
 
PRUDENTIAL PUBLIC LIMITED COMPANY
 
 
(Translation of registrant's name into English)
 
 
LAURENCE POUNTNEY HILL,
LONDON, EC4R 0HH, ENGLAND
(Address of principal executive offices)
 
 
 
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
 
Form 20-F X           Form 40-F
 
 
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
Yes              No X
 
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-


 
 
 
 
 
Enclosures: Final Results part 3


 
 
 

Y       Defined benefit pension schemes
 
The Group liability in respect of defined benefit pension schemes is as follows:
   
2010 
2009 
   
£m
£m
Economic position:
    
 
Deficit, gross of deferred tax, based on scheme assets held, including investments in Prudential insurance policies:
    
 
Attributable to the PAC with-profits fund (i.e. absorbed by the liability for unallocated surplus)
(106)
(122)
 
Attributable to shareholder-backed operations (i.e. shareholders' equity)
(114)
(128)
Economic deficit
(220)
(250)
Exclude: investments in Prudential insurance liabilities (offset on consolidation in the Group financial statements against insurance liabilities)
(227)
(187)
Deficit under IAS 19 included in Provisions in the statement of financial position
(447)
(437)
 
The Group business operations operate a number of pension schemes. The largest defined benefit scheme is the principal UK scheme, namely the Prudential Staff Pension Scheme (PSPS). The Group also operates two smaller defined benefit schemes for UK employees in respect of Scottish Amicable and M&G. For all three schemes the projected unit method was used for the most recent full actuarial valuations. There is also a small defined benefit scheme in Taiwan but as part of the sale of the Taiwan agency business completed in June 2009, the Group settled the majority of the obligations under the scheme as a significant number of employees transferred out. 
 
The underlying position on an economic basis reflects the assets (including investments in Prudential policies that are offset against liabilities to policyholders on the Group consolidation) and the liabilities of the schemes. At 31 December 2010, the investments in Prudential policies comprise £118 million (2009: £101 million) for PSPS and £227 million (2009: £187 million) for the M&G scheme.
 
Separately, the economic financial position also includes the effect of the application of IFRIC 14, 'IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction'. For PSPS, where there are constraints in the trust deed to prevent the company access, the surplus is not recognised and a liability for additional funding is established.
 
Under IFRIC 14, at 31 December 2010, the Group has not recognised the underlying PSPS surplus of £485 million, gross of deferred tax (2009: £513 million) and has recognised a liability for deficit funding to 30 June 2012 for PSPS of £47 million gross of deferred tax (2009: £75 million).
 
Defined benefit schemes in the UK are generally required to be subject to full actuarial valuation every three years in order to assess the appropriate level of funding for schemes in relation to their commitments. These valuations include assessments of the likely rate of return on the assets held within the separate trustee administered funds. PSPS was last actuarially valued as at 5 April 2008. This valuation demonstrated the scheme to be 106 per cent funded by reference to the Scheme Solvency Target that forms the basis of the scheme's statutory funding objective. No formal deficit plan was required. However, in recognition of the fall in value of the Scheme's investments between 5 April 2008 and the completion of the actuarial valuation, an additional funding akin to deficit funding was agreed by the Trustees. This is subject to a reassessment when the next valuation is completed. The total contributions being currently made by the Group into the scheme, representing the annual accrual cost and deficit funding, are £50 million per annum. Deficit funding for PSPS is apportioned in the ratio of 70/30 between the PAC life fund and shareholder-backed operations following detailed consideration in 2005 of the sourcing of previous contributions.
 
The valuation of the Scottish Amicable Pension Scheme as at 31 March 2008 demonstrated the scheme to be 91 per cent funded. Based on this valuation, deficit funding amounts designed to eliminate the actuarial deficit over a seven year period were made from July 2009 of £7.3 million per annum. Since the valuation date, there has been deterioration in the funding level.  During 2010, the Group agreed to pay additional funding of £5.8 million per annum from October 2010 until the conclusion of the next formal valuation, or until the funding level reaches 90 per cent, whichever is the earlier. The IAS 19 deficit of the Scottish Amicable Pension Scheme at 31 December 2010 of £146 million (2009: £139 million) has been allocated approximately 50 per cent to the PAC with-profits fund and 50 per cent to the shareholders' fund.
 
The valuation of the M&G pension scheme as at 31 December 2008 was finalised in January 2010 and demonstrated the scheme to be 76 per cent funded. Based on this valuation, deficit funding amounts designed to eliminate the actuarial deficit over a five year period have been made from January 2010 of £14.1 million per annum for the first two years and £9.3 million per annum for the subsequent three years. The IAS 19 deficit of the M&G pension scheme on an economic basis at 31 December 2010 was £27 million (2009: £36 million) and is wholly attributable to shareholders.
 
The next triennial valuations for the PSPS, Scottish Amicable and M&G pension schemes are scheduled to take place as at 5 April 2011, 31 March 2011 and 31 December 2011, respectively.


(i)     Assumptions
The actuarial assumptions used in determining benefit obligations and the net periodic benefit costs for the years ended 31 December were as follows:
 
   
2010 
2009 
   
%
 
%
       
Discount rate*
5.45 
5.8 
Rate of increase in salaries
5.55 
5.7 
Rate of inflation
3.55 
3.7 
Rate of increase of pensions in payment for inflation:
    
 
Guaranteed (maximum 5%)
3.55 
3.7 
 
Guaranteed (maximum 2.5%)**
2.5 
2.5 
 
Discretionary**
2.5 
2.5 
Expected returns on plan assets
5.9 
4.5 
 
 
*    The discount rate has been determined by reference to an "AA" corporate bond index adjusted, where applicable, to allow for the difference in duration between the index and the pension liabilities.
 
**  The rates of 2.5 per cent are those for PSPS. Assumed rates of increase of pensions in payments for inflation for all other schemes are 3.55 per cent in 2010 (2009: 3.7 per cent).
 
The calculations are based on current actuarially calculated mortality estimates with a specific allowance made for future improvements in mortality. The 2010 specific allowance is in line with a custom calibration of the 2009 mortality model from the Continuous Mortality Investigation Bureau of the Institute and Faculty of Actuaries ("CMI").
 
The tables used for PSPS immediate annuities in payment at 31 December 2010 were:
 
Male: 108.6 per cent PNMA 00 with improvements in line with a custom calibration of the CMI's 2009 mortality model, with a long-term mortality improvement rate of 1.75 per cent per annum; and
Female: 103.4 per cent PNFA 00 with improvements in line with a custom calibration of the CMI's 2009 mortality model, with a long-term mortality improvement rate of 1.00 per cent per annum.
 
In July 2010, the UK Government announced plans to use the Consumer Price Index (CPI) in place of the Retail Price Index (RPI) in its determination of the statutory minimum pension increases for private sector occupational pension schemes. In December 2010, the Government published the statutory revaluation order for 2011 which confirms the change to use CPI. In addition, the Government has also published in December 2010 a consultation paper which sets out the Government's views on the impact of the switch from RPI to CPI will have on the private sector occupational pension schemes. The consultation period closed on 2 March 2011. 
 
For the Group's UK defined benefit schemes, the pensions in deferment and/or pensions in payment for certain tranches of these schemes are subject to statutory increases in accordance with the schemes' rules and may therefore be affected by the Government's decision to change the indexation from RPI to CPI. Other tranches, where RPI is specified in the scheme rules, are unaffected.
 
The above has no impact on the results for the year ended 31 December 2010. The impact of this change, if and when made, will be recognised in a future period. Using the underlying information as at 31 December 2010 the estimated effect of such a change would give rise to an accounting benefit of approximately £30 million to the Group's operating profit based on longer-term investment returns and profit attributable to shareholders before tax and £20 million to shareholders' equity.
 
(ii)    Estimated pension scheme deficit - economic basis
 
Movements on the pension scheme deficit (determined on the 'economic basis') are as follows, with the effect of the application of IFRIC 14 being shown separately:

 
             
   
2010 
     
(Charge) credit to income statement
   
   
Surplus (deficit) in scheme at 1 January 2010
Operating results (based on longer-term investment returns)
 (note a)
Actuarial and other gains and losses (note b)
Contributions paid
Surplus (deficit) in scheme at 31 Dec 2010 (note c)
   
£m
£m
£m
£m
£m
All schemes
          
Underlying position (without the effect of IFRIC 14)
          
Surplus (deficit)
338 
(7)
(109)
90 
312 
Less: amount attributable to PAC with-profits fund
(285)
(11)
71 
(39)
(264)
Shareholders' share:
          
 
Gross of tax surplus (deficit)
53 
(18)
(38)
51 
48 
 
Related tax
(15)
5 
11 
(14)
(13)
Net of shareholders' tax
38 
(13)
(27)
37 
35 
Effect of IFRIC 14
          
Surplus (deficit)
(588)
(38)
94 
 - 
(532)
Less: amount attributable to PAC with-profits fund
407 
29 
(66)
 - 
370 
Shareholders' share:  
          
 
Gross of tax surplus (deficit)
(181)
(9)
28 
 - 
(162)
 
Related tax
51 
2 
(9)
 - 
44 
 
Net of shareholders' tax
(130)
(7)
19 
 - 
(118)
With the effect of IFRIC 14
          
Surplus (deficit)
(250)
(45)
(15)
90 
(220)
Less: amount attributable to PAC with-profits fund
122 
18 
5 
(39)
106 
Shareholders' share:
          
 
Gross of tax surplus (deficit)
(128)
(27)
(10)
51 
(114)
 
Related tax
36 
7 
2 
(14)
31 
 
Net of shareholders' tax
(92)
(20)
(8)
37 
(83)
 
Notes
(a)
The components of the (charge) credit to operating results (gross of allocation of the share attributable to the PAC with-profits fund) are as follows:
 
   
2010 
2009 
   
£m 
£m 
Service cost
(38)
(34)
Finance (expense) income:
    
 
Interest on pension scheme liabilities
(294)
(277)
 
Expected return on assets
325 
240 
Total charge without the effect IFRIC 14
(7)
(71)
Effect of IFRIC 14 for pension schemes
(38)
23 
Total charge after the effect of IFRIC 14  
(45)
(48)
 
The net charge to operating profit (gross of the share attributable to the PAC with-profits fund) of £45 million (2009: £48 million) is made up of a charge of £27 million (2009: £29 million) relating to PSPS and a charge of £18 million (2009: £19 million) for other schemes. This net charge represents:
 
 
2010 
2009 
 
£m 
£m 
Underlying IAS 19 charge for other pension schemes
(18)
(19)
Cash costs for PSPS
(23)
(25)
Unwind of discount on opening provision for deficit funding for PSPS
(4)
(4)
 
(45)
(48)


Consistent with the derecognition of the Company's interest in the underlying IAS 19 surplus of PSPS, the charge to operating profit on longer-term investment returns for PSPS reflects the cash cost of contributions for ongoing service of active members. In addition, the charge to the operating results also includes a charge for the unwind of discount on the opening provision for deficit funding for PSPS.
 
(b)
The components of the credit (charge) for actuarial and other gains and losses (gross of allocation of the share attributable to the PAC with-profits fund (but for 2009 excluding the charge relating to the Taiwan agency business sold in that year)) are as follows:
 
 
2010 
2009 
 
£m 
£m 
Actual less expected return on assets
306 
108 
Losses on changes of assumptions for plan liabilities
(411)
(521)
Experience (losses) gains on liabilities
(4)
76 
Total charge without the effect of IFRIC 14
(109)
(337)
Effect of IFRIC 14 for pension schemes
94 
182 
Actuarial and other gains and losses after the effect of IFRIC 14
(15)
(155)
 
The net charge for actuarial and other gains and losses is recorded within the income statement but, within the segmental analysis of profit, the shareholders' share of actuarial and other gains and losses (i.e. net of allocation of the share to the PAC with-profits funds) is excluded from operating profit based on longer-term investment returns.
 
The 2010 actuarial losses of £109 million primarily reflects the effect of decrease in risk discount rates and the change in the economic assumptions underlying PSPS commutation factors partially offset by the effect of decreases in inflation rates and the excess of market returns over long-term assumption.
 
Consistent with the derecognition of the Company's interest in the underlying IAS 19 surplus of PSPS, the actuarial gains and losses do not include those of PSPS. In addition, as a result of applying of IFRIC 14, the Group has recognised a provision for deficit funding in respect of PSPS. The change in 2010 in relation to this provision recognised above as other gains and losses on defined benefit pension schemes was £nil (2009: £48 million).
 
 (c)
On the 'economic basis', after including the underlying assets represented by the investments in Prudential insurance policies as scheme assets, the underlying statements of financial position of the schemes at 31 December were:
 
   
2010 
2009 
   
£m
£m
Equities
825 
1,096 
Bonds
4,203 
3,686 
Properties
228 
287 
Cash-like investments
748 
443 
Total value of assets
6,004 
5,512 
Present value of benefit obligations
(5,692)
(5,174)
   
312 
338 
Effect of the application of IFRIC 14 for pension schemes:
    
 
Derecognition of PSPS surplus
(485)
(513)
 
Adjust for deficit funding for PSPS
(47)
(75)
Pre-tax deficit
(220)
(250)

 
(iii)   Sensitivity of the pension scheme liabilities of the PSPS, Scottish Amicable and M&G pension schemes to key variables
 
The table below shows the sensitivity of the underlying PSPS, Scottish Amicable and M&G pension scheme liabilities at 31 December 2010 of £4,866 million, £572 million and £254 million respectively (2009: £4,436 million, £515 million and £223 million) to changes in discount rates and inflation rates. In addition, the table below shows the sensitivity of the underlying PSPS, Scottish Amicable and M&G pension scheme liabilities at 31 December 2010 to changes to mortality rate assumptions.
 
2010 
Assumption
Change in assumption
Impact on scheme liabilities on IAS 19 basis
  
Discount rate
Decrease by 0.2% from 5.45% to 5.25%
Increase in scheme liabilities by:
  
     
PSPS
3.6%
     
Scottish Amicable
5.2%
     
M&G
5.1%
Discount rate
Increase by 0.2% from 5.45% to 5.65%
Decrease in scheme liabilities by:
  
     
PSPS
3.5%
     
Scottish Amicable
4.9%
     
M&G
4.8%
Rate of inflation
Decrease by 0.2% from 3.55% to 3.35%
Decrease in scheme liabilities by:
  
 
with consequent reduction in salary
  
PSPS
1.0%
 
increases
  
Scottish Amicable
5.0%
     
M&G
4.5%
Mortality rate
Increase life expectancy by 1 year
Increase in scheme liabilities by:
  
     
PSPS
2.1%
     
Scottish Amicable
2.5%
     
M&G
2.9%
 
2009 
Assumption
Change in assumption
Impact on scheme liabilities on IAS 19 basis
  
Discount rate
Decrease by 0.2% from 5.8% to 5.6%
Increase in scheme liabilities by:
  
     
PSPS
3.50%
     
Scottish Amicable
5.20%
     
M&G
4.90%
Discount rate
Increase by 0.2% from 5.8% to 6.0%
Decrease in scheme liabilities by:
  
     
PSPS
3.20%
     
Scottish Amicable
4.80%
     
M&G
4.90%
Rate of inflation
Decrease by 0.2% from 3.7% to 3.5%
Decrease in scheme liabilities by:
  
 
with consequent reduction in salary
  
PSPS
0.90%
 
increases
  
Scottish Amicable
4.90%
     
M&G
4.50%
 
The sensitivity of the underlying pension scheme liabilities to changes in discount, inflation and mortality rates as shown above does not directly equate to an impact on the profit or loss attributable to shareholders or shareholders' equity due to the effect of the application of IFRIC 14 on PSPS and the allocation of a share of the interest in financial position of the PSPS and Scottish Amicable schemes to the PAC with-profits fund as described above.
 
The sensitivity to the changes in the key variables as shown in the table above has no significant impact on the pension costs included in the Group's operating results. This is due to the pension costs charged in each of the periods presented being derived largely from market conditions at the beginning of the period. After applying IFRIC 14 and to the extent attributable to shareholders, any residual impact from the changes to these variables is reflected as actuarial gains and losses on defined benefit pension schemes within the supplementary analysis of profits. The relevance of this to each of the three UK schemes is described further below.
 
For PSPS, the underlying surplus of the scheme of £485 million (2009: £513 million) has not been recognised under IFRIC 14. Any change in the underlying scheme liabilities to the extent that it is not sufficient to alter PSPS into a liability in excess of the deficit funding provision will not have an impact on the Group's results and financial position. Based on the underlying financial position of PSPS as at 31 December 2010, none of the changes to the underlying scheme liabilities for the changes in the variables shown in the table above have had an impact on the Group's 2010 results and financial position.
 
In the event that a change in the PSPS scheme liabilities results in a deficit position for the scheme which is recognisable, the deficit recognised affects the Group's results and financial position only to the extent of the amounts attributable to shareholder operations. The amounts attributable to the PAC with-profits fund are absorbed by the liability for unallocated surplus and have no direct effect on the profit or loss attributable to shareholders or shareholders' equity.
 
The deficit of the Scottish Amicable pension scheme has been allocated 50 per cent to the PAC with-profits fund and 50 per cent to the shareholders. Accordingly, half of the changes to the scheme liabilities for the changes in the variables shown in the table above would have had an impact on the Group's shareholder results and financial position. The M&G pension scheme is wholly attributable to shareholders.

Z     Policyholder liabilities
 
Analysis of movement in policyholder liabilities and unallocated surplus of with-profits funds
 
Group insurance operations
 
   
Insurance operations
   
UK
US
Asia
Total
   
£m
£m
£m
£m
At 1 January 2009
115,961 
45,361 
21,069 
182,391 
Premiums
6,867 
9,177 
3,807 
19,851 
Surrenders
(3,971)
(3,255)
(1,201)
(8,427)
Maturities/Deaths
(7,239)
(733)
(342)
(8,314)
Net flows
(4,343)
5,189 
2,264 
3,110 
Shareholders transfers post tax
(202)
- 
(20)
(222)
Change in reserving basis in Malaysia
- 
- 
(63)
(63)
Assumption changes (shareholder-backed business)
(46)
- 
(4)
(50)
Investment-related items and other movements
14,118 
2,986 
4,242 
21,346 
Foreign exchange translation differences
707 
(5,225)
(2,069)
(6,587)
Disposal of Taiwan agency business
- 
- 
(3,508)
(3,508)
At 31 December 2009 / 1 January 2010
126,195 
48,311 
21,911 
196,417 
Comprising:
        
 
- Policyholder liabilities
116,229 
48,311 
21,858 
186,398 
 
- Unallocated surplus of with-profits funds
9,966 
- 
53 
10,019 
Premiums
7,890 
11,735 
4,308 
23,933 
Surrenders
(3,779)
(3,598)
(2,241)
(9,618)
Maturities/Deaths
(7,303)
(769)
(498)
(8,570)
Net flows
(3,192)
7,368 
1,569 
5,745 
Shareholders transfers post tax
(223)
- 
(24)
(247)
Assumption changes (shareholder-backed business)
(46)
- 
19 
(27)
Investment-related items and other movements
13,218 
3,464 
2,216 
18,898 
Foreign exchange translation differences
(208)
1,380 
2,081 
3,253 
Dilution of holding in PruHealth
(27)
- 
- 
(27)
Acquisition of UOB Life Assurance Limited
- 
- 
968 
968 
As at 31 December 2010
135,717 
60,523 
28,740 
224,980 
Comprising:
        
 
- Policyholder liabilities
125,530 
60,523 
28,674 
214,727 
 
- Unallocated surplus of with-profits funds
10,187 
- 
66 
10,253 
Average policyholder liability balances*
        
 
2010
120,880 
54,417 
25,750 
201,047 
 
2009
111,969 
46,837 
19,630 
178,436 
* Adjusted for acquisition and disposals in the period and excluding unallocated surplus of with-profits funds.
 
The items above represent the amount attributable to changes in policyholder liabilities and unallocated surplus of with-profits funds as a result of each of the components listed.
 
Premiums, surrenders and maturities / deaths represent the amounts impacting policyholder liabilities and may not represent the total cash paid / received (for example, premiums are net of any deductions to cover acquisition costs and claims represents the policyholder liabilities released).

 
UK insurance operations
           
A reconciliation of the total policyholder liabilities and unallocated surplus of with-profits funds of UK insurance operations is as follows:
           
     
Other shareholder-backed funds and subsidiaries
  
   
SAIF and PAC with-profits sub-fund
Unit-linked  liabilities
Annuity and other long-term business
Total
   
£m
£m
£m
£m
At 1 January 2009
82,108 
16,318 
17,535 
115,961 
Premiums
3,271 
1,860 
1,736 
6,867 
Surrenders
(2,394)
(1,535)
(42)
(3,971)
Maturities/Deaths
(5,147)
(670)
(1,422)
(7,239)
Net flows (note (a))
(4,270)
(345)
272 
(4,343)
Shareholders transfers post tax
(202)
- 
- 
(202)
Switches
(270)
270 
- 
- 
Assumption changes (shareholder-backed business) (note (c))
- 
- 
(46)
(46)
Investment-related items and other movements (note (b))
9,365 
2,849 
1,904 
14,118 
Foreign exchange translation differences
764 
(57)
-
707 
At 31 December 2009 / 1 January 2010
87,495 
19,035 
19,665 
126,195 
Comprising:
        
 
- Policyholder liabilities
77,529 
19,035 
19,665 
116,229 
 
- Unallocated surplus of with-profits funds
9,966 
- 
- 
9,966 
Premiums
3,311 
2,301 
2,278 
7,890 
Surrenders
(2,453)
(1,272)
(54)
(3,779)
Maturities/Deaths
(5,079)
(726)
(1,498)
(7,303)
Net flows (note (a))
(4,221)
303 
726 
(3,192)
Shareholders transfers post tax
(223)
- 
- 
(223)
Switches
(236)
236 
- 
- 
Assumption changes (shareholder-backed business) (note (c))
- 
- 
(46)
(46)
Investment-related items and other movements (note (b))
9,165 
2,097 
1,956 
13,218 
Dilution of holding in PruHealth
- 
- 
(27)
(27)
Foreign exchange translation differences
(207)
- 
(1)
(208)
At 31 December 2010
91,773 
21,671 
22,273 
135,717 
Comprising:
        
 
- Policyholder liabilities
81,586 
21,671 
22,273 
125,530 
 
- Unallocated surplus of with-profits funds
10,187 
- 
- 
10,187 
Average policyholder liability balances*
        
 
2010
79,558 
20,353 
20,969 
120,880 
 
2009
75,692 
17,677 
18,600 
111,969 
*Excluding the unallocated surplus of the with-profits funds and as adjusted for corporate transactions in the period.
  
 
 
Notes
(a) 
Net flows of negative £3,192 million have improved from negative £4,343 million in 2009, principally as a result of increased premiums due to the bulk annuity transaction in 2010 and improved unit-linked flows.
(b)     
Investment-related items and other movements of £13,218 million across fund types reflected the continued strong performance of UK equity markets in 2010, as well as the continued increase in value of debt securities.
(c)
Assumption changes principally represent the net impact of changes to the mortality assumptions and expense assumptions.
 
US insurance operations
         
   
Variable 
 annuity 
 separate 
 account 
 liabilities
Fixed annuity, 
 GIC and other 
 business
Total
   
£m 
£m 
£m 
At 1 January 2009
14,538 
30,823 
45,361 
Premiums  
4,667 
4,510 
9,177 
Surrenders
(882)
(2,373)
(3,255)
Maturities/Deaths
(199)
(534)
(733)
Net flows (note (b))
3,586 
1,603 
5,189 
Transfers from general to separate account
984 
(984)
-
Investment-related items and other movements (note (c))
3,368 
(382)
2,986 
Foreign exchange translation differences (note (a))
(1,837)
(3,388)
(5,225)
At 31 December 2009 / 1 January 2010
20,639 
27,672 
48,311 
Premiums  
7,420 
4,315 
11,735 
Surrenders
(1,403)
(2,195)
(3,598)
Maturities/Deaths
(259)
(510)
(769)
Net flows (note (b))
5,758 
1,610 
7,368 
Transfers from general to separate account
1,411 
(1,411)
- 
Investment-related items and other movements (note (c))
2,875 
589 
3,464 
Foreign exchange translation differences (note (a))
520 
860 
1,380 
At 31 December 2010
31,203 
29,320 
60,523 
Average policyholder liability balances
      
 
2010
25,921 
28,496 
54,417 
 
2009
17,589 
29,248 
46,837 
 
 
Notes
(a)
Movements in the year have been translated at an average rate of 1.55 (2009: 1.57). The closing balance has been translated at closing rate of 1.57 (2009: 1.61). Differences upon retranslation are included in foreign exchange translation differences of £1,380 million (2009: £5,525 million).
(b)
Net flows for the year were £7,368 million compared with £5,189 million in 2009, driven largely by increased new business volumes for the variable annuity business.
(c) 
Positive investment-related items and other movements in variable annuity separate account liabilities of £2,875 million in 2010 and £3,368 million in 2009 represent increases in the US equity market during the respective periods. Fixed annuity, GIC and other business investment and other movements primarily reflects the movement in the valuation of the product guarantees and interest credited to policyholder accounts. In 2010, interest credited exceeded the small reduction in the guarantee valuation to give an overall increase in liabilities. In 2009, there was a more significant fall in the valuation of guarantees.

Asian insurance operations
   
With-profits 
 business 
Unit-linked 
 liabilities 
Other 
Total 
   
£m 
£m 
£m 
£m 
At 1 January 2009
8,094 
7,220 
5,755 
21,069 
Premiums  
        
 
New business (note (b))
46 
643 
517 
1,206 
 
In-force
777 
1,223 
601 
2,601 
   
823 
1,866 
1,118 
3,807 
Surrenders
(361)
(666)
(174)
(1,201)
Maturities/Deaths
(253)
(19)
(70)
(342)
Net flows
209 
1,181 
874 
2,264 
Shareholders transfers post tax
(20)
-
-
(20)
Change in reserving basis in Malaysia (note (d))
-
(9)
(54)
(63)
Change in other reserving basis  
-
-
(4)
(4)
Investment-related items and other movements (note (e))
1,431 
2,661 
150 
4,242 
Foreign exchange translation differences (note (a))
(853)
(612)
(604)
(2,069)
Disposal of Taiwan agency business (note (f))
-
(724)
(2,784)
(3,508)
At 31 December 2009 / At 1 January 2010
8,861 
9,717 
3,333 
21,911 
Comprising:
        
 
- Policyholder liabilities
8,808 
9,717 
3,333 
21,858 
 
- Unallocated surplus of with-profits funds
53 
-
-
53 
Premiums  
        
 
New business (note (b))
141 
1,072 
452 
1,665 
 
In-force
897 
1,130 
616 
2,643 
   
1,038 
2,202 
1,068 
4,308 
Surrenders(note (c))
(441)
(1,572)
(228)
(2,241)
Maturities/Deaths
(326)
(40)
(132)
(498)
Net flows (note (b))
271 
590 
708 
1,569 
Shareholders transfers post tax
(24)
- 
- 
(24)
Change in other reserving basis  
- 
- 
19 
19 
Investment-related items and other movements (note (e))
693 
1,405 
118 
2,216 
Foreign exchange translation differences (note (a))
719 
1,009 
353 
2,081 
Acquisition of UOB Life Assurance Limited (note (g))
504 
3 
461 
968 
At 31 December 2010
11,024 
12,724 
4,992 
28,740 
Comprising:
        
 
- Policyholder liabilities
10,958 
12,724 
4,992 
28,674 
 
- Unallocated surplus of with-profits funds
66 
-
-
66 
Average policyholder liability balances*
        
 
2010
10,135 
11,222 
4,393 
25,750 
 
2009
8,371 
8,107 
3,152 
19,630 
*Adjusted for transactions in the period and excluding the unallocated surplus of with-profits funds.
  
 
 
Notes
(a)   
Movements in the year have been translated at the average exchange rate for the year ended 31 December 2010. The closing balance has been translated at the closing spot rates as at 31 December 2010. Differences upon retranslation are included in foreign exchange translation differences of positive £2,081 million in 2010 (2009: negative £2,069 million).
 (b)
     The increase in policyholder liabilities due to new business premium for the unit-linked business was predominantly driven by an increase in sales during the year of individual linked products.
 (c)  
Following the recovery of the stock markets in Asia in late 2009 and 2010, policyholders in Asia took the opportunity to capitalise on the increased value of their unit-linked policies through withdrawals, principally in Indonesia, Malaysia, and India. 
          The depressed state of the investment markets in late 2008 and 2009 resulted in both the number of, and average value of, withdrawals of investment related products decreasing.
(d)  
The change in reserving basis in Malaysia of £63 million reflects the change made following the adoption of a risk based capital (RBC) approach to the local regulatory reporting in that country.
 (e) 
The positive investment related items and other movements in 2010 for with-profits (£693 million) and unit-linked business (£1,405 million) are mainly driven from Asian equity market gains in the period.
 (f) 
The disposal of Taiwan agency business reflects the liabilities transferred at the date of disposal.
(g) 
The acquisition of UOB Life Assurance Limited reflects the liabilities acquired at the date of acquisition.

 
Duration of policyholder liabilities
 
2010 
  
2009 
 
UK insurance operations
(note (i))
US insurance operations
(note (ii))
Asian insurance operations
(note (iii))
Total
  
UK insurance operations
US insurance operations
Asian insurance operations
Total
                   
 
£m
£m
£m
£m
  
£m
£m
£m
£m
Insurance contract liabilities
84,152 
58,641 
28,498 
171,291 
  
77,655 
46,346 
21,712 
145,713 
Investment contract liabilities with discretionary participation features
25,613 
- 
119 
25,732 
  
24,780 
-
100 
24,880 
Investment contract liabilities without discretionary participation features
15,765 
1,882 
57 
17,704 
  
13,794 
1,965 
46 
15,805 
 
125,530 
60,523 
28,674 
214,727 
  
116,229 
48,311 
21,858 
186,398 
 
The tables above show the carrying value of the policyholder liabilities. Separately, the Group uses cash flow projections of expected benefit payments as part of the determination of the value of in-force business when preparing EEV basis results. The tables in the accompanying notes below show the maturity profile of the cash flows used for that purpose for insurance contracts, as defined by IFRS, i.e. those containing significant insurance risk, and investment contracts, which do not.
The cash flow projections of expected benefit payments used in the maturity profile tables are from value of in-force business and exclude the value of future new business, including vesting of internal pension contracts. The maturity tables have been prepared on a discounted basis.
 
Notes
(i)
     UK insurance operations
                             
   
With-profits business
  
Annuity business
(insurance contracts)
  
Other
  
Total
   
Insurance
 contracts
Investment
 contracts
Total
  
PAL
PRIL
Total
  
Insurance
 contracts
Investments
 contracts
Total
    
2010 
£m 
£m 
£m 
  
£m 
£m 
£m 
  
£m 
£m 
£m 
  
£m 
Policyholders liabilities
43,691 
25,613 
69,304 
  
12,282 
16,442 
28,724 
  
11,737 
15,765 
27,502 
  
125,530 
 
%
%
%
  
%
%
%
  
%
%
%
  
%
Expected maturity:
                          
0 to 5 years
46 
31 
40 
  
32 
29 
30 
  
35 
29 
32 
  
36 
5 to 10 years
25 
25 
25 
  
25 
23 
24 
  
26 
21 
23 
  
24 
10 to 15 years
13 
19 
16 
  
18 
17 
18 
  
18 
20 
19 
  
17 
15 to 20 years
7 
14 
10 
  
12 
13 
12 
  
10 
11 
11 
  
11 
20 to 25 years
4 
8 
6 
  
7 
8 
8 
  
6 
8 
7 
  
7 
over 25 years
5 
3 
3 
  
6 
10 
8 
  
5 
11 
8 
  
5 
 
                             
   
With-profits business
  
Annuity business
(Insurance contracts)
  
Other
  
Total
   
Insurance contracts
Investment contracts
Total
  
PAL
PRIL
Total
  
Insurance contracts
Investments contracts
Total
    
 
2009 
£m
£m
£m
  
£m
£m
£m
  
£m
£m
£m
  
£m
 
Policyholders liabilities
40,780 
24,780 
65,560 
  
11,969 
14,292 
26,261 
  
10,614 
13,794 
24,408 
  
116,229 
   
%
%
%
  
%
%
%
  
%
%
%
  
%
 
Expected maturity:
                          
 
0 to 5 years
50 
29 
41 
  
32 
31 
32 
  
34 
35 
35 
  
38 
 
5 to 10 years
26 
25 
26 
  
25 
23 
24 
  
25 
22 
23 
  
25 
 
10 to 15 years
13 
19 
15 
  
18 
17 
17 
  
18 
19 
18 
  
16 
 
15 to 20 years
6 
14 
9 
  
11 
12 
12 
  
11 
11 
11 
  
10 
 
20 to 25 years
3 
9 
6 
  
7 
8 
7 
  
7 
6 
6 
  
6 
 
over 25 years
2 
4 
3 
  
7 
9 
8 
  
5 
7 
7 
  
5 
 
 
Notes
(a)
 The cash flow projections of expected benefit payments used in the maturity profile table above are from value of in-force business and exclude the value of future new business, including vesting of internal pension contracts.
(b)    
Benefit payments do not reflect the pattern of bonuses and shareholder transfers in respect of the with-profits business.
(c)    
Investment contracts under Other comprise certain unit-linked and similar contracts accounted for under IAS 39 and IAS 18.
(d)    
For business with no maturity term included within the contracts, for example with-profits investment bonds such as Prudence Bonds, an assumption is made as to likely duration based on prior experience.
 
(ii)
US insurance operations
                 
   
2010 
    
2009 
  
   
Fixed annuity  and other business (including GICs and similar contracts)
Variable
 annuity
Total
  
Fixed annuity and other business (including GICs and similar contracts)
Variable
 annuity
Total
   
£m
£m
£m
  
£m
£m
£m
 
Policyholder liabilities
29,320 
31,203 
60,523 
  
27,672 
20,639 
48,311 
   
% 
% 
% 
  
% 
% 
% 
 
Expected maturity:
              
 
0 to 5 years
50 
50 
50 
  
52 
50 
51 
 
5 to 10 years
27 
29 
28 
  
27 
28 
28 
 
10 to 15 years
11 
12 
12 
  
10 
12 
11 
 
15 to 20 years
5 
6 
5 
  
5 
6 
5 
 
20 to 25 years
3 
2 
3 
  
3 
2 
2 
 
Over 25 years
4 
1 
2 
  
3 
2 
3 
 
(iii) Asian insurance operations
     
 
2010 
2009 
 
£m 
£m 
Policyholder liabilities
28,674 
21,858 
Expected maturity:
%
%
0 to 5 years
24 
24 
5 to 10 years
20 
21 
10 to 15 years
15 
15 
15 to 20 years
12 
12 
20 to 25 years
10 
9 
Over 25 years
19 
19 
 
 
 
AA  Sensitivity analysis
 
 
 
Sensitivity of IFRS basis profit or loss and equity to market and other risks
 
 
 
Overview of risks by business unit
The financial and insurance assets and liabilities attaching to the Group's life assurance business are, to varying degrees, subject to market and insurance risk and other changes of experience assumptions that may have a material effect on IFRS basis profit or loss and equity.
 
Market risk is the risk that the fair value or future cash flows of a financial instrument or, in the case of liabilities of insurance contracts, their carrying value will fluctuate because of changes in market prices. Market risk comprises three types of risk, namely:
 
 
 
•        Currency risk: due to changes in foreign exchange rates;
 
•        interest rate risk: due to changes in market interest rates; and
 
•        other price risk: due to fluctuations in market prices (other than those arising from interest rate risk or currency risk).
 
 
Policyholder liabilities relating to the Group's life assurance businesses are also sensitive to the effects of other changes in experience, or expected future experience, such as for mortality, other insurance risk and lapse risk.
In addition, the profitability of the Group's life assurance businesses and asset management business, is indirectly affected by the performance of the assets covering policyholder liabilities and related capital.
 
 
 
Three key points are to be noted, namely:
 
 
 
•        The Group's with-profit and unit-linked funds absorb most market risk attaching to the funds' investments. Except for second order effects, for example on asset management fees and shareholders' share of cost of bonuses for with-profits business, shareholder results are not directly affected by market value movements on the assets of these funds;
 
•        the Group's shareholder results are most sensitive to market risks for assets of the shareholder-backed business; and
 
•        the main exposures of the Group's IFRS basis results to market risk for life assurance operations on investments of the shareholder-backed business are for debt securities.
 
 
The most significant items for which the IFRS basis shareholders' profit or loss and equity for the Group's life assurance business is sensitive to these variables are shown in the following tables. The distinction between direct and indirect exposure is not intended to indicate the relative size of the sensitivity.

 
 
Market and credit risk
  
Type of business
Investments/derivatives
  Liabilities/unallocated
  surplus
Other exposure
Insurance and lapse risk
UK insurance operations
    
With-profits business (including Prudential Annuities Limited)
 
Net neutral direct exposure (Indirect exposure only)
 
 
 
 
Investment performance subject to smoothing through declared bonuses
Persistency risk to future shareholder transfers
SAIF sub-fund
 
Net neutral direct exposure (Indirect exposure only)
 
Asset management fees earned by M&G
  
Unit-linked business
Net neutral direct exposure (Indirect exposure only)
 
 
 
Investment performance through asset management fees
Persistency risk
 
Asset/liability mismatch risk
    
Shareholder-backed
 annuity business
 
 
 
Credit risk
    
Mortality experience and assumptions for longevity
Interest rate risk for assets in excess of liabilities i.e. representing shareholder capital
US insurance operations
    
All business
Currency risk
    
Persistency risk
Variable annuity
 business
 
Net effect of market risk arising from incidence of guarantee features and variability of asset management fees offset by derivative hedging programme
    
Fixed indexed annuity business
 
 
 
Derivative hedge programme to the extent not fully hedged against liability and fund performance
 Incidence of equity
 participation features
 
 
 
    
Fixed indexed annuities, Fixed annuities and GIC business
 
Credit risk
Interest rate risk
 
 
 
    
Spread difference between earned rate and rate credited to policyholders
 
Lapse risk but the effects of extreme events are mitigated by the use of swaption contracts
 
These risks are reflected in volatile profit or loss and shareholders' equity for derivative value movements and impairment losses, and, in addition, for shareholders' equity for value movements on fixed income securities classified as 'available for sale' under IAS 39
      
Asian insurance operations
    
   
Mortality and morbidity risk
All business
Currency risk
    
Persistency risk
With-profits business
Net neutral direct exposure (Indirect exposure only)
Investment performance subject to smoothing through declared bonuses
  
Unit-linked business
Net neutral direct exposure (Indirect exposure only)
Investment performance through asset management fees
  
Non-participating business
Interest rate and price risk
  Long-term interest rates
    
 
IFRS shareholder results - Exposures for market and other risk
Key Group exposures
The IFRS operating profit based on longer-term investment returns for UK insurance operations has high potential sensitivity for changes to longevity assumptions affecting the carrying value of liabilities to policyholders for shareholder-backed annuity business. In addition, at the total IFRS profit level the result is sensitive to temporary value movements on assets backing IFRS equity.
 
For Jackson at the level of operating profit based on longer-term investment returns, the results are sensitive to market conditions to the extent of income earned on spread-based products not mitigated by the interest derivative programmes and second order equity-based exposure in respect of variable annuity asset management fees. Further information is given below under the US operations section of market and credit risk.
 
Jackson's derivative programme is used to substantially mitigate equity market risk attaching to its equity-based products and interest rate risk associated with its spread-based products. Movements in interest rates and credit spreads materially affect the carrying value of derivatives which are used to manage the liabilities to policyholders and backing investment assets of fixed annuity and other general account business. Combined with the use of US GAAP measurement (as grandfathered under IFRS 4) for the asset and liabilities for the insurance contract liabilities, which is largely insensitive to current period market movements, the Jackson total profit (i.e. including short-term fluctuations in investment returns) is very sensitive to market movements. In addition to these effects the Jackson IFRS equity is sensitive to the impact of interest rate and credit spread movements on the value of fixed income securities. Movements in unrealised appreciation on these securities are included as movement in equity (i.e. outside the income statement).
 
For Asian operations, the operating profit based on longer-term investment returns is mainly affected by the impact of market levels on unit-linked business persistency, and other insurance risk.
 
At the total IFRS profit level the Asian result is affected by short-term value movements on the asset portfolio for non-linked shareholder-backed business.
 
M&G profits are affected primarily by movements in the growth in funds under management and by the effect any impairment on the loan book and fair value movements on debt securities held by Prudential Capital.
 
 
 
Market and credit risk
 
UK insurance operations
 
With-profits business
 
 
•
   With-profits business
Shareholder results of UK with-profits business are sensitive to market risk only through the indirect effect of investment performance on declared policyholder bonuses.
The investment assets of the PAC with-profits fund are subject to market risk. However, changes in their carrying value, net of related changes to asset-share liabilities of with-profit contracts, affect the level of unallocated surplus of the fund. As unallocated surplus is accounted for as a liability under IFRS, movements in its value do not affect shareholders' profit or equity.
The shareholder results of the UK with-profits fund correspond to the shareholders' share of the cost of bonuses declared on the with-profits business. This currently corresponds to one-ninth of the cost of bonuses declared.
Investment performance is a key driver of bonuses, and hence the shareholders' share of cost of bonuses. Due to the 'smoothed' basis of bonus declaration the sensitivity to investment performance in a single year is low. However, over multiple periods it is important.
 
• 
  Prudential Annuities Limited (PAL)
PAL's business is not with-profits, it writes annuity business. However, as PAL is owned by the PAC with-profits sub-fund, changes in the carrying value of PAL's assets and liabilities are reflected in the liability for unallocated surplus which as described above, do not affect shareholder results.
 
• 
   Scottish Amicable Insurance Fund (SAIF)
SAIF is a ring-fenced fund in which, apart from asset management fees, shareholders have no interest. Accordingly, the Group's IFRS profit and equity are insensitive to the direct effects of market risk attaching to SAIF's assets and liabilities.
 
Shareholder-backed business
The factors that may significantly affect the IFRS results of UK shareholder-backed business are the mortality experience and assumptions and credit risk attaching to the annuity business of Prudential Retirement Income Limited and the PAC non-profit sub-fund.
 
 
•   
   Prudential Retirement Income Limited (PRIL)
The assets covering PRIL's liabilities are principally debt securities and other investments that are held to match the expected duration and payment characteristics of the policyholder liabilities. These liabilities are valued for IFRS reporting purposes by applying discount rates that reflect the market rates of return attaching to the covering assets.
Except to the extent of any asset/liability duration mismatch which is reviewed regularly, and exposure to credit risk, the sensitivity of the Group's results to market risk for movements in the carrying value of PRIL's liabilities and covering assets is broadly neutral on a net basis.
The main market risk sensitivity for PRIL arises from interest rate risk on the debt securities which substantially represent IFRS equity. This equity comprises the net assets held within the long-term fund of the company that cover regulatory basis liabilities that are not recognised for IFRS reporting purposes, for example contingency reserves, and shareholder capital held outside the long-term fund.
The principal items affecting the IFRS results for PRIL are mortality experience and assumptions and credit risk.
 
 •  
   PAC non-profit sub-fund
The PAC non-profit sub-fund principally comprises annuity business previously written by Scottish Amicable Life, credit life, unit-linked and other non-participating business.
The financial assets covering the liabilities for those types of business are subject to market risk. However, for the annuity business the same considerations as described above for PRIL apply, whilst the liabilities of the unit-linked business change in line with the matching linked assets. Other liabilities of the PAC non-profit sub-fund are broadly insensitive to market risk.
 
•   
   Other shareholder-backed unit-linked business
Due to the matching of policyholder liabilities to attaching asset value movements the UK unit-linked business is not directly affected by market or credit risk. The principal factor affecting the IFRS results is investment performance through asset management fees.
 
 
 
US insurance operations
 
Jackson
The IFRS basis results of Jackson are highly sensitive to market risk on the assets covering liabilities other than variable annuity business segregated in the separate accounts.
 
Invested assets covering liabilities (other than the separate accounts) and related capital comprise principally debt securities classified as available-for-sale. Value movements for these securities are reflected as movements in shareholders' equity through the statement of comprehensive income. Other invested assets and derivatives are carried at fair value with the value movements reflected in the income statement.
 
By contrast, the IFRS insurance liabilities for business written by Jackson, by the application of grandfathered GAAP under IFRS 4, are measured on US GAAP bases which with the exception of certain items covered by the equity hedging programme, are generally insensitive to temporary changes in market conditions or the short-term returns on the attaching asset portfolios.
 
These differences in carrying value of debt securities, other invested assets, derivatives and insurance liabilities give rise to potentially significant volatility in the IFRS income statement and shareholders' equity. As with other shareholder-backed business the profit or loss for Jackson is presented by distinguishing the result for the year between an operating result based on longer-term investment returns and short-term fluctuations in investment returns. In this way the most significant direct effect of market changes that have taken place to the Jackson result are separately identified. 
 
Excluding these short-term effects, the factors that most significantly affect the Jackson IFRS operating result based on long-term investment returns are:
 
 
•
Variable annuity business -effect of market risk arising from the variability of asset management fees
•
Fixed annuity business - the spread differential between the earned rate and the rate credited to policyholders; and
•
Fixed index annuity business - the spread differential between the earned rate and the rate credited to policyholders.
 
 
In addition, the total profit for Jackson is affected by the level of impairment losses on the debt securities portfolio, net effect of market risk arising from the incidence and valuation of guarantee features, guaranteed benefit payments and equity index participation features, offset by variability of benefit related fees and equity derivative hedging performance, short-term value movements on derivatives held to manage the fixed annuity and other general account business, and other temporary value movements on portfolio investments classified as fair value through profit and loss.
 
The Group has amended its presentation of operating profit for its US insurance operations to remove the net equity hedge accounting effect and include it in short-term fluctuations as explained further in note C. Following this change the operating profit based on longer-term investment returns of the US insurance operations of £833 million for 2010 (2009: £618 million) excludes £367 million (2009: £159 million) negative net equity hedge accounting effects, net of related change to amortisation of deferred acquisition costs. The presentation of results for 2009 has been amended accordingly.
 
Following this change the US insurance operating profit of £833 million for 2010 excludes the market related impacts comprised of £367 million of net equity hedging losses, net of related change to amortisation of deferred acquisition costs (2009: losses of £159 million), representing the movement in fair value of free standing equity derivatives and the movement in the accounting value of Jackson's liabilities for variable and fixed index annuity guarantees, for which a significant proportion are not fair valued, together with the associated fees and claims included in reserves. These net amounts are highly variable and not representative of underlying performance based on longer-term investment returns and have therefore been included in short-term fluctuations. The presentation of results for 2009 has been amended accordingly.
 
Asian insurance operations
For Asian with-profits business the same features apply as described above for UK with-profits business. Similarly, as for other parts of the Group, for unit-linked business the main factor affecting IFRS basis results is investment performance through asset management fees.
 
The sensitivity of the IFRS basis results of the Group's Asian operations to market risk is primarily restricted to the non-participating business.
 
This sensitivity is primarily reflected through the volatility of asset returns coupled with the fact that the accounting carrying value of liabilities to policyholders are only partially sensitive to changed market conditions. As for UK shareholder-backed operations and Jackson, the IFRS profit is distinguished in the Group's segmental analysis so as to distinguish operating profits based on longer-term investment return and short-term fluctuations in investment returns.
 
Insurance and lapse risk
The features described above cover the main sensitivities of IFRS profit and loss and equity for market, insurance and credit risk. Lapse and longevity risk may also be a key determination of IFRS basis results with variable impacts.
 
In the UK, adverse persistency experience can affect the level of profitability from with-profits and unit-linked business. For with-profits business in any given year, the amount represented by the shareholders' share of cost of bonus may only be marginally affected. However, altered persistency trends may affect future expected shareholder transfers.
 
By contrast, Group IFRS operating profit is particularly sensitive to longevity outlook that results in changes of assumption for the UK shareholder-backed annuity business.
 
Jackson is sensitive to lapse risk. However, Jackson uses swaption derivatives to ameliorate the effect of a sharp rise in interest rates, which would be the most likely cause of a sudden change in policyholder behaviour.
 
In Asia adverse persistency experience can impact the IFRS profitability of certain business written in the region. This risk is managed at a business unit level through monthly monitoring of experience and the implementation of management actions as necessary. These actions could include product enhancements, increased management focus on premium collection as well as other customer retention efforts. The potential financial impact of lapses is often mitigated through the specific features of the products, e.g. surrender charges.
 
Impact of diversification on risk exposure
The Group enjoys significant diversification benefits. This arises because not all risk scenarios will happen at the same time and across all geographic regions. The Group tests the sensitivities of results to different correlation factors such as:
 
Correlation across geographic regions
•     Financial risk factors
•     Non-financial risk factors.
 
Correlation across risk factors    
•     Longevity risk
•     Expenses
•     Persistency
•     Other risks.
 
The effect of Group diversification is to significantly reduce the aggregate standalone volatility risk to IFRS operating profit based on longer-term investment returns. The effect is almost wholly explained by the correlations across risk types, in particular longevity risk.
 
(i)     UK insurance operations   
 
The risks to which the IFRS basis results of the UK insurance operations are sensitive are asset/liability matching, mortality experience and payment assumptions for shareholder-backed annuity business. Further details are described below.
 
With-profits business
SAIF
Shareholders have no interest in the profits of SAIF but are entitled to the asset management fees paid on the assets of the fund.
 
With-profits sub-fund business
For with-profits business (including non-participating business of PAL which is owned by the WPSF) adjustments to liabilities and any related tax effects are recognised in the income statement. However, except for any impact on the annual declaration of bonuses, shareholders' profit for with-profits business is unaffected. This is because IFRS basis profits for with-profits business, which are determined on the same basis as on preceding UK GAAP, solely reflect one-ninth of the cost of bonuses declared for the year.
 
The main factors that influence the determination of bonus rates are the return on the investments of the fund, the effect of inflation, taxation, the expenses of the fund chargeable to policyholders and the degree to which investment returns are smoothed. Mortality and other insurance risk are relatively minor factors.
     
Unallocated surplus represents the excess of assets over policyholder liabilities of the fund. As unallocated surplus of the WPSF is recorded as a liability, movements in its value do not affect shareholders' profits or equity.
     
The level of unallocated surplus is particularly sensitive to the level of investment returns on the portion of the life fund assets that represents the surplus.
 
Shareholder-backed annuity business
Profits from shareholder-backed annuity business are most sensitive to:
 
•        The extent to which the duration of the assets held closely matches the expected duration of the liabilities under the contracts. Assuming close matching, the impact of short-term asset value movements as a result of interest rate
          movements will broadly offset changes in the value of liabilities caused by movements in valuation rates of interest;
•        Actual versus expected default rates on assets held;
•        The difference between long-term rates of return on corporate bonds and risk-free rates;
•        The variance between actual and expected mortality experience;
•        The extent to which expected future mortality experience gives rise to changes in the measurement of liabilities; and
•        Changes in renewal expense levels.
 
A decrease in assumed mortality rates of one per cent would decrease gross profits by approximately £53 million (2009: £44 million). A decrease in credit default assumptions of five basis points would increase gross profits by £119 million (2009: £91 million). A decrease in renewal expenses (excluding asset management expenses) of five per cent would increase gross profits by £23 million (2009: £17 million). The effect on profits would be approximately symmetrical for changes in assumptions that are directionally opposite to those explained above.
 
Unit-linked and other business
Unit-linked and other business represents a comparatively small proportion of the in-force business of the UK insurance operations.
 
Profits from unit-linked and similar contracts primarily arise from the excess of charges to policyholders, for management of assets under the Company's stewardship, over expenses incurred. The former is most sensitive to the net accretion of funds under management as a function of new business and lapse and timing of death. The accounting impact of the latter is dependent upon the amortisation of acquisition costs in line with the emergence of margins (for insurance contracts) and amortisation in line with service provision (for the investment management component of investment contracts). By virtue of the design features of most of the contracts which provide low levels of mortality cover, the profits are relatively insensitive to changes in mortality experience.
 
Shareholder exposure to interest rate risk and other market risk
By virtue of the fund structure, product features and basis of accounting, the policyholder liabilities of the UK insurance operations are, except for pension annuity business, not generally exposed to interest rate risk. For pension annuity business, liabilities are exposed to fair value interest rate risk. However, the net exposure to the PAC WPSF (for PAL) and shareholders (for liabilities of PRIL and the non-profit sub-fund) is very substantially ameliorated by virtue of the close matching of assets with appropriate duration. The level of matching from period to period can vary depending on management actions and economic factors so it is possible for a degree of mis-matching profits or losses to arise.
 
The close matching by the Group of assets of appropriate duration to annuity liabilities is based on maintaining economic and regulatory capital. The measurement of liabilities under capital reporting requirements and IFRS is not the same with contingency reserves and some other margins for prudence within the assumptions required under the FSA regulatory solvency basis not included for IFRS reporting purposes. As a result IFRS equity is higher than regulatory capital and therefore more sensitive to interest rate risk.
 
The estimated sensitivity of the UK non-linked shareholder-backed business (principally pension annuities business) to a movement in interest rates is as follows.
                   
 
2010 £m
  
2009 £m
 
A decrease
A decrease of 1%
An increase of 1%
An increase
  
A decrease
A decrease
An increase
An increase
 of 2%
of 2%
of 2%
of 1%
of 1%
of 2%
Carrying value of debt securities and derivatives
6,547 
2,938 
(2,434)
(4,481)
  
5,372 
2,422 
(2,020)
(3,731)
Policyholder liabilities
(5,977)
(2,723)
2,109 
3,929 
  
(5,125)
(2,304)
1,905 
3,498 
Related deferred tax effects
(154)
(58)
88 
149 
  
(69)
(33)
32 
65 
Net sensitivity of profit after tax and shareholders' equity
416 
157 
(237)
(403)
  
178 
85 
(83)
(168)
 
In addition the shareholder-backed portfolio of UK non-linked insurance operations covering liabilities and shareholders' equity includes equity securities and investment property. Excluding any second order effects on the measurement of the liabilities for future cash flows to the policyholder, a fall in their value would have given rise to the following effects on pre-tax profit, profit after tax, and shareholders' equity.
 
 
2010 £m
  
2009 £m
 
A decrease
     of 20%
A decrease 
        of 10%
  
A decrease 
        of 20%
A decrease 
        of 10%
Pre-tax profit
(302)
(151)
  
(292)
(146)
Related deferred tax effects
82 
41 
  
82 
41 
Net sensitivity of profit after tax and shareholders' equity
(220)
(110)
  
(210)
(105)
 
A 10 or 20 per cent increase in their value would have an approximately equal and opposite effect on profit and shareholders' equity to the sensitivities shown above. The market risk sensitivities shown above reflect the impact of temporary market movements and, therefore, the primary effect of such movements would, in the Group's segmental analysis of profits, be included within the short-term fluctuations in investment returns.
 
In the equity risk sensitivity analysis given above, the Group has considered the impact of an instantaneous 20 per cent fall in equity markets. If equity markets were to fall by more than 20 per cent, the Group believes that this would not be an instantaneous fall but rather this would be expected to occur over a period of time during which the Group would be able to put in place mitigating management actions.
 
 
(ii)    US insurance operations
 
 
Currency fluctuations
Consistent with the Group's accounting policies, the profits of the Group's US operations are translated at average exchange rates and shareholders' equity at the closing rate for the reporting period. For 2010, the rates were US$1.55 (2009: US$1.57) and US$1.57 (2009: US$1.61) to £1 sterling, respectively. A 10 per cent increase or decrease in these rates would reduce or increase profit (loss) before tax attributable to shareholders, profit (loss) for the year and shareholders' equity attributable to US insurance operations respectively as follows:
 
 
A 10% increase in exchange rates
A 10% decrease in exchange rates
 
2010 
2009 
2010 
2009 
 
£m
£m
£m
£m
Profit (loss) before tax attributable to shareholders (note (i))
(41)
(44)
50 
54 
Profit (loss) for the year
(31)
(54)
37 
65 
Shareholders' equity attributable to US insurance operations
(347)
(274)
424 
335 
 
 
Note
 
(i)      Sensitivity on profit (loss) before tax i.e. aggregate of the operating profit based on longer-term investment returns and short-term fluctuations.
Other sensitivities
The principal determinants of variations in operating profit based on longer-term returns are:
 
•       Growth in the size of assets under management covering the liabilities for the contracts in force;
•       Variations in fees and other income, offset by variations in market value adjustment payments and, where necessary, strengthening of liabilities;
•       Spread returns for the difference between investment returns and rates credited to policyholders; and
•       Amortisation of deferred acquisition costs.
 
For term business, acquisition costs are deferred and amortised in line with expected premiums. For annuity business, acquisition costs are deferred and amortised in line with expected gross profits on the relevant contracts. For interest-sensitive business, the key assumption is the expected long-term spread between the earned rate and the rate credited to policyholders, which is based on an annual spread analysis. In addition, expected gross profits depend on mortality assumptions, assumed unit costs and terminations other than deaths (including the related charges) all of which are based on a combination of actual experience of Jackson, industry experience and future expectations.
 
A detailed analysis of actual experience is measured by internally developed mortality and persistency studies. For variable annuity business, the key assumption is the expected long-term level of equity market returns, which for 2010 and 2009 was 8.4 per cent per annum implemented using a mean reversion methodology. These returns affect the level of future expected profits through their effects on the fee income and the required level of provision for guaranteed minimum death benefit claims. The mean reversion methodology dampens the impact of equity market movements during a particular year, but does not fully eliminate the effects of movements in the equity markets.
 
In addition, the mean reversion methodology includes both a cap and a floor that determine the maximum impact that the methodology may have. The projected rates of return are capped at no more than 15 per cent for each of the next five years.
 
Except to the extent of mortality experience, which primarily affects profits through variations in claim payments and GMDB reserves, the profits of Jackson are relatively insensitive to changes in insurance risk.
 
Exposure to equity risk
Variable annuity contracts related
Jackson issues variable contracts through its separate accounts for which investment income and investment gains and losses accrue to, and investment risk is borne by, the contract holder (traditional variable annuities). It also issues variable annuity and life contracts through separate accounts where it contractually guarantees to the contract holder (variable contracts with guarantees) either a) return of no less than deposits made to the contract adjusted for any partial withdrawals, b) total deposits made to the contract adjusted for any partial withdrawals plus a minimum return, or c) the highest contract value on a specified anniversary date adjusted for any withdrawals following the contract anniversary. These guarantees include benefits that are payable in the event of death (GMDB), annuitisation (GMIB), at specified dates during the accumulation period (GMWB) or at the end of a specified period (GMAB).
 
At 31 December 2010 and 2009, Jackson had variable annuity contracts with guarantees, for which the net amount at risk ("NAR") is generally the amount of guaranteed benefit in excess of current account value, as follows:
 
31 December 2010
   
Minimum
return
Account
value
Net amount
at risk
Weighted
average
attained age
Period
until
expected
annuitisation
     
£m
£m
    
             
Return of net deposits plus a minimum return
          
 
GMDB
0-6%
25,540 
2,106 
64.0 years
  
 
GMWB - Premium only
0%
2,742 
149 
    
 
GMWB - For life
0-5%**
1,996 
415*
    
 
GMAB - Premium only
0%
48 
1 
    
Highest specified anniversary account value minus withdrawals post-anniversary
          
 
GMDB
  
3,742 
466 
63.3 years
  
 
GMWB - Highest anniversary only
  
2,010 
343 
    
 
GMWB - For life
  
852 
196*
    
Combination net deposits plus minimum return, highest specified anniversary account value minus withdrawals post-anniversary
          
 
GMDB
0-6%
1,768 
311 
65.7 years
  
 
GMIB
0-6%
1,933 
418 
  
5.1 years
 
GMWB -For life
0-8%**
15,025 
672*
    
 
31 December 2009
   
Minimum
  return
Account 
value
Net amount
 at risk
Weighted  average attained age
Period until  expected annuitisation
     
£m
£m
    
             
Return of net deposits plus a minimum return
          
 
GMDB
0-6%
16,915 
2,834 
63.8 years
  
 
GMWB - Premium only
0%
2,505 
277 
    
 
GMWB - For life
0-5%**
1,240 
471*
    
 
GMAB - Premium only
0%
27 
2 
    
Highest specified anniversary account value minus withdrawals post-anniversary
          
 
GMDB
  
2,933 
691 
62.8 years
  
 
GMWB - Highest anniversary only
  
1,694 
496 
    
 
GMWB - For life
  
811 
258*
    
Combination net deposits plus minimum return, highest specified anniversary account value minus withdrawals post-anniversary
          
 
GMDB
0-6%
1,307 
384 
65.1 years
  
 
GMIB
0-6%
1,815 
488 
  
5.9 years
 
GMWB -For life
0-7%**
6,934 
568*
    
* The NAR for GMWB "For life" has been estimated as the present value of future expected benefit payments remaining after the amount of the "not for life " guaranteed benefit is zero.
**Ranges shown based on simple interest. The upper limits of five per cent, seven per cent and eight per cent simple interest are approximately equal to 4.1 per cent, 5.5 per cent and six per cent respectively, on a compound interest basis over a typical 10-year bonus period.
 
Account balances of contracts with guarantees were invested in variable separate accounts as follows:
       
   
2010 
2009 
   
£m 
£m 
Mutual fund type:
    
 
Equity
23,841 
15,477 
 
Bond
3,417 
2,340 
 
Balanced
3,345 
2,186 
 
Money market
451 
522 
 
Total
31,054 
20,525 
 
Jackson is exposed to equity risk through the options embedded in the fixed indexed liabilities and GMDB and GMWB guarantees included in certain VA benefits as illustrated above. This risk is managed using a comprehensive equity hedging programme to minimise the risk of a significant economic impact as a result of increases or decreases in equity market levels while taking advantage of naturally offsetting exposures in Jackson's operations. Jackson purchases external futures and options that hedge the risks inherent in these products, while also considering the impact of rising and falling separate account fees.
 
As a result of this hedging programme, if the equity markets were to increase further in the future, Jackson's free-standing derivatives would decrease in value. However, over time, this movement would be broadly offset by increased separate account fees and reserve decreases, net of the related changes to amortisation of deferred acquisition costs. Due to the nature of the free-standing and embedded derivatives, this hedge, while highly effective on an economic basis, may not completely mute the immediate impact of equity market movements as the free-standing derivatives reset immediately while the hedged liabilities reset more slowly and fees are recognised prospectively. The opposite impacts would be observed if the equity markets were to decrease.
 
At 31 December 2010 based on the hedges in place at that time, it is estimated that an immediate decrease in the equity markets of 10 per cent would result in an accounting benefit, net of related DAC amortisation, before tax of up to £100 million (2009: £60 million), excluding the impact on future separate account fees. After related deferred tax there would have been an estimated increase in shareholders' equity at 31 December 2010 of up to £60 million (2009: £40 million). An immediate decrease in the equity markets of 20 per cent is estimated to result in an accounting benefit, net of related DAC amortisation, before tax of up to £170 million (2009: £110 million), excluding the impact on future separate account fees. After related deferred tax there would have been an estimated increase in shareholders' equity at 31 December 2010 of up to £110 million (2009: £80 million). An immediate increase in the equity markets of 10 and 20 per cent is estimated to result in an approximately equal and opposite estimated effect on profit and shareholders' equity as that disclosed above for a decrease.
 
The actual impact on financial results would vary contingent upon the volume of new product sales and lapses, changes to the derivative portfolio, correlation of market returns and various other factors including volatility, interest rates and elapsed time.
 
Other exposure to equity risk
 
In addition to the above, Jackson is also exposed to equity risk from its holding of equity securities, partnerships in investment pools and other financial derivatives.
 
A range of reasonably possible movements in the value of equity securities, partnerships in investment pools and other financial derivatives have been applied to Jackson's holdings at 31 December 2010 and 31 December 2009. The table below shows the sensitivity to a 10 and 20 per cent fall in value and the impact that this would have on pre-tax profit, net of related changes in amortisation of DAC, profit after tax and shareholders' equity.
 
 
2010 £m
2009 £m
 
A decrease of 20%
A decrease of 10%
A decrease of 20%
A decrease of 10%
Pre-tax profit, net of related changes in amortisation of DAC
(143)
(72)
(117)
(58)
Related deferred tax effects
50 
25 
41 
20 
Net sensitivity of profit after tax and shareholders' equity
(93)
(47)
(76)
(38)
 
A 10 or 20 per cent increase in their value is estimated to have an approximately equal and opposite effect on profit and shareholders' equity to the sensitivities shown above.
 
In the equity risk sensitivity analysis given above, the Group has considered the impact of an instantaneous 20 per cent fall in equity markets. If equity markets were to fall by more than 20 per cent, the Group believes that this would not be an instantaneous fall but rather this would be expected to occur over a period of time during which the Group would be able to put in place mitigating management actions.
 
Exposure to interest rate risk
Notwithstanding the market risk exposure previously described, except in the circumstances of interest rate scenarios where the guarantee rates included in contract terms are higher than crediting rates that can be supported from assets held to cover liabilities, the accounting measurement of fixed annuity liabilities of Jackson products is not generally sensitive to interest rate risk. This position derives from the nature of the products and the US GAAP (as 'grandfathered' under IFRS 4) basis of measurement. The GMWB features  attaching to variable annuity business (other than "for-life") represents embedded derivatives which are fair valued and so will be sensitive to changes in interest rate.
 
Debt securities and related derivatives are marked to fair value. Value movements on derivatives, again net of related changes to amortisation of DAC and deferred tax, are recorded within profit and loss. Fair value movements on debt securities, net of related changes to amortisation of DAC and deferred tax, are recorded within other comprehensive income. The estimated sensitivity of these items and policyholder liabilities to a one per cent and two per cent decrease and increase in interest rates at 31 December 2010 and 2009 is as follows:

 
   
2010 £m
2009 £m
   
A 2% decrease
A 1% decrease
A 1% increase
A 2% increase
A 2% decrease
A 1% decrease
A 1% increase
A 2% increase
Profit and loss
                
Direct effect
                
 
Derivatives value change
842 
363 
(277)
(529)
(319)
(148)
159 
370 
 
Policyholder liabilities
(547)
(243)
219 
416 
(418)
(185)
170 
334 
Related effect on amortisation of DAC
47 
23 
(34)
(63)
364 
162 
(156)
(328)
                   
Pre-tax profit effect
                
 
Operating profit based on longer-term investment returns
579 
245 
(181)
(345)
(144)
(62)
56 
109 
 
Short-term fluctuations in investment returns
(237)
(102)
89 
169 
(229)
(109)
117 
267 
   
342 
143 
(92)
(176)
(373)
(171)
173 
376 
Related effect on charge for deferred tax
(120)
(50)
32 
62 
131 
60 
(60)
(131)
Net profit effect
222 
93 
(60)
(114)
(242)
(111)
113 
245 
                   
Other comprehensive income
                
Direct effect on carrying value of debt securities
2,663 
1,454 
(1,454)
(2,663)
2,183 
1,179 
(1,179)
(2,183)
Related effect on amortisation of DAC
(1,174)
(641)
641 
1,174 
(764)
(413)
413 
764 
Related effect on movement in deferred tax
(521)
(285)
285 
521 
(497)
(268)
268 
497 
Net effect
968 
528 
(528)
(968)
922 
498 
(498)
(922)
Total net effect on IFRS equity
1,190 
621 
(588)
(1,082)
680 
387 
(385)
(677)
 
(iii)   Asian insurance operations
 
Sensitivity of IFRS basis profit and equity to market and other risks
Currency translation
Consistent with the Group's accounting policies, the profits of the Asian insurance operations are translated at average exchange rates and shareholders' equity at the closing rate for the reporting period.
 
A 10 per cent increase or decrease in these rates would have reduced or increased profit before tax attributable to shareholders, profit for the year and shareholders' equity, excluding goodwill, attributable to Asian operations respectively as follows:
 
 
A 10% increase in exchange rates
A 10% decrease in exchange rates
 
2010 
2009 
2010 
2009 
 
£m
£m
£m
£m
Profit before tax attributable to shareholders (note(i))
(65)
(40)
80 
49 
Profit for the year
(58)
(35)
71 
43 
Shareholders' equity, excluding goodwill, attributable to Asian operations
(193)
(129)
236 
158 
 
Note
 (i)
Sensitivity on profit before tax i.e. aggregate of the operating profit based on longer-term investment returns, short-term fluctuations in investment returns, and actuarial gains and losses on defined benefit pension schemes but excluding the loss on sale and results for Taiwan agency business.
 
Other risks
With-profits business
Similar principles to those explained for UK with-profits business apply to profit emergence for the Asian with-profits business.
Correspondingly, the profit emergence reflects bonus declaration and is relatively insensitive to period by period fluctuations in insurance risk or interest rate movements.
Unit-linked business
As for the UK insurance operations, the profits and shareholders' equity related to the Asian operations is primarily driven by charges related to invested funds. For the Asian operations, substantially all of the contracts are classified as insurance contracts under IFRS 4, i.e. containing significant insurance risk. The sensitivity of profits and equity to changes in insurance risk is minor and, to interest rate risk, not material.
 
Other business
Interest rate risk
Asian operations offer a range of insurance and investment products, predominately with-profits and non-participating term, whole life endowment and unit-linked. Excluding with-profit and unit-linked business, the results of the Asian business are sensitive to the vagaries of routine movements in interest rates.
 
For the purposes of analysing sensitivity to variations in interest rates, it has been determined for the majority of territories that a movement of 1 per cent in the 10 year government bond rate can be considered reasonably possible. At 31 December 2010, 10 year government bond rates vary from territory to territory and range from 1.1 per cent to 12.25 per cent (2009: 1.3 per cent to 11.45 per cent). Exception to this arises in Japan and Taiwan where reasonably possible interest rate movements have been determined as 0.5 per cent (2009: Japan and Taiwan 0.5 per cent). These reasonably possible changes would have the following impact:
 
 
2010 £m
2009 £m
   
A decrease of 1% (note (i))
  
A decrease of 1% (note (i))
Pre-tax profit
  
110 
  
91 
Related deferred tax (where applicable)
  
(41)
  
(22)
Net effect on profit and equity
  
69 
  
69 
 
Note
(i)
One per cent sensitivity has been used in all territories (except Japan and Taiwan (0.5 per cent)) (2009: Japan and Taiwan 0.5 per cent)
 
          The pre-tax impacts, if they arose, would mostly be recorded within the category short-term fluctuations in investments returns in the Group's segmental analysis of profit before tax.
          At 31 December 2010, an increase in the rates of one per cent (Japan and Taiwan (0.5 per cent) (2009: one per cent except Japan and Taiwan 0.5 per cent) is estimated to have the effect of decreasing pre-tax profit by £112 
          million (2009: £109 million). After adjusting these results for deferred tax the reasonable possible effect on shareholders' equity is a decrease of £82 million (2009: £83 million).
Equity price risk
 
 
The non-linked shareholder business has limited exposure to equity and property investment (£515 million at 31 December 2010). Generally changes in equity and property investment values are not automatically matched by investments in policyholder liabilities. However for the Vietnam business, to the extent that equity investment appreciation is realised through sales of securities then policyholders' liabilities are adjusted to the extent that policyholders participate.
 
The estimated sensitivity to a 10 and 20 per cent change in equity and property prices for shareholder-backed Asian other business, which would be reflected in the short-term fluctuation component of the Group's segmental analysis of profit before tax, at 31 December 2010 and 2009 would be as follows:
 
 
2010 £m
2009 £m
 
A decrease of 20%
A decrease of 10%
A decrease of 20%
A decrease of 10%
Pre-tax profit
(103)
(52)
(58)
(29)
Related deferred tax (where applicable)
10 
5 
8 
4 
Net effect on profit and equity
(93)
(47)
(50)
(25)
 
A 10 or 20 per cent increase in their value is estimated to have an approximately equal and opposite effect on profit and shareholders' equity to the sensitivities shown above.
 
In the equity risk sensitivity analysis given above the Group has considered the impact of an instantaneous 20 per cent fall in equity markets. If equity markets were to fall by more than 20 per cent, the Group believes that this would not be an instantaneous fall but rather this would be expected to occur over a period of time during which the Group would be able to put in place mitigating management actions.
 
Insurance risk
Many of the territories in Asia are exposed to mortality/morbidity risk and provision is made within IFRS policyholder liabilities on a prudent regulatory basis to cover the potential exposure. If these prudent assumptions were strengthened by five per cent (estimated at one in ten year shock) then it is estimated that post tax IFRS profit would be impacted by approximately £21 million (2009: £9 million) (with a corresponding change to IFRS shareholders' equity). Mortality/morbidity has a symmetrical effect on portfolio and so a weakening of mortality/morbidity assumptions would have an approximately equal and opposite similar impact.
 
(iv)    Asset management operations#
         
         Currency translation
 
Consistent with the Group's accounting policies, the profits of the Asia and PPM America asset management operations are translated at average exchange rates and shareholders' equity at the closing rate for the reporting period. The rates for the most significant operations are given in note VII.
 
A 10 per cent increase in the relevant exchange rates would have reduced reported profit before tax attributable to shareholders and shareholders' equity, excluding goodwill attributable to Asia and PPM America asset management operations, by £9 million (2009: £5 million) and £28 million (2009: £23 million) respectively.
 
 
 
Other sensitivities to other financial risks for asset management operations
The principal sensitivities to other financial risk of asset management operations are credit risk on the bridging loan portfolio of the Prudential Capital operation and the indirect effect of changes to market values of funds under management. Due to the nature of the asset management operations there is limited direct sensitivity to movements in interest rates. Total debt securities held at 31 December 2010 by asset management operations were £1,574 million (2009: £1,164 million), the majority of which are held by the Prudential Capital operation. Debt securities held by M&G and Prudential Capital are in general variable rate bonds and so market value is limited in sensitivity to interest rate movements and consequently any change in interest rates would not have a material impact on profit or shareholder's equity. Asset management operations do not hold significant investments in property or equities.
 
AB   Share capital, share premium and own shares
 
   
2010 
   
Number of ordinary shares
Share capital
Share premium
     
£m
£m
Issued shares of 5p each fully paid:
      
 
At 1 January 2010
2,532,227,471 
127 
1,843 
 
Shares issued under share option schemes
2,455,227 
 - 
13 
 
Shares issued in lieu of cash dividends
10,911,808 
 - 
62 
 
Reserve movements in respect of shares issued in lieu of cash dividends
 - 
 - 
(62)
At 31 December 2010
2,545,594,506 
127 
1,856 
 
   
2009 
         
 
Number of ordinary shares
Share capital
Share premium
     
£m
£m
Issued shares of 5p each fully paid:
      
 
At 1 January 2009
2,496,947,688 
125 
1,840 
 
Shares issued under share option schemes
605,721 
-
3 
 
Shares issued in lieu of cash dividends
34,674,062 
2 
136 
 
Reserve movements in respect of shares issued in lieu of cash dividends
-
-
(136)
At 31 December 2009
2,532,227,471 
127 
1,843 
 
Amounts recorded in share capital represent the nominal value of the shares issued. The difference between the proceeds received on issue of shares, net of issue costs, and the nominal value of shares issued is credited to the share premium account.
Shares issued in lieu of cash dividends are considered to take the legal form of bonus issue shares and have been accounted for as such.
 
At 31 December 2010, there were options outstanding under Save As You Earn schemes to subscribe for 12,802,482 (2009: 12,230,833) shares at prices ranging from 288 pence to 572 pence (2009: 266 pence to 572 pence) and exercisable by the year 2016 (2009: 2016).
 
The cost of own shares of £75 million as at 31 December 2010 (2009: £75 million) is deducted from retained earnings. The Company has established trusts to facilitate the delivery of shares under employee incentive plans and savings-related share option schemes. At 31 December 2010, 4.5 million (2009: 5.3 million) Prudential plc shares with a market value of £30 million (2009: £34 million) were held in such trusts. Of this total, 4.4 million (2009: 4.8 million) shares were held in trusts under employee incentive plans. In 2010, the Company purchased 5.7 million (2009: 3.4 million) shares in respect of employee incentive plans at a cost of £32 million (2009: £17 million). The maximum number of shares held in the year was 5.3 million which was at the beginning of the year.
 
Of the total shares held in trust 0.1 million (2009: 0.5 million) were held by a qualifying employee share ownership trust. These shares are expected to be fully distributed in the future on maturity of savings-related share option schemes.

 
The shares purchased each month are as follows:
2010 
    
Share Price
    
Number of shares
  
Low
  
High
  
Cost
     
£
  
£
  
£
January
9,338 
  
6.38 
  
6.38 
  
59,530 
February
11,638 
  
5.68 
  
5.68 
  
66,046 
March
3,908,274 
  
5.16 
  
6.09 
  
20,884,460 
April
11,129 
  
5.63 
  
5.63 
  
62,601 
May
14,638 
  
5.59 
  
5.59 
  
81,753 
June
190,991 
  
5.26 
  
5.66 
  
1,075,712 
July
13,457 
  
5.14 
  
5.14 
  
69,102 
August
10,016 
  
5.86 
  
5.86 
  
58,644 
September
13,727 
  
5.25 
  
5.84 
  
78,539 
October
11,634 
  
6.37 
  
6.37 
  
74,108 
November
385,321 
  
5.74 
  
6.49 
  
2,244,770 
December
1,153,611 
  
6.04 
  
6.65 
  
7,445,358 
2010 Total
5,733,774 
          
32,200,623 
 
The shares purchased each month are as follows:
2009 
    
Share Price
    
Number of shares
  
Low
  
High
  
Cost
     
£
  
£
  
£
January
19,852 
  
3.83 
  
3.94 
  
76,575 
February
19,926 
  
3.52 
  
3.52 
  
70,140 
March
1,112,209 
  
2.02 
  
3.50 
  
3,837,968 
April
22,164 
  
3.38 
  
3.38 
  
74,859 
May
32,416 
  
4.45 
  
6.59 
  
173,242 
June
26,594 
  
4.44 
  
7.31 
  
145,230 
July
342,062 
  
3.86 
  
4.03 
  
1,374,929 
August
14,059 
  
4.85 
  
4.85 
  
68,144 
September
12,435 
  
5.50 
  
5.50 
  
68,393 
October
10,332 
  
6.34 
  
6.34 
  
65,453 
November
10,576 
  
6.04 
  
6.04 
  
63,879 
December
1,739,591 
  
6.06 
  
6.35 
  
10,941,847 
2009 Total
3,362,216 
          
16,960,659 
 
The Group has consolidated a number of authorised investment funds where it is deemed to control these funds under IFRS. Some of these funds hold shares in Prudential plc. The total number of shares held by these funds at 31 December 2010 was 9.8 million (2009: 10.6 million) and the cost of acquiring these shares of £47 million (2009: £50 million) is included in the cost of own shares. The market value of these shares as at 31 December 2010 was £65 million (2009: £67 million).
 
During 2010 and 2009 respectively, these funds made 833,618 net disposals and 1,414,263 net acquisitions of Prudential shares for a net decrease of £3 million and a net increase of £3 million to book cost.
               
All share transactions were made on an exchange other than the Stock Exchange of Hong Kong.
 
The Company did not buy back any of its own shares during 2010 or 2009.
 
AC   Post balance sheet events
 
In January 2011, the Company issued US$550 million 7.75 per cent Tier 1 subordinated debt, primarily to retail investors. The proceeds, net of costs, were US$539 million and are intended to finance the repayments of the €500 million Tier 2 subordinated notes in December 2011. 
 
Additional Unaudited Financial Information
 
1     Analysis of long-term insurance business pre-tax IFRS operating profit based on longer-term investment returns by driver
 
This schedule classifies the Group's pre-tax operating earnings from long-term insurance operations into the underlying drivers of those profits, using the following categories:
 
 (i)
Spread income represents the difference between net investment income (or premium income in the case of the UK annuities new business) and amounts credited to policyholder accounts. It excludes the longer-term investment return on assets in excess of those covering shareholder-backed policyholder liabilities, which has been separately disclosed as expected return on shareholder assets.
 (ii)    
Fee income represents profits driven by net investment performance, being asset management fees that vary with the size of the underlying policyholder funds net of investment management expenses.
(iii)
With-profits business represents the shareholders' transfer from the with-profits fund in the period.
 
Insurance margin primarily represents profits derived from the insurance risks of mortality, morbidity and persistency.
(v) 
Margin on revenues primarily represents amounts deducted from premiums to cover acquisition costs and administration expenses.
(vi)
Acquisition costs and administration expenses represent expenses incurred in the period attributable to shareholders. It excludes items such as restructuring costs and Solvency II costs which are not included in the segment profit for insurance as well as items that are more appropriately included in other source of earnings lines (e.g. investment expenses are netted off investment income as part of spread income or fee income as appropriate).
(vii)
DAC adjustments comprises DAC amortisation for the period, excluding amounts related to short-term fluctuations, net of costs deferred in respect of new business.
 
Analysis of pre-tax IFRS operating profit by source
   
2010 
   
Asia 
US 
UK 
  
Total 
 
Unallocated 
   
£m 
£m 
£m 
£m 
£m 
Spread income
70 
692 
251 
 - 
1,013 
Fee income
122 
506 
60 
 - 
688 
With-profits
32 
- 
310 
 - 
342 
Insurance margin
392 
188 
12 
 - 
592 
Margin on revenues
1,018 
- 
223 
 - 
1,241 
Expenses
          
 
Acquisition costs
(656)
(851)
(167)
 - 
(1,674)
 
Administration expenses
(467)
(344)
(113)
 - 
(924)
 
DAC adjustments
2 
517 
(1)
 - 
518 
Expected return on shareholder assets
19 
125 
98 
 - 
242 
Long-term business operating profit
532 
833 
673 
 - 
2,038 
Asset management operating profit
72 
22 
284 
 - 
378 
GI commission
 - 
 - 
46 
 - 
46 
Other income and expenditure*
 - 
 - 
 - 
(521)
(521)
Total operating profit based on longer-term investment returns
604 
855 
1,003 
(521)
1,941 
             
   
2009 (i)
   
Asia 
US 
UK 
Unallocated 
Total 
   
£m 
£m 
£m 
£m 
£m 
Spread income
31 
524 
198 
 - 
753 
Fee income
80 
324 
54 
 - 
458 
With-profits
29 
- 
281 
 - 
310 
Insurance margin
253 
154 
41 
 - 
448 
Margin on revenues
766 
- 
275 
 - 
1,041 
Expenses
          
 
Acquisition costs
(605)
(690)
(192)
 - 
(1,487)
 
Administration expenses
(382)
(259)
(173)
 - 
(814)
 
DAC adjustments
150 
467 
(3)
 - 
614 
Expected return on shareholder assets
25 
98 
125 
 - 
248 
Non-recurrent release of reserves for Malaysia life operations
63 
- 
- 
 - 
63 
Long-term business operating profit
410 
618 
606 
 - 
1,634 
Asset management operating profit
55 
4 
238 
 - 
297 
GI commission
 - 
 - 
51 
 - 
51 
Other income and expenditure*
 - 
 - 
 - 
(418)
(418)
Total operating profit based on longer-term investment returns
465 
622 
895 
(418)
1,564 
*Including restructuring and Solvency II implementation costs.
          
 
   
2008 (i)
   
Asia 
US 
UK 
Unallocated 
Total 
   
£m 
£m 
£m 
£m 
£m 
Spread income
38 
461 
35 
 - 
534 
Fee income
54 
292 
57 
 - 
403 
With-profits
30 
 - 
395 
 - 
425 
Insurance margin
198 
161 
(12)
 - 
347 
Margin on revenues
672 
- 
314 
 - 
986 
Expenses
          
 
Acquisition costs
(619)
(451)
(172)
 - 
(1,242)
 
Administration expenses
(331)
(217)
(212)
 - 
(760)
 
DAC adjustments
173 
 - 
32 
 - 
205 
Expected return on shareholder assets
16 
89 
108 
- 
213 
Long-term business operating profit
231 
335 
545 
 - 
1,111 
Asset management operating profit
52 
7 
286 
 - 
345 
GI commission
 - 
 - 
44 
 - 
44 
Other income and expenditure*
 - 
 - 
- 
(288)
(288)
Total operating profit based on longer-term investment returns
283 
342 
875 
(288)
1,212 
*Including restructuring and Solvency II implementation costs.
          
 
(i) 
During 2010 the Group amended its presentation of operating profit for its US insurance operations to remove the net equity hedge accounting effect associated with Jackson's variable annuity and fixed index annuity products, which are now classified in the Group's supplementary analysis of profit before tax attributable to shareholders as part of short term fluctuations in investment returns. 2009 and 2008 operating profit have been amended accordingly and so net equity hedge effects of £159 million negative and £71 million positive have been removed from the previously stated operating profits of £1,405 million and £1,283 million to give a restated value of £1,564 million and £1,212 million, respectively.
 
 

Margin analysis of long-term insurance business
 
The following analysis expresses certain of the Group's sources of operating profit as a margin of policyholder liabilities or other suitable driver. Details of the Group's average policyholder liability balances are given in note Z.
 
           
Total
            
     
2010 
      
2009 
      
2008 
  
     
Average  
      
Average  
      
Average  
  
   
Profit  
Liability 
Margin 
  
Profit  
Liability 
Margin 
  
Profit  
Liability 
Margin 
Long-term business
£m 
£m 
bps 
  
£m 
£m 
bps 
  
£m 
£m 
bps 
                         
Spread income
1,013 
53,858 
188 
  
753 
51,000 
148 
  
534 
44,281 
121 
Fee income
688 
57,496 
120 
  
458 
43,373 
106 
  
403 
38,850 
104 
With-profits
342 
89,693 
38 
  
310 
84,063 
37 
  
425 
89,075 
48 
Insurance margin
592 
      
448 
      
347 
    
Margin on revenues
1,241 
      
1,041 
      
986 
    
Expenses
                      
 
Acquisition costs*
(1,674)
3,492 
(48%)
  
(1,487)
2,896 
(51%)
  
(1,242)
2,879 
(43%)
 
Administration expenses
(924)
111,354 
(83)
  
(814)
94,373 
(86)
  
(760)
83,131 
(91)
 
DAC adjustments
518 
      
614 
      
205 
    
Expected return on shareholder assets
242 
      
248 
      
213 
    
Non-recurrent release of reserve for Malaysia Life
- 
      
63 
      
- 
    
Operating profit
2,038 
      
1,634 
      
1,111 
    
                         
           
Asia
            
     
2010 
      
2009 
      
2008 
  
     
Average 
      
Average  
      
Average 
  
   
Profit 
Liability 
Margin 
  
Profit  
Liability 
Margin 
  
Profit 
Liability 
Margin 
Long-term business
£m 
£m 
bps 
  
£m 
£m 
bps 
  
£m 
£m 
bps 
                         
Spread income
70 
4,393 
159 
  
31 
3,152 
98 
  
38 
2,421 
157 
Fee income
122 
11,222 
109 
  
80 
8,107 
99 
  
54 
6,419 
84 
With-profits
32 
10,135 
32 
  
29 
8,371 
35 
  
30 
7,168 
42 
Insurance margin
392 
      
253 
      
198 
    
Margin on revenues
1,018 
      
766 
      
672 
    
Expenses
                      
 
Acquisition costs*
(656)
1,508 
(44%)
  
(605)
1,261 
(48%)
  
(619)
1,216 
(51%)
 
Administration expenses
(467)
15,615 
(299)
  
(382)
11,259 
(339)
  
(331)
8,840 
(374)
 
DAC adjustments
2 
      
150 
      
173 
    
Expected return on shareholder assets
19 
      
25 
      
16 
    
Non-recurrent release of reserve for Malaysia Life
- 
      
63 
      
- 
    
Operating profit
532 
      
410 
      
231 
    
* The ratio for acquisition costs is calculated as a percentage of APE including with-profits sales and Japan (2010: £7 million; 2009: £52 million). Acquisition costs include only those relating to shareholders.
 
Analysis of Asian operating profit drivers
 
•  
Spread income has increased from £31 million in 2009 to £70 million in 2010. This increase arises primarily as a result of improved investment return in Vietnam (where the return in 2009 was particularly low compared to both 2008 and 2010) and additional dividend income received in Japan.
 
 
•  
Fee income has increased both in absolute terms by £42 million and as an improvement in margin, which has increased 10bps to 109bps. This primarily relates in a change in mix towards those countries with a higher asset management fee margin (e.g. Indonesia) from countries where fees charged are lower.
 
 
•  
Insurance margin has increased by £139 million from £253 million in 2009 to £392 million in 2010. This reflects the continued growth in the in-force book, which has a relatively high proportion of risk-based products. 2010 includes £19 million relating to reserving changes in India and China.
 
 
•  
Margin on revenues has increased by £252 million reflecting the growth in the size of the portfolio and changes in country mix.
 
•  
Acquisition costs - the costs as a percentage of APE new business sales has fallen over the period 2008-2010 reflecting management's continued focus on capital management activities, such as the closure of Japan to new business in the first quarter of 2010 and changes to business and country mix. The analysis above uses shareholder acquisition costs as a proportion of total APE, excluding with profits sales from the denominator the margin would become 2010: 53 per cent, 2009: 56 per cent and 2008: 58 per cent.
 
 
• 
Administration expense margin has reduced from 339 bps in 2009 in part reflecting operational leverage benefit and a shift in mix towards countries with highly efficient business models (e.g. Indonesia).
 
           
US
            
     
2010 
      
2009 
      
2008 
  
     
Average
      
Average
      
Average
  
   
Profit
Liability
Margin
  
Profit
Liability
Margin
  
Profit
Liability
Margin
Long-term business
£m
£m
bps
  
£m
£m
bps
  
£m
£m
bps
                         
Spread income
692 
28,496 
243 
  
524 
29,248 
179 
  
461 
25,322 
182 
Fee income
506 
25,921 
195 
  
324 
17,589 
184 
  
292 
14,783 
198 
With-profits
- 
      
- 
      
- 
    
Insurance margin
188 
      
154 
      
161 
    
Margin on revenues
- 
      
- 
      
- 
    
Expenses
                      
 
Acquisition costs
(851)
1,164 
(73%)
  
(690)
912 
(76%)
  
(451)
716 
(63%)
 
Administration expenses
(344)
54,417 
(63)
  
(259)
46,837 
(55)
  
(217)
40,105 
(54)
 
DAC adjustments
517 
      
467 
      
- 
    
Expected return on shareholder assets
125 
      
98 
      
89 
    
Operating profit
833 
      
618 
      
335 
    
                         
 
Analysis of US operating profit drivers:
 
 • 
Spread income benefited from the effect of transactions to more closely match the overall asset and liability duration in 2010. Excluding this effect (£108 million), spread margin in 2010 would have been 205 bps. The increase over the 2009 margin of 179 bps is due in part to decreased crediting rates on fixed annuities.
 
 
• 
Fee income margins are based on the average of the opening and closing separate account balances. In normal years this is expected to be a reasonable proxy for the average balances throughout the year. In 2009 separate account flows were weighted towards the end of the year artificially lowering the 2009 margin. Using an average based on end of month balances, margins show little movement between years, (2010: 200bps; 2009: 203bps; 2008: 200bps) indicating that absolute revenue amounts are growing in line with separate accounts values. Separate account values increased between 2008 and 2010 both as a result of strong sales and improving equity markets.
 
 
• 
Insurance margin represents operating profits from insurance risks, including variable annuity guarantees and other sundry net income. Positive net flows into variable annuity business with life contingent and other guarantees have helped improved the margin from £154 million in 2009 to £188 million in 2010.
 
 
• 
Acquisition costs have increased in 2010 in absolute terms compared to 2009 following an increase in sales volumes. However acquisition costs as a percentage of APE has fallen from 76 per cent in 2009 to 73 per cent in 2010 as more advisors are electing to take asset based commission, which is paid over the life of the policy based on fund value. This asset based-commission is treated as an administration expense in this analysis as opposed to a cost of acquisition, resulting in a lower acquisition cost ratio but a higher administration expenses margin.
 
 
 
2008 acquisition costs as a percentage of APE sales was 63 per cent, lower than 2009 and 2010. This is primarily because sales of GICs in 2008 (APE £120 million), on which no acquisition costs are incurred, reduces the margin for that year. Excluding GIC APE sales the acquisition cost ratio for 2008 becomes 76 per cent, in line with 2009.
 
 
• 
Administration expenses margin has increased to 63 bps in 2010 partly as a result of higher asset based commission, which lowers acquisition costs but increases the expenses classified as administration expenses in the table above.

 
           
UK
            
   
2010 
      
2009 
      
2008 
  
     
Average 
      
Average  
      
Average  
  
   
Profit  
Liability 
Margin 
  
Profit  
Liability 
Margin 
  
Profit  
Liability 
Margin 
Long-term business
£m 
£m 
bps 
  
£m 
£m 
bps 
  
£m 
£m 
bps 
                         
Spread income
251 
20,969 
120 
  
198 
18,600 
106 
  
35 
16,538 
21 
Fee income
60 
20,353 
29 
  
54 
17,677 
31 
  
57 
17,648 
32 
With-profits
310 
79,558 
39 
  
281 
75,692 
37 
  
395 
81,907 
48 
Insurance margin
12 
      
41 
      
(12)
    
Margin on revenues
223 
      
275 
      
314 
    
Expenses
                      
 
Acquisition costs*
(167)
820 
(20%)
  
(192)
723 
(27%)
  
(172)
947 
(18%)
 
Administration expenses
(113)
41,322 
(27)
  
(173)
36,277 
(48)
  
(212)
34,186 
(62)
 
DAC adjustments
(1)
      
(3)
      
32 
    
Expected return on shareholder assets
98 
      
125 
      
108 
    
Operating profit
673 
      
606 
      
545 
    
* The ratio for acquisition costs is calculated as a percentage of APE including with-profits sales. Acquisition costs include only those relating to shareholders.
 
 
Analysis of UK operating profit drivers:
 
•
Spread income has increased by £53 million to £251 million in 2010 reflecting in a higher margin of 120 bps, up from 106 bps last year. The improved margin primarily reflects the beneficial impacts of the bulk annuity deal written in 2010, improved margins on retail annuity new business and improved spread on equity release business following its closure to new business. Spread income was lower in 2008 due to lower margins on new business and the establishment of credit default and deflation reserves in that year in light of the credit crisis offset by the impact of actions to rebalance the credit portfolio.
 
 
•
Fee income has increased by 11 per cent to £60 million broadly in line with the value of unit-linked liabilities following the improvement in equity markets.
 
 
•
 
Margin on revenues represents premiums charges for expenses and other sundry net income received by the UK. Lower amounts were recorded in 2010 (£223 million) compared to 2009 (£275 million) reflecting, in part, lower premiums from shareholder-backed retail business in 2010 as compared to 2009.
 
 
•
 
Insurance margin has fallen by £29 million to £12 million in 2010 reflecting that 2009 included a one-off benefit of £34 million in respect of a longevity swap on certain aspects of the UK's annuity back-book liabilities, which was not repeated in 2010.
 
•
 
Acquisition costs as a percentage of new business sales has fallen from 27 per cent in 2009 to 20 per cent in 2010. This reflects in part the impact of the bulk annuity deal which contributed £88 million APE in the period with a relatively low level of acquisition costs, together with the closure of equity release to new business as well as on-going cost saving initiatives.
 
The ratio above expresses the percentage of shareholder acquisition costs as a percentage of total APE sales. It is therefore impacted by the level of with-profit sales in the year. Acquisition costs as a percentage of shareholder-backed new business sales were 36 per cent in 2010 (49 per cent in 2009), with the most significant impact being the effect of the bulk annuity deal.
 
•
 
Administration expenseshave fallen by £60 million to £113 million and the ratio from 48 bps in 2009 to 27 bps in 2010. This is primarily the result of cost savings initiatives initiated by the UKIO in line with the business's stated objectives.
 
 
2          Asian operations - analysis of operating profit by territory
 
Operating profit based on longer-term investment returns for Asian operations are analysed as follows:
     
 
2010 
2009 
 
£m
£m
China(note (ii))
(12)
4 
Hong Kong
51 
48 
India(note (iii))
60 
12 
Indonesia
157 
102 
Japan
(6)
(18)
Korea
12 
6 
Malaysia  
    
- Underlying results
97 
65 
- Exceptional credit(note (i))
  
63 
Philippines
2 
2 
Singapore
129 
112 
Taiwan bancassurance business (note (iv))
(4)
(7)
Thailand
2 
(1)
Vietnam
43 
30 
Other
5 
(2)
Total insurance operations (note (v))
536 
416 
Development expenses
(4)
(6)
Total long-term business operating profit  
532 
410 
Asset management
72 
55 
Total Asian operations  
604 
465 
 
 
Notes
 (i) 
For the Malaysia life business, under the basis applied previously, 2008 IFRS basis liabilities were determined on the local regulatory basis using prescribed interest rates such that a high degree of prudence resulted. As of 1 January 2009, the local regulatory basis has been replaced by the Malaysian authority's risk-based capital (RBC) framework. In the light of this development; the Company has re-measured the liabilities by reference to the method applied under the new RBC framework, which is more realistic than the previous approach, but with an overlay constraint to the method such that negative reserves derived at an individual policyholder level are not included. This change has resulted in a one-off release from liabilities at 1 January 2009 of £63 million.
 (ii)  
China's operating loss of £12 million is after a net charge of £17 million for local reserving changes and associated impacts that have been reflected in the Group's IFRS accounts. Excluding this effect, China's underlying result is a £5 million profit.
 (iii)
The operating profit of £60 million from India, a joint venture, includes £36 million arising from changes that improve the reserving estimation technique. Excluding this effect, India's underlying result is a profit of £24 million.
 (iv) 
Sale of Taiwan agency business
          In order to facilitate comparisons of operating profit based on longer-term investment returns that reflect the Group's retained operations, the results attributable to the Taiwan agency business for which the sale process was
          completed in June 2009 are excluded from analysis of operating profit.
(v) 
Analysis of operating profit between new and in-force business
The result for insurance operations comprises amounts in respect of new business and business in-force as follows:
 
 
2010 
2009 
 
£m
£m
New business strain (excluding Japan)
(56)
(72)
Japan
(1)
(6)
New business strain (including Japan)
(57)
(78)
Business in force
593 
494 
Total
536 
416 
 
The IFRS new business strain corresponds to approximately four per cent of new business APE premiums for 2010 (2009: approximately six per cent of new business APE).
 
The strain reflects the aggregate of the pre-tax regulatory basis strain to net worth after IFRS adjustments for deferral of acquisition costs and deferred income where appropriate.
 

3       Analysis of asset management operating profit based on longer-term investment returns
 
 
2010 
 
M&G(i)
Asia(i)
PruCap
US
Total
 
£m
£m
£m
£m
£m
Operating income before performance-related fees
615 
185 
88 
229 
1,117 
Performance-related fees
17 
6 
- 
 - 
23 
Operating income*
632 
191 
88 
229 
1,140 
Operating expense
(386)
(119)
(50)
(207)
(762)
Operating profit based on longer-term investment returns
246 
72 
38 
22 
378 
Average funds under management (FUM)**
186.5 bn
47.2 bn
      
           
Margin based on operating income**
34 bps
40 bps
      
Cost / income ratio***
63%
64%
      
           
 
2009 
 
M&G(i)
Asia(i)
PruCap
US
Total
 
£m
£m
£m
£m
£m
Operating income before performance-related fees
470 
157 
89 
183 
899 
Performance-related fees
12 
3 
- 
 - 
15 
Operating income*
482 
160 
89 
183 
 914 
Operating expense
(305)
(105)
(28)
(179)
(617)
Operating profit based on longer-term investment returns
177 
55 
61 
4 
297 
Average funds under management (FUM)**
157.5 bn
39.6 bn
      
           
Margin based on operating income**
31 bps
40 bps
      
Cost / income ratio***
65%
67%
      
           
 
2008 
 
M&G(i)
Asia(i)
PruCap
US
Total
 
£m
£m
£m
£m
£m
Operating income before performance-related fees
480 
144 
123 
139 
886 
Performance-related fees
43 
3 
- 
 - 
46 
Operating income*
523 
147 
123 
139 
932 
Operating expense
(295)
(95)
(65)
(132)
(587)
Operating profit based on longer-term investment return
228 
52 
58 
7 
345 
Average funds under management (FUM)**
154.0 bn
36.9 bn
      
           
Margin based on operating income**
34 bps
40 bps
      
Cost / income ratio***
61%
66%
      
 
(i)    M&G and Asia asset management businesses can be further analysed as follows:
                             
     
M&G
              
Asia
      
Operating income*
  
Operating income*
 
Retail
Margin
 of FUM**
Institu-
tional+
Margin
 of FUM**
Total
Margin
 of FUM**
    
Retail
Margin
 of FUM**
Institu-
tional+
Margin
 of FUM**
Total
Margin
 of FUM**
 
£m 
bps 
£m 
bps 
£m 
bps 
    
£m 
bps 
£m 
bps 
£m 
bps 
2010 
345 
93 
287 
19 
632 
34 
  
2010 
120 
62 
71 
26 
191 
40 
2009 
255 
102 
227 
17 
482 
31 
  
2009 
98 
60 
62 
27 
160 
40 
2008 
243 
122 
280 
21 
523 
34 
  
2008 
91 
59 
56 
26 
147 
40 
 
 
*    Operating income is net of commissions and includes performance related fees.
 
**  Margin represents operating income as a proportion of the related funds under management (FUM). Opening and closing internal and external funds managed by the respective entity have been used to derive the average. Any funds held by the Group's insurance operations which are managed by third parties outside of the Prudential Group are excluded from these amounts.
 
***    Cost / income ratio is calculated as cost as a percentage of income excluding performance-related fees.
 
+      Institutional includes internal funds.
 
 
4          Shareholders' funds summary by business unit and net asset value per share
 
(i)
Shareholders' fund summary
         
   
2010 
  
2009 
   
£m 
  
£m 
Asian operations
      
Insurance operations
      
 
Net assets of operation 
1,913 
  
1,382 
 
Acquired goodwill
236 
  
80 
 
Total
2,149 
  
1,462 
Asset management
      
 
Net assets of operation
197 
  
161 
 
Acquired goodwill
61 
  
61 
 
Total
258 
  
222 
 
Total
2,407 
  
1,684 
         
US operations
      
 
Jackson (net of surplus note borrowings) 
3,815 
  
3,011 
 
Broker-dealer and asset management operations:
      
 
Net assets of operation
106 
  
95 
 
Acquired goodwill
16 
  
16 
 
Total
122 
  
111 
 
Total
3,937 
  
3,122 
         
UK operations
      
Insurance operations:
      
 
Long-term business operations
2,115 
  
1,902 
 
Other
33 
  
37 
 
Total
2,148 
  
1,939 
M&G
      
 
Net assets of operation
254 
  
173 
 
Acquired goodwill
1,153 
  
1,153 
 
Total
1,407 
  
1,326 
 
Total
3,555 
  
3,265 
         
Other operations
      
 
Holding company net borrowings 
(2,035)
  
(1,754)
 
Shareholders' share of provision for future deficit funding of the Prudential Staff Pension Scheme (net of tax) 
(10)
  
(16)
 
Other net assets (liabilities)
177 
  
(30)
Total
(1,868)
  
(1,800)
Total of all operations
8,031 
  
6,271 
       
   
 
(ii)
Net asset value per share  
       
   
2010 
2009 
   
£m 
£m 
       
Closing equity shareholders' funds
8,031 
6,271 
Net asset value per share attributable to equity shareholders(note (i))
315 p
248 p
       
Note
    
(i)
Based on the closing issued share capital as at 31 December 2010 of 2,546 million shares (2009: 2,532 million shares).
 
 
5       Memorandum fair value of Jackson's GMDB and GMWB liabilities
 
The IFRS accounting for minimum death and withdrawal benefits guarantees of the Group's US insurance operations has a mixed measurement approach. 
 
'Not for life' Guaranteed Minimum Withdrawal Benefits (GMWB) are accounted for as 'embedded derivatives'. Where the economic characteristics and risks of embedded derivatives are not closely related to the economic characteristics and risks of the host insurance contract, and where the contract is not measured at fair value with the changes in fair value recognised in the income statement, the embedded derivative is bifurcated and carried at fair value as a derivative in accordance with IAS 39. In Jackson, the embedded derivative liabilities for GMWB liabilities are fair valued using the economic assumptions shown below, in line with IAS 39 (FAS 157 - Fair Value Measurements.)
 
Where a significant insurance element is present, such as for Guaranteed Minimum Death Benefit (GMDB) and 'for life' GMWB, the guarantees are accounted for as part of the accounting applied to the host insurance contracts. Under IFRS4, the insurance contract accounting applied prior to IFRS adoption has continued to be applied. Accordingly for US variable annuity business the US GAAP standards applicable to insurance contract accounting are applied. Consistent with that approach, the GMDB and 'for life' GMWB guarantees are valued under FASB ASC Topic 944 (sub-topics 944-20, 944-40 and 944-80) Financial Services - Insurance - Separate Accounts, formerly known as "SOP03-1" (Statement of Position 03-1: "Accounting and Reporting by Insurance Enterprises Contracts and for Separate Accounts").
 
The two reserving methodologies typically produce quite different patterns of results. It is the variation in assumptions, and the way the two reserving methods react to emerging experience, that produces potentially significant differences in reserve patterns through time.
 
Both methods determine a hypothetical fee or charge (referred to in the rest of this note as "fee assessment") that is anticipated to fund future projected benefit payments arising using the assumptions applicable for that method. After determination at issue, the FAS 157 fee assessment is fixed for the life of the policy, so that variations in experience from that assumed at issue, as well as cash flow timing issues, will create a liability or asset as the value of future benefits becomes more or less, respectively, than the value of the fee assessments.
 
The SOP 03-1 fee assessment, on the other hand, is recomputed at each valuation date to take into account emerging experience and cash flow timing differences. After redetermination based on valuation date parameters, the new fee assessment is applied retrospectively from issue date to recompute the current reserve provision. This retrospective aspect of the calculation is not present in the FAS 157 methodology.
 
The chart below compares the assumption bases for the two methods in general terms as well as showing representative comparative values as of December 31, 2010. The comparative values for the projected earned rate and AA corporate bond rate are the 10-year rate in both cases, and the comparative value for volatility is the 5-year rate.
 
 
 
Assumption
  
SOP 03-1
  
IAS 39 (FAS 157)
                   
 
Fund earned rate
  
8.4 % before fees
  
Quoted rate swap curve
             
(10-year rate:-  3.4% before fees)
 
Discount rate
  
8.4%
  
AA corporate rate curve
             
(10-year rate:-  4.8%)
 
Equity volatility
  
15%
  
Implied curve
             
(5 year volatility:-  24% )
 
To provide an approximate translation of values from the SOP 03-1 basis to the IAS 39 basis, the table below shows estimates of the impact of changing each primary economic assumption from the SOP 03-1 values to the IAS 39 values.  
 
Two other items are shown in addition: a reconciling item to account for the difference in how each method adjusts for emerging economic experience (labelled as the "method" component below), and a further adjustment to recognise the impact of additional fees collected over and above those considered for reserving purposes (i.e. the difference between fees actually collected and the hypothetical fee assessment referenced earlier). 

Guaranteed Benefit Liability Supplemental Disclosure as of 31 December 2010
 
 
   
Note
  
GMDB
  
GMWB
  
GMWB
  
           
"for life"
  
"not for life"
Total
As recorded in I the 31 December 2010 financial statements:
    
£m
  
£m
  
£m
£m
 
--SOP 03-1
1 
  
220 
  
29 
    
249 
 
--IAS 39 fair value
1 
          
201 
201 
 
Total per 31 December 2010 financial statements
              
450 
 
Change in assumed fund earned rate
2 
  
375 
  
25 
  
n/a
400 
 
Change in discount rate
3 
  
200 
  
50 
  
n/a
250 
 
Change in equity volatility assumption
4 
  
225 
  
0
  
n/a
225 
 
Change in method
5 
  
(150)
  
(25)
  
n/a
(175)
                 
700 
                   
 
Hypothetical IAS 39 basis fair value
6 
  
870 
    
280 
  
1,150 
 
Adjustment to full fees
7 
  
(200)
    
(600)
  
(800)
 
Hypothetical fair value with full fee recognition
8 
  
670 
    
(320)
  
350 
 
Notes                                                                                     
 
1
Note GMWB benefits have reported components on both an SOP 03-1 and IAS 39 basis.
 
 
 
2 
Change in fund earned rate: 8.4 per cent to 3.4 per cent, producing significantly higher values of future benefit payments due to lower future assumed fund growth and therefore greater potential for future guaranteed benefit payouts. For GMWBs, future fee income is less dramatically affected, given that for most benefit forms fee income is based on a more stable benefit base rather than a current account value.
 
3 
Change in discount rate: 8.4 per cent to 4.8 per cent, producing significantly higher values, both for future benefit payments and future fees, with a net increase in liability. The absolute impact of this item will be influenced not only by the rate difference, but also by current market conditions, as the proportional impact of a particular rate change will be diluted if applied to a lower absolute value of future cash flows.
 
4
Change in equity volatility assumption: 15 per cent to 24 per cent, producing higher values, primarily for future benefit payments.  The impact is muted for GMWBs due primarily to the length of time until benefit payments occur, and also by the SOP 03-1 methodology itself.
 
5 
Generally, it is expected that the SOP 03-1 methodology will "lag" market events in terms of reflecting their impact in the reserve calculation. This is because of the retrospective aspect of the calculation described above. This line item is also the balancing item in the reconciliation so contains any cross-effects from other variables.
 
6
Representation of an approximate hypothetical IAS 39 (FAS 157)value were all guaranteed benefits to be reported on this basis.
 
7
Value of actual fees collected, on an IAS 39 assumption basis, over and above those already considered in the reserve calculation. The reserve calculation restricts the level of future guarantee fees to a level that is sufficient to meet the expected benefit payments at issue using at issue assumptions to avoid profit recognition at inception.
 
8
Resulting modified hypothetical IAS 39 (FAS 157) value including adjustment for the value of fees in excess of those considered in the reserve calculation.
 
 
 
In all cases, values shown above, were they to be reflected in actual financial statements, would be significantly offset by an adjustment to deferred acquisition costs, which is impacted by changes in gross profit elements of the variable annuity product.  Thus, for example, it might be expected that the GMDB impacts shown would be offset by some 70 to 75 per cent of the change illustrated, and the GMWB impacts shown would be offset by some 50-55% of the change illustrated. The table below illustrates the approximate impact on shareholders' equity.  
 
Estimated impact on Shareholders' Equity
   
Accounts carrying value
 to hypothetical
 IAS 39 basis
 fair value
  
Accounts carrying
 value to hypothetical
 fair value with
full fee recognition
Estimated increase/(decrease) in liability
700 
  
(100)
Related adjustments to:
      
 
      DAC
(475)
  
(50)
 
      Deferred tax
(75)
  
50 
Estimated Decrease/(increase) in Shareholders' Equity
150 
  
(100)
All numbers rounded to the nearest £25 million.
 
6     Funds under management
 
(i)     Summary
 
   
2010 
2009 
   
£bn
£bn
Business area  
    
Asian operations
30.9 
23.7 
US operations
63.6 
49.6 
UK operations
145.2 
135.6 
Internal funds under management
239.7 
208.9 
External funds (note (i))
100.4 
80.9 
Total funds under management
340.1 
289.8 
 
Note
 
 (i)
External funds shown above for 2010 of £100.4 billion (2009: £80.9 billion) comprise £111.4 billion (2009: £89.8 billion) in respect of investment products, as published in the New Business schedules (see schedule VIII) less £11.0 billion (2009: £8.9 billion) that are classified within internal funds.
 
 
 (ii)
    Internal funds under management - analysis by business area
 
 
Asian operations
US operations
UK operations
Total
 
2010 
2009 
2010 
2009 
2010 
2009 
2010 
2009 
 
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
Investment properties(note (i))
- 
- 
0.1 
0.1 
11.5 
11.0 
11.6 
11.1 
Equity securities
14.5 
11.4 
31.5 
21.0 
40.7 
37.0 
86.7 
69.4 
Debt securities
14.1 
10.0 
26.4 
22.8 
75.9 
69.1 
116.4 
101.9 
Loans and receivables
1.3 
1.2 
4.2 
4.3 
3.8 
3.3 
9.3 
8.8 
Other investments
1.0 
1.1 
1.4 
1.4 
13.3 
15.2 
15.7 
17.7 
Total
30.9 
23.7 
63.6 
49.6 
145.2 
135.6 
239.7 
208.9 
 
 
Note
(i) 
As included in the investments section of the consolidated statement of financial position at 31 December 2010 except for £0.4 billion (2009: £0.2 billion) investment properties which are held-for-sale or occupied by the Group and, accordingly under IFRS, are included in other statement of financial position captions.
 
7     Foreign currency translation
 
(i)     Rates of exchange
 
The profit and loss accounts of foreign subsidiaries are translated at average exchange rates for the year. Assets and liabilities of foreign subsidiaries are translated at closing exchange rates. Foreign currency borrowings that have been used to provide a hedge against Group equity investments in overseas subsidiaries are also translated at closing exchange rates. The impact of these translations is recorded as a component of the movement in shareholders' equity.

The following translation rates have been applied:
 
 
Closing
Average
Closing
Average
Local currency: £
2010 
2010 
2009 
2009 
Hong Kong
12.17 
12.01 
12.52 
12.14 
Indonesia
14,106.51 
14,033.41 
15,171.52 
16,173.28 
Malaysia
4.83 
4.97 
5.53 
5.51 
Singapore
2.01 
2.11 
2.27 
2.27 
India
70.01 
70.66 
75.15 
75.70 
Vietnam
30,526.26 
29,587.63 
29,832.74 
27,892.39 
USA
1.57 
1.55 
1.61 
1.57 
 
(ii)   Effect of rate movements on results
    
   
As published 2010
 (note (i))
Memorandum 2009
(note (i)
 and (ii))
IFRS basis results
£m
£m
Asian operations:
    
 
Long-term operations
536 
451 
 
Development expenses
(4)
(6)
 
Total Asian insurance operations after development costs
532 
445 
 
Asset management
72 
58 
Total Asia operations  
604 
503 
US operations
    
 
Jackson(note (iii))
833 
626 
 
Broker-dealer, asset management and Curian operations
22 
4 
Total US operations
855 
630 
UK operations
    
 
Long-term business
673 
606 
 
General insurance commission
46 
51 
 
Total UK insurance operations
719 
657 
 
M&G
284 
238 
Total UK operations
1,003 
895 
Total segment profit
2,462 
2,028 
Other income and expenditure
(450)
(396)
Solvency II implementation costs
(45)
(23)
Restructuring costs
(26)
- 
Operating profit from continuing operations based on longer-term investment returns
1,941 
1,609 
Shareholders' funds
8,031 
6,473 
 
 
   
         
         
     
As published 
 2010 
(note (i))
Memorandum 
 2009 
(note (i) and (ii))
EEV basis results
£m 
£m 
Asian operations:
    
 
New business:
    
   
Excluding Japan
902 
783 
   
Japan
(1)
(13)
   
Total 
901 
770 
   
Business in force
549 
420 
   
Long-term operations
1,450 
1,190 
   
Asset management
72 
58 
   
Development expenses
(4)
(6)
Total Asia operations
1,518 
1,242 
   
US operations
    
   
New business
761 
673 
   
Business in force
697 
576 
   
Jackson
1,458 
1,249 
   
Broker-dealer, asset management and Curian operations
22 
4 
Total US operations
1,480 
1,253 
   
UK operations
    
   
New business
365 
230 
Business in force
571 
640 
   
Long-term business
936 
870 
   
General insurance commission
46 
51 
   
Total insurance
982 
921 
   
M&G
284 
238 
Total UK operations
1,266 
1,159 
         
Other income and expenditure
(494)
(434)
Solvency II implementation costs
(46)
- 
Restructuring costs
(28)
(27)
Operating profit from continuing operations based on longer-term investment returns
3,696 
3,193 
Shareholders' funds
18,207 
15,904 
 
Notes
(i)
The 'as published' operating profit for 2010 and 'memorandum' operating profit for 2009 have been calculated by applying average 2010 exchange rates (CER).
          The 'as published' shareholders' funds for 2010 and memorandum' shareholders' funds for 2009 have been calculated by applying closing period end 2010 exchange rates.
(ii)   
 The 2009 operating profit of Asian long-term operations excludes the results of the Taiwan agency business for which the sale process was completed in June 2009.
(iii) 
 The Company has amended the presentation of IFRS operating profit for its US insurance operations to remove the net equity hedge accounting credit/charge (incorporating related amortisation of deferred acquisition costs) and include it in short-term fluctuations. The 2009 'memorandum' operating profit amounts have been amended accordingly.
 
 
8       New Business Schedules
 
BASIS OF PREPARATION
 
The new business schedules are provided as an indicative volume measure of transactions undertaken in the reporting period that have the potential to generate profits for shareholders. The amounts shown are not, and not intended to be, reflective of premium income recorded in the IFRS income statement.
 
The format of the schedules is consistent with the distinction between insurance and investment products as applied for previous financial reporting periods. Products categorised as "insurance" refer to those classified as contracts of long-term insurance business for regulatory reporting purposes, i.e. falling within one of the classes of insurance specified in part II of Schedule 1 to the Regulated Activities Order under FSA regulations.
 
The details shown for insurance products include contributions for contracts that are classified under IFRS 4 "Insurance Contracts" as not containing significant insurance risk. These products are described as investment contracts or other financial instruments under IFRS. Contracts included in this category are primarily certain unit-linked and similar contracts written in UK Insurance Operations, and Guaranteed Investment Contracts and similar funding agreements written in US Operations.
 
New business premiums for regular premium products are shown on an annualised basis. Department of Work and Pensions rebate business is classified as single recurrent business. Internal vesting business is classified as new business where the contracts include an open market option. 
 
Investment products referred to in the tables for funds under management are unit trusts, mutual funds and similar types of retail fund management arrangements. These are unrelated to insurance products that are classified as investment contracts under IFRS 4, as described in the preceding paragraph, although similar IFRS recognition and measurement principles apply to the acquisition costs and fees attaching to this type of business.
 
Notes to Schedules 8(a) - 8(f)
 
(1a)
Insurance and investment new business for overseas operations has been calculated using average exchange rates. The applicable rate for Jackson is 1.55.
(1b)
Insurance and investment new business for overseas operations for 2009 has been calculated using constant exchange rates. The applicable rate for Jackson is 1.55.
(2)
New business values are all presented pre-tax.
(3) 
Annual Equivalents, calculated as regular new business contributions plus ten per cent of single new business contributions, are subject to roundings. PVNBPs are calculated as equalling single premiums plus the present value of expected premiums of new regular premium business. In determining the present value, allowance is made for lapses and other assumptions applied in determining the EEV new business profit.
(4)
Balance includes segregated and pooled pension funds, private finance assets and other institutional clients. Other movements reflect the net flows arising from the cash component of a tactical asset allocation fund managed by PPM South Africa.
(5) 
New business in India is included at Prudential's 26 per cent interest in the India life operation. 
(6)
Balance Sheet figures have been calculated at the closing exchange rate.
(7)
Sales are converted 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.
(8)
New business in China is included at Prudential's 50 per cent interest in the China life operation. 
(9)
Mandatory Provident Fund (MPF) product sales in Hong Kong are included at Prudential's 36 per cent interest in Hong Kong MPF operation.
 
Schedule 8(a) - Reported Exchange Rates
Prudential plc - NEW BUSINESS -2010
INSURANCE OPERATIONS
 
 
Single
    
Regular
  
Annual Equivalents(3)
PVNBP
                         
 
2010 
2009 
+/- (%)
2010 
2009 
+/- (%)
2010 
2009 
+/- (%)
2010 
2009 
+/-
YTD
YTD
YTD
YTD
YTD
YTD
YTD
YTD
 (%)
 
£m
£m
  
£m
£m
  
£m
£m
  
£m
£m
  
Group Insurance Operations
                        
Asia - ex Japan(1a)
 1,104 
 785 
41%
 1,391 
 1,131 
23%
 1,501 
 1,209 
24%
 7,493 
 5,982 
25%
US(1a)
 11,417 
 8,885 
29%
 22 
 24 
(8%)
 1,164 
 912 
28%
 11,572 
 9,048 
28%
UK
 5,656 
 4,768 
19%
 254 
 246 
3%
 820 
 723 
13%
 6,842 
 5,902 
16%
Group Total - ex Japan
 18,177 
 14,438 
26%
 1,667 
 1,401 
19%
 3,485 
 2,844 
23%
 25,907 
 20,932 
24%
Japan
 13 
 57 
(77%)
 6 
 46 
(87%)
 7 
 52 
(87%)
 39 
 263 
(85%)
Group Total
 18,190 
 14,495 
26%
 1,673 
 1,447 
16%
 3,492 
 2,896 
21%
 25,946 
 21,195 
22%
                         
Asian Insurance Operations(1a)
                        
Hong Kong
 107 
 94 
14%
 276 
 232 
19%
 287 
 241 
19%
 1,693 
 1,414 
20%
Indonesia
 141 
 41 
244%
 269 
 186 
45%
 283 
 190 
49%
 1,011 
 671 
51%
Malaysia
 58 
 63 
(8%)
 198 
 140 
41%
 204 
 146 
40%
 1,153 
 814 
42%
Philippines
 64 
 14 
357%
 17 
 10 
70%
 23 
 11 
109%
 108 
 39 
177%
Singapore
 318 
 297 
7%
 143 
 98 
46%
 175 
 128 
37%
 1,357 
 1,033 
31%
Thailand
 15 
 14 
7%
 25 
 14 
79%
 26 
 16 
63%
 100 
 54 
85%
Vietnam
 1 
 1 
0%
 41 
 35 
17%
 41 
 35 
17%
 148 
 128 
16%
SE Asia Operations inc. Hong Kong
 704 
 524 
34%
 969 
 715 
36%
 1,039 
 767 
35%
 5,570 
 4,153 
34%
China(8)
 103 
 72 
43%
 48 
 38 
26%
 58 
 45 
29%
 336 
 253 
33%
India(5)
 85 
 47 
81%
 180 
 163 
10%
 188 
 168 
12%
 582 
 581 
0%
Korea
 66 
 38 
74%
 89 
 118 
(25%)
 96 
 122 
(21%)
 486 
 568 
(14%)
Taiwan
 146 
 104 
40%
 105 
 97 
8%
 120 
 107 
12%
 519 
 427 
22%
Total Asia Operations - ex Japan
 1,104 
 785 
41%
 1,391 
 1,131 
23%
 1,501 
 1,209 
24%
 7,493 
 5,982 
25%
                         
US Insurance Operations(1a)
                        
Fixed Annuities
 836 
 1,053 
(21%)
-
-
0%
 84 
 105 
(20%)
 836 
 1,053 
(21%)
Fixed Index Annuities
 1,089 
 1,433 
(24%)
-
-
0%
 109 
 143 
(24%)
 1,089 
 1,433 
(24%)
Life
 11 
 10 
10%
 22 
 24 
(8%)
 23 
 25 
(8%)
 166 
 173 
(4%)
Variable Annuities
 9,481 
 6,389 
48%
-
-
0%
 948 
 639 
48%
 9,481 
 6,389 
48%
Total US Insurance Operations
 11,417 
 8,885 
29%
 22 
 24 
(8%)
 1,164 
 912 
28%
 11,572 
 9,048 
28%
                         
UK & Europe Insurance Operations
                        
Direct and Partnership Annuities
 593 
 590 
1%
-
-
0%
 59 
 59 
0%
 593 
 590 
1%
Intermediated Annuities
 221 
 242 
(9%)
-
-
0%
 22 
 24 
(8%)
 221 
 242 
(9%)
Internal Vesting Annuities
 1,235 
 1,357 
(9%)
-
-
0%
 124 
 136 
(9%)
 1,235 
 1,357 
(9%)
Total Individual Annuities
 2,049 
 2,189 
(6%)
-
-
0%
 205 
 219 
(6%)
 2,049 
 2,189 
(6%)
Corporate Pensions
 228 
 192 
19%
 198 
 191 
4%
 221 
 210 
5%
 1,099 
 1,007 
9%
On-shore Bonds
 1,660 
 1,444 
15%
-
-
0%
 166 
 145 
15%
 1,660 
 1,444 
15%
Other Products
 774 
 881 
(12%)
 56 
 55 
2%
 133 
 143 
(7%)
 1,089 
 1,200 
(9%)
Wholesale
 945 
 62 
1,424%
-
-
0%
 95 
 6 
1,483%
 945 
 62 
1,424%
Total UK & Europe Insurance Ops
 5,656 
 4,768 
19%
 254 
 246 
3%
 820 
 723 
13%
 6,842 
 5,902 
16%
Group Total - ex Japan
 18,177 
 14,438 
26%
 1,667 
 1,401 
19%
 3,485 
 2,844 
23%
 25,907 
 20,932 
24%
 
The Prudential's European operation is based in Ireland and sells products into Jersey, Guernsey, Isle of Man, Gibraltar, Cyprus, Malta, Belgium, Spain and UK.
 
Schedule 8(b) - Current Exchange Rates
Prudential plc - NEW BUSINESS -2010
INSURANCE OPERATIONS
 
 
Single
    
Regular
  
Annual Equivalents(3)
PVNBP
                         
 
2010 
2009 
+/- (%)
2010 
2009 
+/- (%)
2010 
2009 
+/- (%)
2010 
2009 
+/-
YTD
YTD
YTD
YTD
YTD
YTD
YTD
YTD
 (%)
 
£m
£m
  
£m
£m
  
£m
£m
  
£m
£m
  
Group Insurance Operations
                        
Asia - ex Japan(1b)
 1,104 
 840 
31%
 1,391 
 1,216 
14%
 1,501 
 1,300 
15%
 7,493 
 6,407 
17%
US(1b)
 11,417 
 9,000 
27%
 22 
 24 
(8%)
 1,164 
 924 
26%
 11,572 
 9,165 
26%
UK
 5,656 
 4,768 
19%
 254 
 246 
3%
 820 
 723 
13%
 6,842 
 5,902 
16%
Group Total - ex Japan
 18,177 
 14,608 
24%
 1,667 
 1,486 
12%
 3,485 
 2,947 
18%
 25,907 
 21,474 
21%
Japan
 13 
 61 
(79%)
 6 
 50 
(88%)
 7 
 56 
(88%)
 39 
 284 
(86%)
Group Total
 18,190 
 14,669 
24%
 1,673 
 1,536 
9%
 3,492 
 3,003 
16%
 25,946 
 21,758 
19%
                         
Asian Insurance Operations(1b)
                        
Hong Kong
 107 
 95 
13%
 276 
 234 
18%
 287 
 244 
18%
 1,693 
 1,429 
18%
Indonesia
 141 
 47 
200%
 269 
 214 
26%
 283 
 219 
29%
 1,011 
 773 
31%
Malaysia
 58 
 70 
(17%)
 198 
 156 
27%
 204 
 163 
25%
 1,153 
 901 
28%
Philippines
 64 
 14 
357%
 17 
 11 
55%
 23 
 12 
92%
 108 
 42 
157%
Singapore
 318 
 320 
(1%)
 143 
 106 
35%
 175 
 138 
27%
 1,357 
 1,115 
22%
Thailand
 15 
 16 
(6%)
 25 
 15 
67%
 26 
 17 
53%
 100 
 59 
69%
Vietnam
 1 
 1 
0%
 41 
 33 
24%
 41 
 33 
24%
 148 
 121 
22%
SE Asia Operations inc. Hong Kong
 704 
 563 
25%
 969 
 769 
26%
 1,039 
 826 
26%
 5,570 
 4,440 
25%
China(8)
 103 
 74 
39%
 48 
 39 
23%
 58 
 46 
26%
 336 
 259 
30%
India(5)
 85 
 51 
67%
 180 
 174 
3%
 188 
 179 
5%
 582 
 622 
(6%)
Korea
 66 
 42 
57%
 89 
 131 
(32%)
 96 
 135 
(29%)
 486 
 633 
(23%)
Taiwan
 146 
 110 
33%
 105 
 103 
2%
 120 
 114 
5%
 519 
 453 
15%
Total Asia Operations - ex Japan
 1,104 
 840 
31%
 1,391 
 1,216 
14%
 1,501 
 1,300 
15%
 7,493 
 6,407 
17%
                         
US Insurance Operations(1b)
                        
Fixed Annuities
 836 
 1,067 
(22%)
-
-
0%
 84 
 107 
(21%)
 836 
 1,067 
(22%)
Fixed Index Annuities
 1,089 
 1,452 
(25%)
-
-
0%
 109 
 145 
(25%)
 1,089 
 1,452 
(25%)
Life
 11 
 10 
10%
 22 
 24 
(8%)
 23 
 25 
(8%)
 166 
 175 
(5%)
Variable Annuities
 9,481 
 6,471 
47%
-
-
0%
 948 
 647 
47%
 9,481 
 6,471 
47%
Total US Insurance Operations
 11,417 
 9,000 
27%
 22 
 24 
(8%)
 1,164 
 924 
26%
 11,572 
 9,165 
26%
                         
UK & Europe Insurance Operations
                        
Direct and Partnership Annuities
 593 
 590 
1%
-
-
0%
 59 
 59 
0%
 593 
 590 
1%
Intermediated Annuities
 221 
 242 
(9%)
-
-
0%
 22 
 24 
(8%)
 221 
 242 
(9%)
Internal Vesting Annuities
 1,235 
 1,357 
(9%)
-
-
0%
 124 
 136 
(9%)
 1,235 
 1,357 
(9%)
Total Individual Annuities
 2,049 
 2,189 
(6%)
-
-
0%
 205 
 219 
(6%)
 2,049 
 2,189 
(6%)
Corporate Pensions
 228 
 192 
19%
 198 
 191 
4%
 221 
 210 
5%
 1,099 
 1,007 
9%
On-shore Bonds
 1,660 
 1,444 
15%
-
-
0%
 166 
 145 
15%
 1,660 
 1,444 
15%
Other Products
 774 
 881 
(12%)
 56 
 55 
2%
 133 
 143 
(7%)
 1,089 
 1,200 
(9%)
Wholesale
 945 
 62 
1,424%
-
-
0%
 95 
 6 
1,483%
 945 
 62 
1,424%
Total UK & Europe Insurance Ops
 5,656 
 4,768 
19%
 254 
 246 
3%
 820 
 723 
13%
 6,842 
 5,902 
16%
Group Total - ex Japan
 18,177 
 14,608 
24%
 1,667 
 1,486 
12%
 3,485 
 2,947 
18%
 25,907 
 21,474 
21%

 
Schedule 8(c) - Reported Exchange Rates
PRUDENTIAL PLC - NEW BUSINESS - 2010
TOTAL INSURANCE NEW BUSINESS APE - BY QUARTER
 
 
2009 
2010 
                 
 
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
 
£m
£m
£m
£m
£m
£m
£m
£m
Group Insurance Operations
                
Asia - ex Japan(1a)(7)
 276 
 248 
 282 
 403 
 359 
 354 
 353 
 435 
US(1a)(7)
 184 
 208 
 249 
 272 
 255 
 305 
 290 
 314 
UK  
 180 
 197 
 158 
 189 
 193 
 189 
 166 
 272 
Group Total - ex Japan  
 640 
 652 
 689 
 864 
 807 
 848 
 809 
 1,021 
Japan(1a)(7)
 17 
 12 
 11 
 12 
 7 
 - 
 - 
 - 
Group Total
 656 
 664 
 700 
 876 
 814 
 848 
 809 
 1,021 
                 
Asian Insurance Operations(1a)(7)
                
Hong Kong
 46 
 49 
 55 
 91 
 68 
 62 
65 
92 
Indonesia
 38 
 46 
 43 
 64 
 61 
 68 
59 
95 
Malaysia
 24 
 29 
 32 
 62 
 36 
 41 
52 
75 
Philippines
 2 
 2 
 3 
 4 
 5 
 5 
6 
7 
Singapore
 22 
 30 
 29 
 48 
 33 
 42 
43 
57 
Thailand
 4 
 3 
 4 
 4 
 5 
 8 
7 
6 
Vietnam
 5 
 9 
 9 
 11 
 8 
 10 
10 
13 
SE Asia Operations inc. Hong Kong
 141 
 168 
 175 
 284 
 216 
 236 
242 
345 
China(8)
 11 
 11 
 13 
 11 
 14 
 13 
15 
16 
India(5)
 56 
 20 
 40 
 52 
 73 
 46 
48 
21 
Korea
 37 
 29 
 30 
 26 
 22 
 24 
23 
27 
Taiwan
 31 
 20 
 26 
 30 
 34 
 35 
25 
26 
Total Asian Insurance Operations - ex Japan
 276 
 248 
 282 
 403 
 359 
 354 
353 
435 
                 
US Insurance Operations(1a)(7)
                
Fixed Annuities
 48 
 22 
 14 
 21 
 18 
 24 
 24 
 18 
Fixed Index Annuities
 25 
 33 
 48 
 38 
 30 
 30 
 24 
 25 
Life
 6 
 6 
 6 
 6 
 6 
 5 
 6 
 6 
Variable Annuities
 105 
 147 
 180 
 207 
 201 
 246 
 236 
 265 
Total US Insurance Operations
 184 
 208 
 249 
 272 
 255 
 305 
290 
314 
                 
UK & Europe Insurance Operations
                
Direct and Partnership Annuities
 13 
 14 
 15 
 17 
 20 
 16 
14 
9 
Intermediated Annuities
 6 
 8 
 6 
 5 
 6 
 6 
5 
5 
Internal Vesting annuities
 39 
 34 
 30 
 33 
 33 
 31 
29 
31 
Total Individual Annuities
 58 
 56 
 50 
 55 
 59 
 53 
48 
45 
Corporate Pensions
 52 
 62 
 41 
 55 
 60 
 62 
48 
51 
On-shore Bonds
 34 
 42 
 34 
 35 
 33 
 36 
41 
56 
Other Products
 35 
 35 
 33 
 41 
 40 
 38 
27 
28 
Wholesale
 1 
 1 
 1 
 3 
 1 
 - 
2 
92 
Total UK & Europe Insurance Operations
 180 
 197 
 158 
 189 
 193 
 189 
166 
272 
Group Total - ex Japan
 640 
 652 
 689 
 864 
 807 
 848 
809 
 1,021 

 
Schedule 8(d) - Current Exchange Rates
PRUDENTIAL PLC - NEW BUSINESS - 2010
TOTAL INSURANCE NEW BUSINESS APE - BY QUARTER
 
 
2009 
2010 
                 
 
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
 
£m
£m
£m
£m
£m
£m
£m
£m
Group Insurance Operations
                
Asia - ex Japan(1b)(7)
 285 
 267 
 314 
 434 
 359 
 354 
 353 
 435 
US(1b)(7)
 171 
 207 
 261 
 285 
 255 
 305 
 290 
 314 
UK  
 180 
 197 
 158 
 189 
 193 
 189 
 166 
 272 
Group Total - ex Japan  
 636 
 671 
 733 
 908 
 807 
 848 
 809 
 1,021 
Japan(1b)(7)
 17 
 14 
 13 
 13 
 7 
 - 
 - 
 - 
Group Total
 653 
 685 
 746 
 921 
 814 
 848 
 809 
 1,021 
                 
Asian Insurance Operations(1b)(7)
                
Hong Kong
 43 
 49 
58 
94 
 68 
 62 
65 
92 
Indonesia
 45 
 53 
50 
71 
 61 
 68 
59 
95 
Malaysia
 25 
 32 
36 
70 
 36 
 41 
52 
75 
Philippines
 2 
 2 
3 
5 
 5 
 5 
6 
7 
Singapore
 22 
 32 
32 
52 
 33 
 42 
43 
57 
Thailand
 4 
 4 
5 
4 
 5 
 8 
7 
6 
Vietnam
 5 
 8 
9 
11 
 8 
 10 
10 
13 
SE Asia Operations inc. Hong Kong
 146 
 180 
193 
307 
 216 
 236 
242 
345 
China(8)
 10 
 11 
13 
12 
 14 
 13 
15 
16 
India(5)
 56 
 23 
45 
55 
 73 
 46 
48 
21 
Korea
 42 
 32 
34 
27 
 22 
 24 
23 
27 
Taiwan
 31 
 21 
29 
33 
 34 
 35 
25 
26 
Total Asian Insurance Operations - ex Japan
 285 
 267 
314 
434 
 359 
 354 
353 
435 
                 
US Insurance Operations(1b)(7)
                
Fixed Annuities
 45 
 23 
16 
23 
 18 
 24 
 24 
 18 
Fixed Index Annuities
 23 
 33 
50 
39 
 30 
 30 
 24 
 25 
Life
 6 
 6 
6 
7 
 6 
 5 
 6 
 6 
Variable Annuities
 97 
 145 
189 
216 
 201 
 246 
 236 
 265 
Total US Insurance Operations
 171 
 207 
261 
285 
 255 
 305 
290 
 314 
                 
UK & Europe Insurance Operations
                
Direct and Partnership Annuities
 13 
 14 
15 
17 
 20 
 16 
14 
9 
Intermediated Annuities
 6 
 8 
6 
5 
 6 
 6 
5 
5 
Internal Vesting annuities
 39 
 34 
30 
33 
 33 
 31 
29 
31 
Total Individual Annuities
 58 
 56 
50 
55 
 59 
 53 
48 
45 
Corporate Pensions
 52 
 62 
41 
55 
 60 
 62 
48 
51 
On-shore Bonds
 34 
 42 
34 
35 
 33 
 36 
41 
56 
Other Products
 35 
 35 
33 
41 
 40 
 38 
27 
28 
Wholesale
 1 
 1 
1 
3 
 1 
 - 
2 
92 
Total UK & Europe Insurance Operations
 180 
 197 
158 
189 
 193 
 189 
166 
272 
Group Total - ex Japan
 636 
 671 
733 
 908 
 807 
 848 
809 
 1,021 

 
Schedule 8 (e) - Reported Exchange Rates
PRUDENTIAL PLC - NEW BUSINESS - 2010
INVESTMENT OPERATIONS - BY QUARTER
 
 
2009 
2010 
 
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
 
£m
£m
£m
£m
£m
£m
£m
£m
Group Investment Operations
                
Opening FUM
62,279 
61,703 
72,336 
85,016 
89,780 
96,746 
96,015 
104,451 
Net Flows
2,725 
7,344 
2,898 
2,450 
1,203 
3,173 
1,802 
2,712 
 - Gross Inflows
19,154 
25,567 
26,394 
24,942 
24,173 
27,182 
25,727 
29,887 
 - Redemptions
(16,429)
(18,223)
(23,496)
(22,492)
(22,970)
(24,009)
(23,925)
(27,175)
Other Movements
(3,301)
3,289 
9,782 
2,314 
5,763 
(3,904)
6,634 
4,211 
Total Group Investment Operations
61,703 
72,336 
85,016 
89,780 
96,746 
96,015 
104,451 
111,374 
                 
M&G
                
                 
Retail
Opening FUM
19,142 
19,671 
23,324 
28,504 
31,059 
34,069 
33,724 
38,232 
Net Flows
2,207 
1,863 
1,656 
1,790 
1,454 
1,922 
1,742 
2,298 
 - Gross Inflows
3,325 
3,126 
3,315 
3,802 
4,190 
4,450 
3,986 
5,285 
 - Redemptions
(1,118)
(1,263)
(1,659)
(2,012)
(2,736)
(2,528)
(2,244)
(2,987)
Other Movements
(1,678)
1,790 
3,524 
765 
1,556 
(2,267)
2,766 
1,976 
Closing FUM
19,671 
23,324 
28,504 
31,059 
34,069 
33,724 
38,232 
42,506 
                 
Institutional(4)
Opening FUM
27,855 
26,865 
32,597 
37,731 
39,247 
42,155 
41,946 
44,694 
Net Flows
336 
4,219 
856 
551 
435 
863 
(206)
597 
 - Gross Inflows
1,083 
5,097 
2,495 
2,632 
2,151 
2,581 
1,630 
2,099 
 - Redemptions
(747)
(878)
(1,639)
(2,081)
(1,716)
(1,718)
(1,836)
(1,502)
Other Movements
(1,326)
1,513 
4,278 
965 
2,473 
(1,072)
2,954 
1,529 
Closing FUM
26,865 
32,597 
37,731 
39,247 
42,155 
41,946 
44,694 
46,820 
                 
Total M&G Investment Operations
46,536 
55,921 
66,235 
70,306 
76,224 
75,670 
82,926 
89,326 
                 
Asia
                 
Equity/Bond/Other(9)
Opening FUM
10,570 
10,038 
10,636 
12,492 
13,122 
14,923 
14,497 
15,825 
Net Flows
(370)
174 
322 
57 
166 
1,031 
446 
103 
 - Gross Inflows
911 
1,083 
1,725 
1,512 
1,713 
3,414 
3,248 
3,423 
 - Redemptions
(1,281)
(909)
(1,403)
(1,455)
(1,547)
(2,383)
(2,802)
(3,320)
Other Movements
(162)
424 
1,534 
573 
1,635 
(1,457)
882 
430 
Closing FUM
10,038 
10,636 
12,492 
13,122 
14,923 
14,497 
15,825 
16,358 
                 
Third Party Institutional Mandates
                
Opening FUM
789 
799 
859 
1,008 
1,450 
1,549 
1,604 
1,680 
Net Flows
1 
2 
(2)
372 
5 
125 
(39)
- 
 - Gross Inflows
24 
10 
5 
378 
12 
137 
14 
12 
 - Redemptions
(23)
(8)
(7)
(6)
(7)
(12)
(53)
(12)
Other Movements
9 
58 
151 
70 
94 
(70)
115 
127 
Closing FUM
799 
859 
1,008 
1,450 
1,549 
1,604 
1,680 
1,807 
                 
                 
MMF
                
Opening FUM
3,873 
4,286 
4,882 
5,281 
4,902 
4,050 
4,244 
4,020 
Net Flows
554 
1,095 
115 
(321)
(857)
(768)
(141)
(286)
 - Gross Inflows
13,808 
16,248 
18,854 
16,618 
16,107 
16,600 
16,849 
19,068 
 - Redemptions
(13,254)
(15,153)
(18,739)
(16,939)
(16,964)
(17,368)
(16,990)
(19,354)
Other Movements
(141)
(499)
284 
(58)
5 
962 
(83)
149 
Closing FUM
4,286 
4,882 
5,281 
4,902 
4,050 
4,244 
4,020 
3,883 
                 
Total Asian Investment Operations
15,123 
16,377 
18,781 
19,474 
20,522 
20,345 
21,525 
22,048 
                 
US
                
                 
Retail
Opening FUM
50 
44 
38 
- 
-
-
-
-
Net Flows
(3)
(9)
(49)
1 
-
-
-
-
 - Gross Inflows
3 
3 
- 
- 
-
-
-
-
 - Redemptions
(6)
(12)
(49)
1 
-
-
-
-
Other Movements
(3)
3 
11 
(1)
-
-
-
-
Closing FUM
44 
38 
- 
- 
-
-
-
-
                 
Curian Capital - FUM
1,613 
1,646 
2,041 
2,260 
2,708 
2,781 
3,038 
3,457 


 
Schedule 8 (f) - Reported Exchange Rates
PRUDENTIAL PLC - NEW BUSINESS - 2010
TOTAL INSURANCE NEW BUSINESS PROFIT AND MARGIN (% APE AND % PVNBP)
 
 
2009 
2010 
 
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
 
YTD
YTD
YTD
YTD
YTD
YTD
YTD
YTD
 
£m
£m
£m
£m
£m
£m
£m
£m
Annual Equivalent(3)
                
Total Asian Insurance Operations - ex Japan
276 
524 
806 
1,209 
359 
713 
1,066 
1,501 
Total US Insurance Operations
184 
392 
640 
912 
255 
560 
850 
1,164 
Total UK & Europe Insurance Operations
180 
376 
534 
723 
193 
382 
548 
820 
Group Total - ex Japan
640 
1,292 
1,980 
2,844 
807 
1,655 
2,464 
3,485 
Japan
17 
29 
40 
52 
7 
7 
7 
7 
Group Total
657 
1,321 
2,020 
2,896 
814 
1,662 
2,471 
3,492 
                 
New business profit(2)
                
Total Asian Insurance Operations - ex Japan
136 
286 
465 
725 
183 
396 
621 
902 
Total US Insurance Operations
140 
292 
482 
664 
175 
361 
532 
761 
Total UK & Europe Insurance Operations
60 
122 
169 
230 
69 
135 
192 
365 
Group Total - ex Japan
336 
700 
1,116 
1,619 
427 
892 
1,345 
2,028 
Japan
(4)
(9)
(12)
(12)
(1)
(1)
(1)
(1)
Group Total
332 
691 
1,104 
1,607 
426 
891 
1,344 
2,027 
                 
New business margin (% of APE)
                
Total Asian Insurance Operations - ex Japan
49%
55%
58%
60%
51%
56%
58%
60%
Total US Insurance Operations
76%
74%
75%
73%
69%
64%
63%
65%
Total UK & Europe Insurance Operations
33%
32%
32%
32%
36%
35%
35%
45%
Group Total - ex Japan
53%
54%
56%
57%
53%
54%
55%
58%
Japan
(24%)
(31%)
(30%)
(23%)
(14%)
(14%)
(14%)
(14%)
Group Total
51%
52%
55%
56%
52%
54%
54%
58%
                 
PVNBP(3)
                
Total Asian Insurance Operations - ex Japan
1,297 
2,551 
3,987 
5,982 
1,581 
3,316 
5,071 
7,493 
Total US Insurance Operations
1,840 
3,889 
6,360 
9,048 
2,538 
5,569 
8,457 
11,572 
Total UK & Europe Insurance Operations
1,490 
3,062 
4,372 
5,902 
1,557 
3,081 
4,463 
6,842 
Group Total - ex Japan
4,627 
9,502 
14,719 
20,932 
5,676 
11,966 
17,991 
25,907 
Japan
82 
155 
212 
263 
32 
34 
36 
39 
Group Total
4,709 
9,657 
14,931 
21,195 
5,708 
12,000 
18,027 
25,946 
                 
New business profit(2)
                
Total Asian Insurance Operations - ex Japan
136 
286 
465 
725 
183 
396 
621 
902 
Total US Insurance Operations
140 
292 
482 
664 
175 
361 
532 
761 
Total UK & Europe Insurance Operations
60 
122 
169 
230 
69 
135 
192 
365 
Group Total - ex Japan
336 
700 
1,116 
1,619 
427 
892 
1,345 
2,028 
Japan
(4)
(9)
(12)
(12)
(1)
(1)
(1)
(1)
Group Total
332 
691 
1,104 
1,607 
426 
891 
1,344 
2,027 
                 
New business margin (% of PVNBP)
                
Total Asian Insurance Operations - ex Japan
10.5%
11.2%
11.7%
12.1%
11.6%
11.9%
12.2%
12.0%
Total US Insurance Operations
7.6%
7.5%
7.6%
7.3%
6.9%
6.5%
6.3%
6.6%
Total UK & Europe Insurance Operations
4.0%
4.0%
3.9%
3.9%
4.4%
4.4%
4.3%
5.3%
Group Total - ex Japan
7.3%
7.4%
7.6%
7.7%
7.5%
7.5%
7.5%
7.8%
Japan
(4.9%)
(5.8%)
(5.7%)
(4.6%)
(3.1%)
(2.9%)
(2.8%)
(2.6%)
Group Total
7.1%
7.2%
7.4%
7.6%
7.5%
7.4%
7.5%
7.8%
 


 
 
 


 
 
SIGNATURES
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 


 
 
Date 09 March 2011
 
 
PRUDENTIAL PUBLIC LIMITED COMPANY
   
 
By: /s/ Clive Burns
   
 
Clive Burns
 
Head of Group Secretariat