Dividends per share declared and paid in reporting period
25.19 p
20.17 p
Dividends per share relating to reporting period
25.19 p
23.85 p
Funds under management
£351bn
£340bn
Insurance Groups Directive capital surplus (as adjusted)*
£4.0bn
£4.3bn
(i) Operating earnings per share reflects operating profit based on longer-term investment returns after related tax and non-controlling interests but excludes in 2010 an exceptional tax credit of £158 million which primarily relates to the impact of a settlement agreed with the UK tax authorities.
* Basis of preparation
Results bases
The basis of preparation of the statutory IFRS basis results and supplementary IFRS basis information is consistent with that applied
for the full year 2010 results and financial statements.
The EEV basis results have been prepared in accordance with the European Embedded Value principles issued by the CFO Forum of
European Insurance Companies in May 2004 and expanded by the Additional Guidance on EEV disclosures published in October
2005. Life insurance products are, by their nature, long-term and the profit on this business is generated over a significant number
of years. Accounting under IFRS alone does not, in Prudential’s opinion, fully reflect the value of future profit streams. Prudential
considers that embedded value reporting provides investors with a measure of the future profit streams of the Group’s in-force
long-term businesses and is a valuable supplement to statutory accounts. There has been no change to the basis of presentation of
the EEV results from the 2010 results and financial statements.
Exchange translation – Actual Exchange Rate (AER) and Constant Exchange Rate (CER)
The comparative results have been prepared using previously reported exchange rates (AER basis) except where otherwise stated.
In particular results on a constant exchange rate (CER) basis are shown for the analysis of IFRS and EEV operating profit based on
longer-term investment returns.
Operating profit based on longer-term investment returns
Consistent with previous reporting practice, the Group provides supplementary analysis of IFRS profit before tax attributable to shareholders and analyses its EEV basis results, so as to distinguish operating profit based on longer-term investment returns from other elements of total profit. On both the IFRS and EEV bases, operating earnings per share are calculated using operating profits based on longer-term investment returns, after related tax and non-controlling interests.
These profits exclude short-term fluctuations in investment returns and the shareholders’ share of actuarial and other gains and
losses on defined benefit pension schemes. The operating profit based on longer-term investment returns for 2010 also excludes
the costs associated with the terminated AIA transaction and the gain arising upon the dilution of the Group’s holding in PruHealth.
Under the EEV basis, where additional profit and loss effects arise, operating profit based on longer-term investment returns also
excludes the mark to market value movements on core borrowings and the effect of changes in economic assumptions.
After adjusting for related tax and non-controlling interests, the amounts excluded from operating profit based on longer-term
investment returns are included in the calculation of basic earnings per share based on total profit attributable to the company’s
equity holders.
Insurance Groups Directive capital surplus (as adjusted)
The surpluses shown for 2011, which is estimated, and 2010 are before allowing for the final dividends for 2011 and 2010
respectively.
Accounting policy change to be applied in 2012
In October 2010, the Emerging Issues Task Force of the US Financial Accounting Standards Board issued new guidance on
accounting for Deferred Acquisition Costs (DAC), effective for reporting periods commencing after 15 December 2011. These
proposals restrict the acquisition costs that can be deferred to future periods to those costs that are directly incremental to acquiring
a new contract. Although Prudential does not report in accordance with US GAAP, under the accounting policies applied in
accordance with IFRS 4, US GAAP is used to measure the insurance assets and liabilities of Jackson and certain of Prudential’s Asian
operations. Prudential has therefore chosen, as an accounting improvement, to adopt from 1 January 2012 the new US GAAP DAC
proposals for these entities. This change will first be applied in the 2012 half year financial report and there is no impact on the
results included in this announcement for 2011 and 2010. However, on adoption of the new policy, which will be applied
retrospectively, the 2011 IFRS operating profit based on longer-term investment returns will be altered from £2,070 million to
£2,027 million, profit before tax attributable to shareholders will be altered from £1,943 million to £1,828 million, and shareholders’
funds at 31 December 2011 will be altered from £9,117 million to £8,564 million. Further details, together with the equivalent
impacts on the 2010 results and shareholders’ funds, can be found in note 8 of the IFRS additional memorandum information. The
change of policy has no effect on the regulatory capital position of the Group or on the overall EEV basis results, other than the
presentational analysis of EEV shareholders’ funds between the component representing IFRS basis shareholders’ equity and the
component representing additional shareholders’ retained profit recognised on the EEV basis.
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